On January 21, 2020, the 30-day New Mexico legislative session begins. The 30-day session is referred to as the “short session” which are held in even number years while 60-day sessions occur in odd number years. Thirty-day sessions are limited to budgetary matters and issues approved for consideration and placed on what is referred to as the Governor’s call. Revenue bills, such as taxation, may also be considered during 30-day sessions.
$7.68 Billion DOLLAR BUDGET PROPOSED
On January 6, 2020, Governor Michelle Lujan Grisham released her proposed executive budget to be considered during the 2020 New Mexico Legislative session. The proposed budget is a $7.68 billion dollar budget reflecting a 8.4% increase with a 25% General Fund reserve set aside in case projected revenue levels do not materialize. Under the proposed budget, spending will again rise for the second consecutive year. If adopted by the legislature state spending will increase by $596.3 million, the 8.4% increase over the current fiscal year that ends June 30, 2020. Under the Governor’s budget, money is also being set aside in cash reserves in case projected revenue levels do not materialize.
The Governor’s increase in spending comes after several cash-lean years resulting in downsizing of government, at least a 15% reduction in state personnel and the slashing of state budgets to allow the previous Republican Administration to avoid any and all tax increases even if it affected essential services. The increase in budget is being fueled in large part by record-breaking oil production in the state’s southeast corner and the premium basin. Oil production has driven state revenue levels to an all-time high. Oil production royalty revenues has generated an estimated $797 million in “new” money for the coming fiscal budget year that begins July 1, 2020.
In a statement announcing her Executive Budget, Governor Lujan Grisham had this to say:
“This budget consists of both bold investments and prudent decisions that continue to fix what was left broken, addressing urgent needs and strategically investing in sustainable improvements over the long term – all at once. … We are investing for tomorrow and delivering today. … We are making bold investments and prudent decisions about sustainability all at once. … We are ensuring the growth we undertake is shielded from the outside economic forces that could, in the future, threaten our bottom line. … We recognize great opportunity necessitates both aggressive strategic action and fiscal responsibility.”
EDUCATION FUNDING MAJOR PRIORITY, AGAIN
New Mexico’s children continue to be the number 1 priority for the Governor in her Executive Budget for the 2020 session. Nearly half of the state spending increase proposed by the first-term Democratic governor for the budget year that starts July 1 would go toward education programs, from early childhood through higher education. The proposed budget contains an expansion of what has been labeled the “education moonshot” to cover education from cradle to career, with more than 47% of all new recurring spending going toward education, from early childhood to higher education priorities.
During last year’s 2019 legislative session, the legislature approved a whopping $3.2 Billion public education budget, a 16% increase over the previous year’s budget, out of the total state budget of $7 Billion. Included in the budget was a $500 million of additional funding for K-12 education. The 2020 Executive Budget expands the Public Schools budget by $200.3 million for a total General Fund recurring budget of approximately $3.4 billion in addition to a total of $42 million in one-time General Fund investments.
The proposed budget is close to $7.7 billion and includes a proposed 4% salary increase for New Mexico teachers and more money for school districts with a large number of “at risk” students. The state education system is still dealing with the Santa Fe District Court ruling that the state of New Mexico is violating the constitutional rights of at-risk students by failing to provide them with a sufficient education. The Judge found that it was clear that many New Mexico students are not receiving the basic education in reading, writing and math they should be receiving in our public-school system.
The proposed budget contains $200.3 million increase in the public school budgets. This includes the most significant back-to-back raises for educators in over a decade and increases in whole-child education, bilingual and multicultural frameworks, community schools, and STEAM education program.
The Governor’s budget maintains funding in the amount of $182 million for the K-5 Plus program and the Extended Learning Time program. These programs allow schools to extend their school year by 10 and 25 days. A $53 million increase to the at-risk index from 0.25 to 0.3 in the State Equalization Guarantee funding formula is being proposed. This increase builds on the $113.2 million in FY20 when the Lujan Grisham Administration almost doubled the at-risk index in the funding formula from 0.13 to 0.25.
