SANTA FE New Mexicos financial picture is improving and more than $360 million in new revenues will be available in the upcoming budget year, state lawmakers were told Thursday.
After several years of budget shortfalls and weak revenues, New Mexico faces the prospect of having additional money that could help restore recent cuts in programs, replenish the states cash reserves or potentially allow for tax reductions.
However, Republican Gov. Susana Martinezs top budget adviser warned legislators not to start a spending spree.
According to an updated financial forecast released to the Legislative Finance Committee at a meeting in Socorro:
Revenues in the just-completed 2011 fiscal year should be nearly $111 million more than previously anticipated. Economists expect revenues will be almost 10 percent higher than the previous year, but a third of the improvement is because of tax increases approved in 2010 to help plug a hole in the states budget. Part of the growth also comes from energy-related revenues because oil and natural-gas prices were higher than economists anticipated when they prepared a revenue forecast last December.
Revenues should be almost $120 million higher than expected in the current budget year, which started this month. Economists project revenues to grow 4.9 percent compared with 2011.
The state should collect about $5.8 billion in its main budget account in the next fiscal year, which starts in July 2012. That would mean about $367 million in new money is available to appropriate for programs and services when the Legislature meets in January to start work on the 2013 budget. That pool of money represents the difference between projected revenues and maintaining a flat budget little growth in spending next year except for Medicaid, which provides health care for about a fourth of the states population.
Although the new revenue forecast looks encouraging in some ways, the administration strongly believes that continued fiscal restraint and caution is still needed in both FY12 and FY13, Finance and Administration Secretary Rick May said in a statement.
He said New Mexico faced a range of financial challenges, including rising costs of health care, looming public pension obligations and the possibility that federal cutbacks to deal with the nations deficit will put pressure on states to pick up the tab for more services. Medicaid, for instance, is mostly financed by the federal government, but it accounts for about 16 percent of state spending in New Mexico.
Sen. John Arthur Smith, a Deming Democrat and Legislative Finance Committee chairman, said the revenue growth will allow lawmakers to replenish programs, such as a college scholarship endowment fund, that have been raided recently to balance the budget. But he said its unwise to start spending on new initiatives because of the continued uncertainty over New Mexicos economy.
The good news is its trending in the right direction, but its certainly not one that we should go out and say that we have a recovery, Smith said in a telephone interview.
The Martinez administration has directed state agencies to prepare zero growth budgets for next year. The administration will use those agency budget proposals to prepare its spending recommendations for the 2012 Legislature.
May said the higher-than-expected revenues in the just-ended 2011 budget year should be added to the states cash reserves. If that happens, the reserves will increase to about $491 million the equivalent of about 9 percent of state spending. The administration considers it financially prudent to maintain 10 percent reserves, according to May.
The improved revenue outlook could help public employees, who have seen their take-home pay decline as theyve contributed more into their pension programs while the state lowered its payments by a similar amount.
State workers and educators started paying an extra 1.75 percent of their salaries for their pensions in July and that will save the state nearly $50 million this year. Those higher contributions will continue in the next fiscal year unless the states revenues rebound by a certain amount. If the latest revenue improvements continue, however, the pension contributions for employees will drop starting in July 2012.