SANTA FE, N.M. — New Mexico Gov. Susana Martinez and leading lawmakers proposed increases in state spending Friday on public school education, Medicaid, public safety agencies and economic development incentives for the coming fiscal year, amid a sharp increase in state income from taxes and oil-field revenues.
The two budget wish lists – from the Republican governor and the Democratic-led Legislature – both emphasize investments in early childhood education and the justice system, with pay increases assigned for teachers, prison guards, prosecutors and state workers.
Democratic House speaker Brian Egolf said the governor and lawmakers have many closely aligned priorities – including “modest” pay increases for public employees.
“A raise for hard working state employees, teachers, police officers is very much appropriate and long overdue,” he said.
Surging state tax revenues linked to a rebound in the oil and natural gas sectors have been propelling a rapid turnaround in New Mexico government finances after two years of austere budgets. State government income for the fiscal year starting on July 1, 2018, is expected to surpass current annual spending by nearly $200 million.
The Martinez administration aims to collect an additional $99 million – much of it from the nonprofit health care sector – through proposed changes to tax and health care laws.
Efforts failed last year to overhaul the state’s gross receipts tax on sales and business services that would stem redundant taxes on professional services and do away with an array of tax credits, deductions and exemptions.
Egolf said Friday that there may be more room for comprise this year. Republican House minority leader Nate Gentry described one proposal to remove credits, exemptions and deductions that big businesses receive and small businesses do not.
The Legislature convenes Jan. 16 for a 30-day session that focuses on spending and taxation issues. The governor has discretion over what other matters are heard, and lawmakers can revive vetoed bills.
Last year, New Mexico plugged a budget hole with money from severance tax notes amid a hiring freeze and agency spending cuts.
Rep. Patricia Lundstrom, chairwoman of the Legislative Finance Committee, said about one-third of surplus state revenues next fiscal year will be needed to backfill depleted state accounts. Many agencies are likely to see no budget increase.
The Legislature’s lead budget-writing committee is seeking a $178 million increase in general fund spending to nearly $6.3 billion. The governor is seeking a $250 million increase, with more money set aside for reserves.
Public school spending, the state’s single largest budget item, would increase by $52 million, under the Legislature’s plan. Martinez called for a larger, $70 million increase that would create an “exemplary teacher fund” to boost annual pay by as much as $10,000 for teachers that produce high student achievement. Both plans call for base-pay raises.
The state of New Mexico is defending itself in district court from accusations that it fails to sufficiently fund public education for all students.
Both budget proposals call for increased spending on assistance for childcare, prekindergarten and a program that extends the school year for some students from kindergarten through third grade. Increases also are slated for district attorneys, public defenders, court and judge’s salaries.
The Legislature proposed an average pay increase of 1.5 percent for state employees. The executive branch suggested 1 percent.
The state would devote an additional $35-$38 million to Medicaid health care for the poor and disabled, a multibillion-dollar program supported mostly by the federal government.
Associated Press writer Mary Hudetz contributed to this report from Albuquerque.
This story has been corrected to clarify that last year’s budget hole was filled with money from severance tax notes rather than bonds.