The Governor is proposing a onetime $320 million new early childhood endowment trust fund that would help pay for early childhood education services. The endowment would increase state spending on prekindergarten, home visiting programs for new parents and other early childhood services. Lujan Grisham has previously described the endowment proposal for early childhood programs as a “prudent way” to expand spending on prekindergarten and reach “universal pre-K” that prepares every child to start school.
The Executive Budget Recommendation funds an additional $12 million to support educator and administrator development in the areas outlined in the Bilingual Multicultural Education Act and the Hispanic Education Act. The $12 million funding is considered critical to support low-income, Native American and Hispanic students, English language learners and students with disabilities which was singled out in the court ruling that the state of New Mexico is violating the constitutional rights of at-risk students by failing to provide them with a sufficient education.
CHILDREN, YOUTH AND FAMILIES DEPARTMENT
The Executive Budget includes a total increase of $22 million and a General Fund increase of $19.4 million for the Children, Youth and Families Department (CYFD). This includes funding for 62 new positions throughout the agency, including the protective services division and within the behavioral health services program. This addition builds on last year’s funding for new positions and brings the protective services division up to 863 funded positions.
The proposed Executive Budget includes funding of $8.1 million for rate increases for guardians, at-risk child care, the child advocacy center, safe and stable family contracts and kinship services. Kinship care providers are considered the backbone of our child welfare and foster family care. CYFD emphasizes prevention supports for at-risk children and youth and the proposed budget allots $8.5 million for behavioral health services.
EARLY CHILDHOOD EDUCATION AND CARE
The Executive Budget is proposing a funding increase of $74 million in General Fund to expand and improve on early childhood care services. Major components of the expansion include:
1. $26 million to expanding child care assistance by changing eligibility from 150% to 200% of the federal poverty level upon entrance and from 200% to 250% upon exit to serve an additional 4,163 children.
2. $15.6 million to provide wage supplements for over 3,000 child care providers statewide.
3. $8.4 million to expand private pre-k slots for three-year old children and three and four-year old children in mixed classrooms.
4. $11.5 million to expand public pre-k slots for four-year olds and conversion of part-day child care to full day child care and 637 new slots and 1,751 children to go from part time to full day care.
5. $3 million to expand home visiting services for over 1,000 families.
6. $3.5 million to expand the FIT program services to approximately 800 children.
7. $2.4 million to continue implementing provider rate increases based on the 2017 rate study.
$74 million is earmarked to increase early childhood services to establish a fully functioning Early Childhood Education and Care Department, including expanding child care assistance, raises for child care providers, more slots for pre-kinder garden, and expanded home visiting services
$320 million is earmarked to create the new “Early Childhood Trust Fund”, providing a dedicated and self-sustaining revenue stream to fund early childhood programs into the future.
The 2020 Executive Budget includes $839.9 million for Higher Education Institutions. The increase includes $5.6 million in formula funding for Instruction and General and $5.8 million for additional research and public service projects, which will total $141.1 million, and a $1.2 million increase for the Instruction and General line item for special schools.
Research and Public Service Projects include the following:
$1 million for the four flagship Centers of Excellence: Bioscience, Sustainable Agriculture, Cybersecurity, and Renewable Energy.
$2 million increase for the University of New Mexico Cancer Center to assist with their National Cancer Institute re-accreditation which is in addition to nonrecurring amounts for this purpose
$1.4 million increase for nursing programs within various institutions
$700,000 increase for early childhood and teacher education programs within various institutions
$100,000 increase for the New Mexico State University Dona Ana Branch Dental Hygiene Program; and a $375,000 increase for mental health programs.
The proposed Executive Budget creates a “New Mexico Opportunity Scholarship” that would benefit an estimated 55,000 college students and expand funding for child-care assistance and pre-Kindergarten programs statewide. The “Opportunity Scholarship” will cover the cost of tuition for students enrolled at New Mexico colleges and universities are expected to cost $25 million to $35 million. The scholarships offered will be aimed at covering the remaining gap for students after other awards and scholarships, including New Mexico’s lottery program scholarships or other sources. This funding will restore the initial promise of the Lottery Scholarship and re-establishing essential career pathways for New Mexicans across the state.
