Legislators including Democratic New Mexico Sen. George Muñoz of Gallup, second from left, listen to a new forecast for state government revenue, Monday, Dec. 11, 2023, in Santa Fe, New Mexico. A windfall in government income from petroleum production is slowing down but far from over in New Mexico as the nation's No. 2 oil production state grapples with how much it can effectively spend — and how to set aside billions of dollars for the future in case the world's thirst for oil falters. (AP Photo/Morgan Lee)
Legislators including Democratic New Mexico Sen. George Muñoz of Gallup, second from left, listen to a new forecast for state government revenue, Monday, Dec. 11, 2023, in Santa Fe, New Mexico. A windfall in government income from petroleum production is slowing down but far from over in New Mexico as the nation's No. 2 oil production state grapples with how much it can effectively spend — and how to set aside billions of dollars for the future in case the world's thirst for oil falters. (AP Photo/Morgan Lee)
SANTA FE, N.M. (AP) — Leading New Mexico lawmakers on Friday recommended a 5.9% increase in general fund spending for the coming fiscal year amid a windfall in oil-related income, while also sounding a cautionary note on the future of the state's petroleum bonanza and setting aside more money in savings and investment accounts.
The proposal from a lead budget writing committee to the Democratic-led Legislature would increase general fund spending by $566 million to $10.1 billion for the fiscal year running from July 2024 to June 2025. The increased general spending represents a fraction of an anticipated $3.5 billion surplus of state income in excess of current tax obligations.
The budget blueprint would bolster efforts to improve student achievement in public education, buttresses health care for people in poverty or on the cusp as federal support for Medicaid recedes in the aftermath of the pandemic, and provide pay raises averaging 4% to state employees along with compensation boosts at public school and colleges.
Support for childhood wellbeing also figures prominently, including a recommendation to increased spending from an early childhood education trust to expand prekindergarten and home visits from nurses for parents of infants and toddlers. The early childhood education trust was established in 2020 amid an extraordinary surge in oil-related income and already contains roughly $6 billion.
State Sen. George Muñoz of Gallup warned that the state budget is more reliant than ever on income from oil and natural gas — a commodity subject to volatile swings in pricing and production.
“That's a very dangerous situation in the end,” said Muñoz, chairman of two lead budget-writing committees. “I think this is a very sound budget. ... It keeps the state of New Mexico able to grow over the next couple years without having massive cuts” later on.
The legislature convenes Jan. 16 for a rapid-fire, 30-day legislative session centered on budget negotiations. Gov. Michelle Lujan Grisham can veto any and all budget provisions approved by legislators.
Republican state Sen. Pat Woods of Grady said he's urging colleagues in the Democratic majority to be reasonable and slow the pace of recent budget increases.
“Do we even know what we’re funding is working?" said Woods, one of 14 GOP senators who are outnumbered nearly 2-1 by Democrats in the chamber. "Do we need to maybe hold off from any more big expenditures to get a general idea of where the funding is working.”
Spending on public schools would increase increase by $243 million, or 5.8%, to $4.42 billion under the proposal from legislators.
The plan also would significantly increase spending on the state courts system, local prosecutors and public defenders amid heightened concerns about crime and gun violence in Albuquerque.
State Rep. Derrick Lente of Sandia Pueblo said the budget plan leaves room for $200 million in tax reductions and incentives.
Lujan Grisham last year used her veto powers to scale back a tax relief package based on concerns it could undermine future spending on public education, heath care and law enforcement. Vetoed items included reduced tax rates on personal income, sales and business transactions. Credits toward the purchase of electric vehicles and related charging equipment also were vetoed — but are back on the negotiating table this year.
“We're taking a much more conservative approach for our tax proposal this year,” said Lente, chairman of lead House committee on taxation.
A rival budget proposal from Lujan Grisham would increase general fund spending more dramatically by about $950 million, or nearly 10%, to $10.5 billion, with major initiatives to shore up homeownership and affordable housing opportunities.
Both budget proposals signal a likely end to three straight years of bulk state money transfers to New Mexico households. The most recent rebates in 2023 exceeded $600 million in individual payments of $500.
