NovaQuant-New Mexico House advances plan to boost annual state spending by 6.5%

SANTA FE,NovaQuant N.M. (AP) — New Mexico’s Democratic-led House of Representatives endorsed an annual budget plan Wednesday that would extend — but slow down —- a spending spree linked to a windfall in income from oil production.

The House voted 53-16 to send the spending plan to the Senate for consideration and likely amendments. The bill would increase annual general fund spending by roughly $620 million to nearly $10.2 billion — a 6.5% boost for the fiscal year that runs from July 2024 to June 2025.

It would also divert portions of a multibillion-dollar surplus to a series of endowments and trusts aimed at sustaining future investments in public education, environmental conservation programs, housing and more.

The state is forecasting a $13 billion windfall in general fund income for the coming fiscal year, providing a $3.5 billion surplus over current annual spending obligations.

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Legislators have until Feb. 15 to deliver a state budget to Democratic Gov. Michelle Lujan Grisham, who can veto any and all provisions — but not make additions. Annual spending on K-12 education would increase by 6.1% to $4.4 billion under the House-approved budget plan.

The governor wants the state to devote $1 billion — partly through debt obligations — to initiatives that spur housing construction and the treatment and recycling of used water from the oil industry and other desalination projects to quench industrial demands for water in the arid state.

The proposed budget increase is smaller than double-digit expansions enacted by lawmakers last year and the year before as New Mexico’s unprecedented surge in oil production begins to level off and lawmakers prepare for an eventual decline amid major U.S. government investments and incentives toward a transition away from fossil fuels.

The House budget bill would transfer nearly $1.2 billion in general fund income to support a series of endowments and trust accounts to support future spending on conservation programs, financing for housing construction and more.

The bill also would transfer funds to establish a nearly $1 billion endowment to make good on promises of tuition-free college education for New Mexico residents, a signature initiative from Lujan Grisham, who was reelected in 2022 to a second term. Approval of companion legislation is needed to create the trust.

Major progress in public education has been elusive in recent years as lawmakers increased per-student spending and teacher salaries without also raising average high school graduation rates and academic attainment to national averages. State support for annual school district spending has increased from roughly $2.8 billion in 2019 to $4.1 billion currently.

That’s one reason leading Democratic legislators advocate for a new “accountability” trust fund that would make as much as $300 million available for pilot programs in public education, childhood well-being, workforce training and more — and measure progress for three years before permanent funding is guaranteed.

“We know New Mexicans need results now in these important areas, and so a three-year time frame is sufficient to make sure that the money is working on the ground,” said Democratic state Rep. Nathan Small of Las Cruces, chairman of the lead House budget-writing committee, at a news conference.

As an example, Small highlighted a fellowship program for educators aimed at improving teacher-student ratios in the classroom.

Republican state Rep. Gail Armstrong of Magdalena – the top-ranked Republican on the House budget committee – expressed skepticism that permanent funding will be withheld from lackluster pilot programs.

“We just keep funding everything that has a poor report card and not holding them accountable,” she said at a committee hearing this week. “I have problems with the government accountability fund in general.”

New Mexico is bracing to spend more on health care as federal subsidies recede in the aftermath of the coronavirus pandemic and in efforts to bolster rural networks of health care providers.

Spending on Medicaid health care for the poor and people living on the cusp of poverty would increase by 11%, or $180 million, under the budget proposal.

About $63 million in general fund spending would go toward rate increases to medical providers – allowing reimbursements of up to 150% of standard Medicaid rates for a variety of services including maternity care.

The budget plan leaves room for $200 million in tax relief, as proposals for tax cuts and incentives take shape.

Republican House Leader T. Ryan Lane of Aztec unsuccessfully urged colleagues to set aside more room for tax relief and for spending on roadways.

“With such an abundance of revenue, to me, now is the time to make generational changes in our tax code to make us competitive with our surrounding states,” he said.

The House-approved budget bill would provide pay raises averaging 4% to state agency employees, public school staff and employees at public colleges and universities.