DEPARTMENT OF HUMAN SERVICES, MEDICAID EXPANSION, DEPARTMENT OF HEALTH
The Executive Budget proposal brings the Human Services Department’s (HSD) total General Fund budget to $1.22 billion. The Medicaid budget is increased by $55.8 million for a total Medicaid General Fund budget of $1.1 billion. The new funding will support Medicaid enrollment growth projections in Centennial Care stemming from targeted outreach and enrollment for New Mexicans who are Medicaid-eligible but not yet enrolled. The Department projects total enrollment of 850,000. Ensuring Medicaid is properly managed allows the Administration and State the flexibility to address the private health care market and responsibly oversee state investments in health care, which benefits New Mexicans while infusing billions of dollars into the state’s economy. Since the 2014 Medicaid expansion, more than 10,000 jobs have been created in New Mexico’s health care industry.
Major investments in caring for New Mexicans’ health and well being, including funding to serve additional New Mexicans on the Developmentally Disabled waiver waiting list and develop a new supports waiver service are being funded, as well as a $58 million increase to the Medicaid budget.
A $28.7 million increase to build a new behavioral health network, including community-based health services, is being proposed to effectively addressing substance use disorders, and addressing the behavioral needs of individuals in the justice system.
Funding is being provided to create a new Office of Wholesale Drug Importation within NMDOH to develop, plan, apply for & negotiate w/ the federal government for approval of a Canadian wholesale drug importation plan, working directly to reduce the costs of prescription drugs for New Mexicans.
$25 million is being proposed to create the “Kiki Saavedra Senior Dignity Fund”, addressing high-priority areas for seniors across New Mexico including transportation, food insecurity, physical and behavioral health services, case management, and caregiver services.
BEHAVIORAL HEALTH INITIATIVE
The single cruelest thing that former Republican Governor “She Who Shall Not Be Named” did was when she ordered an “audit” of mental health services by nonprofits in New Mexico based on questionable information. The audit eventually devastated New Mexico’s behavioral health care system.
In June 2013, under the direction of the former Republican Governor, the Human Services Department (HSD) cut off Medicaid funding to 15 behavioral health nonprofits operating in New Mexico. In 2014, more than 160,000 New Mexicans received behavioral health services, with most of those services funded by Medicaid, according to the Human Services Department. After the audits were completed, the former Republican Administration said that the outside audit showed more than $36 million in over billing, as well as mismanagement and possible fraud. Under the orders of the Republican Governor, Human Services Department agency brought in 5 Arizona providers to take over from New Mexico providers.
In early 2016, following exhaustive investigations, the Attorney General cleared all 15 of the healthcare providers of any wrongdoing and exonerated all of them of fraud. Even though the NM Attorney General found no fraud and cleared the nonprofits of fraud, the damage had been done to the nonprofits. With the Medicaid funding freeze, many of the 15 nonprofits could not continue and just went out of business leaving many patients without a behavioral health service provider. Lawsuits against the state were initiated by the mental health care providers.
Three of the five Arizona providers brought in by the previous Republican Administration in 2013 to replace the New Mexico nonprofits pulled out of the state. New Mexico’s mental health system is still struggling to recover.
Fifteen the behavioral health care providers forced out of business by the previous Republican Administration sued the State for damages. Since January 1, 2019 when Governor Michelle Lujan Grisham took office, 10 behavioral health nonprofits have settled their claims against the state with State Risk Management paying upwards of $15 million in damage to settle the cases. Governor Lujan Grisham has said repeatedly that the forced closure of the 15 behavioral health program caused severe disruption to New Mexico’s behavioral health system and had ripple effects on many families and businesses and also caused private health care costs to increase.
