Grappling with the revenue shortfall

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N.M. took its time making it known

By Carol A. Clark

Revenues will be about $10 million less this year and $53 million less than anticipated in 2010, according to a new financial forecast outlined Thursday to the Legislative Finance Committee.

That drop in revenues translates to a potential $500-$600 million budget gap next year. That’s how much is needed to avoid any cutbacks and to maintain a flat budget of services and programs with no growth.

“Unfortunately, it’s more or less true and us legislators have been more or less expecting it. We’ve been frustrated that the state hasn’t been willing to step up and admit it …,” Rep. Jeannette Wallace, R-N.M., said this morning. “The spending comes in through the state and that’s part of the problem — They’re spending more than we have and most of us don’t feel it should be set up that way. We just heard about another task force that’s been set up that hasn’t been announced yet that is going to be looking at how to consolidate parts of the state government so it’ll cost less.”

Spending cuts are almost certain to happen in the upcoming 2011 budget year, which starts in July, according to a report by the Associated Press.

Finance and Administration Secretary Katherine Miller said a combination of spending cuts and revenue increases was being considered as part of the administration’s budget proposals for next year’s Legislature. Lawmakers convene Jan. 19 for a 30-day session.

Gov. Bill Richardson said at a news conference in Albuquerque that he’s looking at ways to consolidate government operations to help reduce spending. He’s formed a task force to consider tax-increase options.

Sen. John Arthur Smith, a Deming Democrat and committee vice chairman, said he worried the latest revenue forecast is too optimistic and that revenues will drop further in coming months. New Mexico lagged behind much of the nation in entering the recession, Smith said, making it likely that the state’s economy will rebound more slowly.

“It could be worse and that’s my concern. I hope I am wrong. I hope we’re starting to level out,” Smith said in an interview after the committee’s hearing.

The state expects to receive $5.1 billion in revenues next year. However, those revenues are less than the amount New Mexico is spending on public education and general government operations this year.

“We looked at revenues yesterday and yes indeed we are very concerned,” Wallace said.

The budget gap of at least $500 million takes into account federal economic stimulus money the state is using for public schools and health care services. The Legislature estimates that at least $300 million in state money will be needed to replace federal funds next year unless budgets are cut.

There also are budget problems to fix in the current fiscal year. Miller said $137 million is needed to boost cash balances to provide an adequate financial safety net.

Miller said one solution is to cancel $150 million in previously approved capital improvement projects, freeing up that amount of money.

Chopping those projects will be politically difficult, however. Several committee members said they viewed spending on construction projects as an economic development tool to provide jobs, which also will generate tax revenues.

Wallace is a member of the House Appropriations Committee, which she said intends to meet one week before the January session.