Heath Haussamen / NMPolitics.net
A statue outside the Roundhouse in Santa Fe.
The state’s general fund is likely to close out the 2016 fiscal year, which ended June 30, in the red.
The Legislative Finance Committee’s revenue forecast for the current fiscal year is also dire, with the state on track to exhaust reserves and maybe still fall short of the revenues needed for the current operating budget.
The outlook for the 2018 fiscal year is also “gloomy.”
Those are among the conclusions of a presentation Legislative Finance Committee (LFC) Director David Abbey made at a Senate Democratic caucus meeting on Sunday.
The outlook has state Sen. John Arthur Smith, a Deming Democrat who chairs the Senate Finance Committee, and state Treasurer Tim Eichenberg calling for a special session in August, The Santa Fe New Mexican is reporting. Smith was quoted as saying the 2016 shortfall would be at least $150 million. There’s no way to address that except with reserves because it’s already in the past.
Smith wants to take money from the state’s $230 million fund from settlements with tobacco companies — money that is supposed to combat smoking and improve public health — to instead pay the 2016 bills. The state has tapped into the fund for fiscal emergencies in the past.
The state is required to balance is budget. There are questions about how long the state can operate in the red and what happens if it doesn’t balance its budget.
As for the current, 2017, fiscal year, Abbey’s presentation notes that, despite an increase in oil and gas prices, general fund revenues were down 9.6 percent from July 2015 to April 2016 compared with the same period in the previous fiscal year. During that time period, gross receipts tax (GRT) revenue was down 7.5 percent statewide, and corporate income tax revenue was down more than 50 percent.
GRT revenue was up in some counties — including Bernalillo, Doña Ana, and Santa Fe — but the situation was much worse in counties heavily dependent on the oil and gas industry. In Lea County, GRT revenue was down 39 percent, according to Abbey’s presentation. In Eddy County it was down 24.9 percent. And in San Juan County it was down 7.2 percent.
Overall, GRT revenues from the mining, quarrying, and oil and gas extraction industries were down 45.9 percent through April 2016 compared to the same time period in the previous fiscal year. The manufacturing, transportation and warehousing industries also saw decreased GRT revenues of more than 28 percent during that time period.
New Mexico Land Office Revenues, which are largely dependent on the oil and gas industry, don’t look any better. They have dropped 32 percent — from $739 million to $495 million — between the 2015 fiscal year and the 2016 fiscal year, the Land Office announced today. The Land Office projects another dip for fiscal year 2017, to about $418 million.
Land Commissioner Aubrey Dunn, a Republican, suggested a temporary gas tax during the legislative session earlier this year to help cover the budget shortfall being addressed at that time. The tax as he proposed it would sunset when oil prices rose again. Asked on Thursday if he still supports such a tax, Dunn said, “It’s the Legislature’s call to figure out, and the governor. All I can say from the Land Office’s standpoint is we’re gonna be 50 percent less as far as revenue.”
The options to address the current-year budget situation, officials including Smith say, including cutting spending further or raising taxes or other revenues. Sweeping money from existing funds is also a temporary measure that may help.
Martinez has in the past repeatedly refused to consider raising taxes as the state’s revenues have declined. On Thursday, her office released a statement that didn’t address the calls for a special session — but did talk about protecting taxpayers.
“As the governor cautioned in January, we just experienced the steepest-ever crash in oil and gas prices, and persistently low energy prices have significantly reduced revenues and energy sector employment,” said Martinez spokesman Mike Lonergan. “When oil and gas prices are down, it also directly and indirectly affects manufacturing, construction, and other industries as well. While energy prices are rising slowly once again, it will take time for production and employment to ramp back up.”
“The governor continues to closely monitor preliminary revenue figures, and the administration expects to have more complete figures relating to the recently concluded fiscal year over the next few weeks,” Lonergan said. “As she has done since day one, the governor is happy to discuss the state’s budget outlook with legislative leaders, but will insist that we move forward in a cautious, diligent, and responsible way that protects New Mexico’s taxpayers.”
The statewide budget woes come as local governments are also feeling squeezed — higher education in particular, whose funding was cut by the Legislature and governor earlier this year. Several state universities, including the University of New Mexico, have raised tuition to make up for revenue shortfalls. At New Mexico State University, the Board of Regents rejected a proposed tuition increase, and the university has been making cuts, including eliminating jobs, to meet an estimated $12.1 million shortfall.
State Sen. Joseph Cervantes, D-Las Cruces, called the budget situation “by far the most important issue.”
“We see the results of cuts to NMSU already,” he said.
In addition, Cervantes mentioned the Martinez Administration’s request last year to tap into the University of New Mexico Health Sciences Center’s $200 million in reserves for help with Medicaid funding.
“This is using nonrecurring money to meet a recurring need — a Band Aid that won’t work after this year,” Cervantes said.
The state’s long-term fiscal outlook isn’t getting any better. Abbey’s presentation says the 2018 fiscal year outlook “is gloomy because of uncertain revenue prospects, the need to replace $75 million of sweeps used to prop up FY17 spending, requirements for Medicaid growth and risks related to public school litigation.”
This article has been updated to include comments from Lonergan, Cervantes and Dunn.