Governor Michelle Lujan Grisham’s 2020 Executive Budget Recommendation funds the multiagency Behavioral Health Initiative (BHI) for $28.7 million. The BHI has four primary goals:
1. Building a new behavioral health provider network;
2. Developing community-based mental health services for kids and families;
3. Effectively addressing substance-use disorder;
4. Effectively addressing the behavioral health needs of justice-involved individuals.
In order to address the behavioral health provider shortages and provide appropriate incentives to behavioral health providers so they can expand coverage across the state, the Executive Budget Recommendation includes funding to implement Medicaid behavioral health provider rate increases, supportive housing programs, and physician training assistance, as well as financial aid.
ECONOMIC DEVELOPMENT AND TOURISM
In November, it was announced that New Mexico has the 3rd highest GDP growth in the country. New Mexico now ranks in the top 10 for private-sector job growth nationally and has had the best year for job growth in the state since 2006. The state’s economy is finally turning around after so many years being affected by the great recession.
The 2019 budget made critical investments in projects qualifying under the Local Economic Development Act (LEDA), Jobs Training Incentive Program (JTIP) and Main Street programs that have contributed to the growth of the state’s economy. Increased funding was also provided to the tourism industry. A continuation of critical investments in economic development and successes in diversifying & expanding the economy, including $40 million for LEDA, $9 million for job training, and funds to grow outdoor recreation, film, & tourism activities is contained in the 2020 proposed budget.
The 2020 proposed Executive Budget contains funding to continue the successful investments made using the LEDA program of $40 million. $10 million will be used for rural infrastructure projects. The LEDA program has successfully encouraged businesses to come to New Mexico to stimulate economic growth in the state and leveraged $2.3 billion in private investments over the last six years. The FY20 goal is to create 2,500 jobs, and the addition of the rural fund will allow greater flexibility and opportunity for projects located in non-metro communities.
Last year, funding for tourism marketing was increased by $3 million. The 2020 Executive Budget Recommendation includes another $3 million increase, which will enable the Tourism Department to saturate our current markets being concentrated upon by the Department. The 2020 Executive Budget proposal funds an increase of $1.4 million for the Cooperative Marketing Program, which has a 1:1 matching fund component with local governments and nonprofits. $600 thousand has been earmarked to grow and enhance the brand extension program Certified New Mexico True by allowing for technical assistance and production support to state agencies and other partners. Nearly 300 products are now New Mexico True certified.
INFRASTRUCTURE, ROADS AND BRIDES
Governor Lujan Grisham is recommending $200 million in General Fund for roads, bridges and rail projects throughout the state. Last year, the Legislature and the Governor appropriated over $450 million in General Fund for state and local road projects. This year’s Executive Budget Recommendation, in addition to what was appropriated last year, will make significant headway in improving the roads in our state.
The State’s infrastructure needs continue to outweigh what is available for capital projects. Notwithstanding, according to the executive budget summary, the Lujan Grisham Administration is committed to putting tax dollars to work and ensuring projects begin faster and are completed faster without diminishing the integrity of the projects. Capital needs and deferred maintenance on public buildings across the state total $2.7 billion for FY21. This includes requests for local governments totaling $1.6 billion, state agencies totaling $752 million, higher education institutions, special and tribal schools totaling $339 million, and senior citizen facilities totaling $39 million. Funding for capital this year includes Severance Tax Bonds (STB) and General Obligation Bonds (GOB). Capacity for STBs is $362.3 million and the GOB capacity total is $198.9 million.
When it comes to public safety, the Governor’s Executive Budget provides funding to hire 60 additional State Police officers. There are more than 660 State Police officers across New Mexico. Right now, only about 60 of them are stationed in the Albuquerque area district, which covers 6 counties.
Then Executive Budget includes funding for the Department of Public Safety budget at $163.9 million, which will provide for a total of 60 new State Police officers, including equipment and training. Additional funding is included for ten new staff for forensic labs, including six new forensic scientists and a new data-sharing system that will address gaps in inter-agency communication, as well as $6.3 million for state police recruitment and retention initiatives.
