Tough choices ahead as New Mexico prepares for weaker revenues, more spending pressure

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ALBUQUERQUE, New Mexico — A key legislator warned Tuesday that New Mexico could be headed into another financial storm thanks to growing spending pressures and slumping oil and gas prices that have resulted in weaker revenues.

Legislative Finance Committee Chair Sen. John Arthur Smith issued the warning during a meeting in Santa Fe. He questioned whether state agencies have any backup plans for reducing spending.

"'Give me more money.' That's the only thing we're hearing right now," said Smith, D-Deming, noting that a disparity is already shaping up between the amount of money the state has to work with and the needs that have to be addressed.

State agencies have asked for $85 million in supplemental appropriations to make it through the rest of the fiscal year, according to legislative analysts. That includes some $47 million to cover the growing costs of Medicaid expansion and that bill is expected to top $100 million annually for at least the next three years.

Projections released in August showed the state would have more than a quarter-billion dollars in new revenue for the next fiscal year. Volatile oil and gas prices could cut into that, leaving lawmakers with fewer options as they begin hammering out budget priorities in advance of the 30-day session in January.

New revenue estimates will be released in early December.

Tom Clifford, head of the state Department of Finance and Administration, said he's confident New Mexico can remain in the black given the administration's effort to keep recurring spending nearly flat last year. That, he said, helped to limit the state's exposure to the volatility of oil and gas revenues.

Clifford also said significant growth in gross receipts tax collections, among other things, has helped to offset oil and gas revenues.

"There are still a lot of good things happening in this economy," he said.

Finance committee staff recommended that legislators consider ways to better manage spending by state agencies and transfer money from restricted reserve accounts so they can be tapped if the state needs to respond to a sharp downturn.

Another option is to sweep any surplus funds in the treasury into the general fund.

"We may need to try everything," said Legislative Finance Committee director David Abbey. "With pretty strong pressures on spending and potentially weaker revenues, we're going to need every tool we have in my estimation."

New Mexico Supreme Court Justices Barbara Vigil and Charles Daniels testified before the committee regarding some of the needs within the state's court system. They talked about the need for more judgeships in some communities and simple efforts such as reducing office supply costs and turning out the lights in courthouses to keep utility bills down.

"I assure you we share your concern about making wise use of taxpayer money," Daniels told the legislators.

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