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New Mexico governor unveils plan for budget shortfall

Posted January 10

— New Mexico Gov. Susana Martinez called on Tuesday for further belt tightening by state government as she unveiled a budget proposal to close the state's general fund deficit and restore depleted reserves, while sticking with her vow to avoid tax increases.

The budget plan for the coming fiscal year preserves funding for economic development initiatives and public safety agencies and extends recent spending reductions for other agencies and deepens cuts to the legislative branch and state universities, colleges and specialty schools.

New solvency measures would shrink overall compensation to state employees and public school teachers by decreasing government pension contributions to the state's two main retirement funds by 3.5 percent of pay. Government employees would contribute more to maintain the same benefits, with less take-home pay as a result.

"This sends a message that it's up to state government to tighten its own belt — not our hard working families," the Republican governor told reporters. "Furthermore this proposal will ensure that we have a strong, healthy savings account for the next oil and gas downturn or the next time federal government fails us."

Amid a sustained downturn in the oil sector that has sharply reduced state revenue, New Mexico has nearly exhausted its operating reserves and confronts a $67 million general fund shortfall for the fiscal year ending June 30.

This year's budget gap would be filled and reserves replenished to just over $200 million largely by using funds from idle public accounts — including $120 million from public school district reserves.

The governor's plan for next year would hold state general fund spending nearly flat at just over $6 billion.

New Mexico is struggling to cover its rising share of Medicaid health care costs for the poor and disabled, as the federal government gradually reduces subsidies for the 2014 expansion under the federal Affordable Care Act. State obligations are expected to increase by about $80 million next year to just over $1 billion, or $1 of every $6 spent on the program.

The state's budget crisis has taken a toll in courtrooms where overburdened attorneys have denied legal counsel to poor defendants, at state museums reeling from layoffs and admission hikes for state universities subject to the deepest overall funding cuts. Those agencies would see no reprieve next fiscal year under the governor's plan.

"We will have to have fewer cases," said Bennett Baur, New Mexico's chief public defender.

The judiciary also has warned that it may soon exhaust funding to pay jurors, interpreters and witnesses for their costs. The governor is encouraging the Administrative Office of the Court to pursue legislation to reduce per diem payments to jurors who now get about $50 daily, as well as further reduction in travel reimbursements of 29 cents per mile for jurors and witnesses.

The Legislature convenes in Santa Fe on Jan. 17 to deal with the budget crisis and a broad range of policy initiatives during a 60-day session.

Martinez's solvency plan spurns preliminary proposals by lawmakers to increase taxes on gasoline to boost reserves and increase local spending on roads and bridges. It also shuns proposals to freeze ongoing, gradual reductions to corporate income tax rates, to tax sales by out-of-state online retailers, and broader reforms that might restore taxes on food to help reduce gross receipts taxes on businesses.

Her proposed changes to state employee pensions were designed to prevent more drastic measures such as furloughs and salary cuts, administration officials said. Similar measures were implemented temporarily in the aftermath of the 2007 recession.

Carter Bundy, a political representative for the American Federation of State, County and Municipal Employees, called the pension contribution changes "a pure pay cut" and expects many lawmakers will object.

"It's just a way to take more money from teachers, corrections officers, nurses, janitors and blue collar workers," he said.

A spending increase of $4.4 million or more is proposed for the Corrections Department. The Children, Youth and Families Department is scheduled to receive a slight budget boost under Martinez's proposal.

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Associated Press writer Russell Contreras in Albuquerque contributed to this report.

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