New Mexico – Republican Gov. Susana Martinez and the Democratic-controlled Legislature will have about $250 million available for budget increases and to potentially allow for tax cuts in the upcoming fiscal year, according to an updated revenue forecast issued Monday.
Despite a sluggish economic recovery, the Legislature will start work in January for the first time since 2008 without a looming budget shortfall or the need to slash spending to avoid a deficit.
In the upcoming 2013 fiscal year, which starts next July, the state expects to collect nearly $5.7 billion in its main budget account. That's about $9 million higher than October revenue estimates, according to report outlined by top officials in the Martinez administration to the Legislative Finance Committee.
The state will have about $254 million in "new money" next year to allocate for programs, restore recent budget cuts or cover the cost of tax cuts, which the Martinez administration has said it's considering to help businesses and to boost the economy.
The $254 million represents the difference between projected revenues and current spending.
However, about $50 million of that will be needed to pay for expected changes in public employee pensions next year and part of the additional revenues likely will go to cover anticipated growth in Medicaid, which pays for health care for the poor and uninsured children.
State workers and educators started paying an extra 1.75 percent of their salaries for their pensions in July, but those retirement fund contributions will drop forcing the state to spend an extra $50 million starting in July 2012 unless the Legislature approves a change in law. The higher employee pension payments will drop automatically under current law if the state's revenues rebound by a certain amount.
The revenue projections, which were developed by economists for the administration and the Legislature, are important because lawmakers will use them in making budget decisions during the upcoming 30-day legislative session.
According to the latest report:
Revenues should be almost $21 million higher than expected in the current budget year, which started in July. Economists project revenues to grow 2.4 percent over 2011. Finance and Administration Secretary Tom Clifford and Taxation and Revenue Secretary Demesia Padilla told lawmakers that higher-than-anticipated revenues from the oil and gas industry account for most of the improvement.
The state will end the current fiscal year with cash reserves of $599 million, which is the equivalent of 11 percent of spending. However, the finance committee estimates that $100 million of that could be needed for one-time spending projects and to supplement this year's budget for some programs, including Medicaid.
About $299 million will be available for capital improvement projects from general obligation bonds, which are repaid with property tax revenues and must be approved by voters. Two years ago, voters rejected a bond issue for projects at colleges and universities.
About $130 million should be available for capital projects from bonds backed by severance taxes, which require approval of the Legislature but not voters.
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Copyright 2011 The Associated Press.