Southeast New Mexico lawmakers still worried for budget deficit as special session concludes

Southeast New Mexico lawmakers had grave concerns for the state’s finances as a special session seemed to be nearing its conclusion during significant financial shortfalls brought on by the COVID-19 pandemic.

The session was convened on June 18 to allow lawmakers to negotiate and balance the state’s budget and contend with an estimated $2 billion deficit attributed to historic drops in oil prices led by shrinking fuel demands brought on by the global health crisis.

The pandemic also led to Gov. Michelle Lujan Grisham mandating statewide business closures in hopes of slowing the spread of the disease, which many blamed for shrinking revenue from gross receipts taxes (GRTs) tied to stymied business activity.

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By Monday, the New Mexico Senate had adjourned with a budget balanced using $780 million in state reserves, $750 million in potential federal relief funds and another $600 million in spending cuts.

New Mexico House Minority Leader Jim Townsend (R-54) said the House reconvened on Monday as law enforcement reform legislation was to be taken up aimed at increasing requirements for police to wear body cameras and to remove qualified immunity that is often used to protect officers who injure or kill a person during an investigation.

But the most important aspect of the special session, Townsend said, was the budget.

More:Southeast New Mexico lawmakers to balance budget, protect road projects in special session

He questioned a $250 million spending increase included in the budget proposed by Lujan Grisham and was concerned another $2 billion shortfall could plague lawmakers going into the 2020 General Session.

“The budget was troublesome,” Townsend said. “We’re looking at a shortfall going into 2021, and our revenue is still upside down. I think we should have trimmed more.”

Townsend also cautioned that the federal relief funding coming from the CARES Act was accompanied with a stipulation that the money could not be used to “backfill” state budgets and would require an act of Congress to be used to balance New Mexico’s finances.

“If the President stands his ground and continues to not allow that, it will have to be taken out of reserves. That just makes the problem worse,” Townsend said. “We’ll have less reserves going into a $2 billion deficit which is pretty challenging.”

More:Oil and gas leads New Mexico's budget woes, programs could be cut in special session

Not being able to use CARES Act funding would mean the state would have to dip deeper into its reserves, Townsend said, depleting them as low as 11 percent.

Unencumbered capital projects will be swept, meaning future infrastructure efforts could be delayed, he said, and New Mexico taxpayers could be forced to shoulder the burden.

“We have no choice,” Townsend said. “What is being set up is a process for higher taxes. If the economy doesn’t turn around, if GRTs don’t come back, if oil prices don’t come back up, they’re going to have to raise taxes.”

More:As New Mexico preps for special budget session, rural communities may see COVID-19 relief

As for road improvements in southeast New Mexico, intended to relief constraints as heavy oilfield traffic moves through residential areas such as Carlsbad, Townsend was cautious to expect they will proceed under the budget cuts.

“I think everything is on the chopping block,” he said. “When you’re in this situation, nothing is safe.”

Rep. Cathrynn Brown (R-55) said although $75 million in road funding was sent back to the State’s general fund, mostly from road projects still in preliminary stages, ongoing projects in southeast New Mexico were not impacted during the session.

More:New Mexico lawmakers fight for federal relief for rural cities amid coronavirus pandemic

“I’m happy to report we have not lost any of our projects’ funding,” she said. “Those projects will continue.”

But for the rest of the budget, Brown worried that spending had increased, and that federal effort would not be available – even hypothetically – in 2021.

“That doesn’t make any sense to me,” she said of increased spending. “That federal funding wont’ be there in 2021. We’re digging a deeper hole.”

More:New Mexico political leaders look to support rural communities in COVID-19 relief funding

Brown said she expected New Mexico to take up to five years to recover employment and revenue to pre-pandemic levels experienced in March before the government-required business closures, travel restrictions and subsequent decline of the oil industry.

“I believe we’re heading into a very slow recovery. New Mexico usually recovers slower than the rest of the nation,” she said. “So many things have to happen in sequence. The bottom line is we need to have people living their lives again.”

Sen. Gay Kernan (R-42) said if the crisis persists, the January 2021 session could see even more challenges for lawmakers, but the special session did result in a balanced budget to carry the state to its regular session without raising taxes.

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“The State of New Mexico will face a far more difficult situation in January 2021. The solvency plan isn’t perfect but as a participant in reaching consensus among my fellow Senators, I support the work that has been done,” Kernan said.

“To all who have voiced concerns about the reduction to their budgets during this session, I say buckle up and get ready because the ride will be a rough one in January.”

Townsend said he was somewhat optimistic as the price of oil saw some regrowth from historic lows in April, while the COVID-19 infection rate appeared to be lessening and lawmakers hoped the state would be allowed to enter a second phase of businesses reopening to restore some of the GRT revenue losses.

More:Carlsbad restaurants re-open amid COVID-19 pandemic

“Hospitalizations are down, even as things are opening up,” he said. “There’s no guarantee, but it’s not all doom and gloom. You just have to be careful.”

The COVID-19 health crisis could have been dealt with better, Brown said, if Lujan Grisham had engaged more with lawmakers in developing initiatives aimed at slowing the spread of the virus while supporting New Mexico businesses.

She said the New Mexico Constitution requires that during an emergency declaration, the Legislature is immediately consulted by the Executive branch.  

That didn’t happen, Brown said.

“It’s so wrong that the governor has kept it all in her wheelhouse,” Brown said. “This whole thing would have been better managed if she brought in the Legislature. We have the pulse of our districts.

“The Constitution is very clear that the Legislature has a role in the decision-making during a disaster emergency. She (Lujan Grisham) has excluded us."

Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.