It was on October 30, 2019 that Governor Michelle Lujan Grisham ordered the creation of the “Fugitive Apprehension Unit” to apprehend hundreds of criminal defendants across New Mexico who have not shown up for court hearings or wanted on bench warrants. The Fugitive Apprehension Unit consists of State Police officers and state Corrections Department staffers. The unit works with local law enforcement officials around New Mexico to track down and arrest people charged with committing violent crimes.
The increase of 60 additional State Police will give the governor the option to do more with the “Fugitive Apprehension Unit” as well as to conduct law enforcement surges as was done in Albuquerque last summer.
PERA SOLVENCY MEASURES
For the 2020 legislative session, Governor Michelle Lujan Grisham has endorsed a complex proposal to overhaul New Mexico’s chronically underfunded Public Employees Retirement Associatiob (PERA) proposed by Democratic legislative leaders. The proposal builds on the work of a PERA task force established by the governor with some major changes. The most controversial recommendations by her task force involved the 2% cost of living (COLA) currently guaranteed to all retirees.
According to media reports, the legislation will establish a “profit-sharing” model for the annual cost-of-living adjustments that most retirees now receive. Rather than an automatic 2% increase in their pensions each year, the actual amount would fluctuate, anywhere from 0.5% to 3%, depending on investment returns.
Under the proposed legislation, government employers and employees will pay more into the system with a schedule that phases in higher contributions. Other changes will help retirees who are older than 75, disabled or receiving pensions of less than $25,000 a year, despite 25 years of service.
In her 2020 proposed budget, the Governor is proposing a $76 million allocation for PERA but is not proposing any funding for Educational Retirement Board (ERB), the educators retirement plan.
Increasing teacher salaries to attract and retain teachers continues to be a major priority. For a second consecutive year of pay increases, the Governor is proposing a 4% increase for all teachers and education personnel costing $92.7 million. The Executive Budget Recommendation also includes funding for educator professional development of $17 million to support professional development and mentoring for teachers early on in their careers; educational leadership development and support; and educator recruitment, retention and evaluation.
The Governor’s budget includes a salary increase of 3% for all state employees totaling $27.6 million and 2% for all higher education employees, including much of the non-General Fund portion totaling $18 million.
See the full budget here: http://bit.ly/37FNFbt
Democratic State Senator John Arthur Smith, D-Deming, chairman of the powerfull Senate Finance Committee and fiscal conservative said the total spending amount proposed by the Governor is higher than under the legislative plan. Senator Smith also said the elevated reserve levels would give the state a cushion if oil prices fall or if an economic recession were to hit.
Republican State Senator Steven Neville, R-Aztec, said the governor’s spending plan bears some similarities to a competing plan that is still being crafted by the influential Legislative Finance Committee that will be released later this week and said:
“We’re kind of in the same ballpark when it comes to getting teachers better compensation and those kinds of things”
STATE REVENUE SURGE
According to news reports state revenue collections are roughly $273 million above projected levels, and will in all likely be even higher, due primarily to skyrocketing oil production in southeastern New Mexico that has led to a regional economic upswing. Royalties, taxes and other direct revenue from oil and natural gas production now make up more than 35% of all revenue collected by New Mexico.
The higher-than-expected revenue surge has the state on track to collect an unprecedented $7.97 billion in the budget year that ended June 30. Such revenues could allow for additional spending increases on public schools, roads, shoring up the PERA pension funds and other state programs in the upcoming 2020 legislative session.
New Mexico was already expecting a $1.3 billion budget surplus for the fiscal year. However, a Legislative Finance Committee revenue tracking report suggests that the final surplus figure will likely end up being larger. Most of the revenue windfall is due to an oil boom in the Permian Basin that has been driven by improvement in drilling techniques and production methods and has made New Mexico the nation’s third-highest oil producing state.
NEW MEXICO LEGISLATURE OFFERS OWN 2020 BUDGET PROPOSAL
On January 7, 2020, one day after Governor Michelle Lujan Grisham released her proposed executive budget, the New Mexico Legislative Finance Committee released its own 2020 proposed budget. The Committee’s proposed budget calls for about $7.5 billion in ongoing spending which is an increase of 6.5% over current levels. The Governor’s proposed budget calls for an 8.4% increase.
