SANTA FE, N.M. – The New Mexico Legislature and Gov. Susana Martinez will have slightly more than $280 million to cover budget increases and tax cuts next year under a new forecast outlined Monday to lawmakers.
The revenue estimates will serve as the backdrop for lawmakers’ financial decision-making when they convene next month for a 60-day legislative session.
The state should collect about $5.9 billion in tax revenue in the fiscal year that starts in July, according to projections by administration and legislative economists. That provides a pool of so-called new money of about $283 million, which is enough for about a 5 percent increase in spending next year.
That amount represents the difference between current spending and next year’s revenue, and is traditionally considered the money available for budget increases or to offset tax cuts.
However, legislative and administration officials say about $72 million of that money will be needed to cover previous commitments to boost state contributions to public-employee pensions and to help pay for Medicaid, which provides health care to the poor and uninsured children. That would leave slightly more than $200 million to cover spending increases for other programs and services. Public schools account for the largest share of state spending, about $2 of every $5 in this year’s budget.
Tom Clifford, secretary of the Department of Finance and Administration, told the Legislative Finance Committee that the governor will propose tax cuts to the Legislature next year. One possibility is a reduction in the state’s corporate income tax to help promote economic development and job growth.
The state ended the last budget year in June with cash balances of about $755 million – the equivalent of nearly 14 percent of spending. The reserves provide a cushion for the state in case of unexpected financial problems.
Administration officials cautioned that the state’s budget and economy face uncertainty because of the negotiations between Congress and President Barack Obama over how to avoid a “fiscal cliff” of federal spending cuts and tax increases. New Mexico is heavily dependent on federal spending, in part because of military bases as well as Los Alamos and Sandia national laboratories.
“There are a lot of risks in this outlook,” Clifford said of the revenue forecast.