The difference amounts to $132 million in annual spending out of a $7.5 billion dollar budget. Both budgets will be considered and debated by both the House and Senate with the goal to reach a consensus during the 30 day session that begins on January 31.
AREAS OF AGREEMENT
According to the released legislative budget, the bipartisan Legislative Finance Committee (LFC) is supporting Governor Michelle Lujan Grisham’s plan to establish her proposed a new endowment fund to help pay for early childhood programs. Both the Governor’s proposed budget and the LFC recommendations include hundreds of millions of dollars to establish an early childhood education trust fund. Governor Lujan Grisham proposed $320 million and lawmakers are proposing $325 million. The trust fund would essentially be an “endowment fund” to be used in future years that would disperse funding for early childhood programs.
Another area of agreement is that the LFC budget revealed also calls for pay hikes for teachers and increased spending on public education very similar in scope to the Governor’s proposed budget recommendations.
Both the Governor’s proposed budget and the LFC budget suggest similar increases of $53 million to $57 million in a funding formula that provides extra money to schools and districts with a large number of “at risk” students.
AREAS OF DISAGREEMENT
The Legislative Finance Committee (LFC) is opposing the Governor’s new college scholarship program allocating $35 million in funding for a new scholarship program aimed at making college tuition-free for state residents. The legislative budget proposal doesn’t include funding for the program but instead targets $35 million in increases for financial aid programs, with a focus on low-income students.
Lujan Grisham is seeking $26 million to expand eligibility for a childcare assistance program for lower-income families. Lawmakers are proposing a mere $1 million extra for childcare assistance subsidies because federal funding might increase.
Under her proposed budget, the Governor is proposing a 4% salary increase for teachers, and state workers would receive 3% pay raises. The LFC is proposing a 3% pay increase across the board for teachers, school personnel and state employees, with targeted increases in a few cases, such as for bilingual and special education teachers and State Police officers.
The Legislative Finance Committee is recommending $150 million to help the state’s two main pension systems, THE PERA system and Educational Retirement Board (ERB) for educators. The Governor is proposing $76 million for PERA and no funding for ERB, the educators retirement system.
Democratic LFC Chairman State Senator John Arthur Smith, Democrat from Deming, said an oil boom in the southeast part of the state is helping provide the revenue to increase spending and maintain healthy reserves of 25%.
State Representative Patricia Lundstrom, a Gallup Democrat and vice chairwoman of the Legislative Finance Committee had this to say:
“Our difference with the executive is not that far apart,” “I feel like this is a very responsible budget.”
The Governor’s Spokeswoman Nora Meyers Sackett said the administration is optimistic about the coming budget talks and said:
“It seems unprecedented to have so much agreement at this point in the process and we’re very excited to be starting from a place where there is so much overlap.”
ANALYSIS AND COMMENTARY
In addition to her proposed Executive Budget, the Governor has made it known that she intends to add to the call bills calling for the legalization of recreational cannabis, Public Education Retirement Association (PERA) solvency measures, parole reform and red flag gun control laws allowing seizure of guns with a court order from those who pose an immediate threat to themselves and others.
One thing is for certain, the governor’s proposed budget is ambitious but the job of promoting her programs during the 2020 legislative session will be made much easier because of the oil boom that has propelled New Mexico’s government revenue to record highs. The fact that the Governor’s proposed budget and the LFC budget are so similar in scope should allow the legislature to consider other items placed on the call by the Governor.
The record surplus should allow the Governor to virtually fund all the education programs she wants, invest in capital projects and infrastructure as well as shore up the PERA pension funds, but only if the legislature allows her. Another major source of revenue for the state would be the legalization of the recreational use of marijuana, if done properly, with responsible regulation and taxation.
The 30 day New Mexico legislative session begins on January 21. Once the session begins, both budgets will be subject to legislative hearings in both the House and Senate. A final budget will emerge. The legislature has until February 20 to send the Governor the approved budget. Governor Lujan Grisham will have until March 11 to veto all or parts of the budget.