The 2024 New Mexico legislative session begins on Tuesday, January 16 at noon and ends on February 15 at noon. The 2024 legislative session will be a 30 short session where budgetary matters will be the primary focus.
NEW MEXICO LEGISLATIVE FINANCE COMMITTEE RELEASES BUDGET
On January 5, the New Mexico Legislative Finance Committee (LFC) held a press conference to announce introduction of its budget proposal for the fiscal year 2024-2025 and just one day after Gov. Michelle Lujan Grisham released her own proposed budget. The fiscal year begins July 1, 2024 and ends June 31, 2025. The LFC’s version is slimmer with just a 5.9% budget increase compared to Governor’s 9.9%. The LFC budget recommendation totaled $10.1 billion, retaining enough reserves to protect against future budget cuts and keep revenues growing for the next several year.
The allocation for public education, like the Governor’s, is the largest in the LFC proposed budget. The $4.4 billion recommendation is essentially the same as the governor’s. The LFC budget calls for across-the-board raises for state employees totaling 4%. The governor’s pitch includes a 3% raise for all state employees, plus bigger raises for state police and corrections, probation and parole officers.
Both budgets endorse the New Mexico Legacy Fund, a dedicated state fund for conservation signed by Lujan Grisham in 2023. The major difference between the two budgets is that Governor Lujan Grisham recommends $250 million while the LFC recommended a $300 million appropriation. The new budgeting tool would float funding evenly over four years while monitoring the performance of the program. The LFC is recommending it as a way to set aside this year’s revenue as a long-term funding plan. According to the recommendation packet, the program would “offer a chance to invest in new ideas,” such as pilot programs.
LFC Chair Senator George Muñoz, D-Gallup, said this at the news conference:
“I think this is a very sound budget. … It keeps the Legislature … and the state of New Mexico able to grow over the next couple of years without having massive cuts.”
LFC Vice Chair Rep. Nathan Small, D-Las Cruces, said the budget includes insurance against market volatility, and both representatives highlighted investments in workforce programs intended to boost education levels and employment in new industries
Lujan Grisham spokesperson Maddy Hayden said this in a statement:
“The Executive looks forward to working with the Legislature on a budget that lifts up all New Mexicans through continued investments in priority areas. … We are just beginning our review of the LFC recommendation and at this time do not have information on how the brand-new budgeting concept developed by the LFC of an ‘Expendable Trust’ would work.”
GOVERNOR MICHELLE LUJAN GRISHAM’S PROPOSED 2024-2025 STATE BUDGET
On January 4, Governor Michelle Lujan Grisham released her proposed 2024-2025 state budget that begins on July 1. She is proposing a $10.5 billion budget which is a 9.9% increase from the current fiscal year that ends on June 30.
The Governor has submitted a record breaking $10.5 billion budget where she is recommending the state capitalize on “record revenues” with $10.5 billion in recurring funds and $2.1 billion in one-time, nonrecurring cash infusions for the upcoming fiscal year budget.
Major increases in pay raises is being proposed for all state employees with even higher pay increases for law enforcement. The Governor is proposing a 3% pay raise for all state employees and teachers. State Police officers would be given a larger pay raise of 14% while corrections, probation and parole officers would get 7% pay raises. More than half a billion would be earmarked for law enforcement recruitment, pay, and equipment and support for other first responders.
The governor wants to put more than $3 billion toward healthcare initiatives to help subsidize patient care and draw more providers to the state. Hundreds of millions would also be allocated for economic development investments, roads and infrastructure, and shoring up the state’s water supply.
Lujan Grisham’s proposed budget includes provisions to keep more than a third of state revenues in reserve, in case of revenue shortfalls in the future. The New Mexico Constitution requires a balanced budget. However during the 2008 recession and an oil bust in the early 2010s, reserves proved insufficient to cover the losses.
As usual, public education is the biggest area for funding. More than $4 billion would go toward K-12 education to expand early childhood programs, train educators and boost teacher pay. A 7% budget increase from last year is being proposed for the Department of Public Education. $4.5 billion would go to summer and after-school programs, literacy programs and a new Structured Literacy Institute, among other programs.
Spending on public education would increase by $283 million, or 6.8%, to nearly $4.5 billion. One goal is to bolster specialized literacy programs, while founding a state literacy institute. Additional funds would help extend annual instructional time at public schools across the state. Republicans in the legislative minority oppose the push to expand public school calendars.
The Lujan Grisham administration hopes to add 2,000 slots for infant and toddler childcare and expand early preschool by 1,380 slots through increased state spending, while also bolstering aid to children being raised by grandparents. Legislators have expressed frustration in recent months with the results of sustained spending increases on public education. Statewide, the share of students who can read at their grade level is 38%. Math proficiency is at 24%. The state’s high school graduation rate hovers at 76%, well below the national average of 87%.
OIL AND GAS REMAINS LARGEST REVENUE SOURCE
As usual, oil and gas revenues still dominates state revenues and is makes up to almost 40% of the expected $13.05 billion in general fund revenues for the next fiscal year.
Although state revenues are still high, Department of Finance and Administration Secretary Wayne Propst acknowledged that growth is expected to slow. Propst said this in a statement:
“We’re fully aware that growth is projected to slow in future fiscal years, but the state is in a unique position to continue to make smart investments now, while maintaining historically high reserves. … It’s also important to note that as we improve health outcomes, lift families out of poverty and bolster the state’s economy, costs for programs and services go down.”
The Governor’s proposed budget also addresses clean energy initiatives. $20 million would be made available as low-interest loans to communities for projects that reduce carbon emissions, and $30 million would head to improving electric vehicle infrastructure in the state. The Governor’s Office is also pursuing incentives for the purchase of electric vehicles or plug-in hybrids to bolster new clean cars requirements adopted by the state.
But Larry Behrens, the communications director for Power the Future, a group that advocates for energy worker interests, wanted more from the “massive” budget recommendation.
MAJOR BUDGET HIGHLIGHTS
A breakdown of what the governor is asking by category for is as follows:
Water & Natural Resources
- $500 million capital appropriation from severance tax bonds for the Strategic Water Supply. Lujan Grisham announced the Strategic Water Supply program during a December trip to Dubai. It treats water for use in renewable energy production
- $250 million general fund transfer to the Land of Enchantment Conservation Fund, which feeds into the Land of Enchantment Legacy Fund
- $20 million to support low-interest loans to communities to implement projects that reduce carbon emissions
Housing & Homelessness
- $250 million for the New Mexico Housing Trust Fund
- $250 million to the New Mexico Finance Authority Opportunity Enterprise Revolving Fund to increase funding for affordable housing, including developments of low-income multi-family housing, down payment assistance for low and middle-income households, homeowner rehabilitation and weatherization programs, etc.
- $40 million for homelessness initiatives to coordinate and expand homelessness services statewide
- $33 million to expand early pre-kindergarten by 1,380 slots
- $101.2 million increase to the State Equalization Guarantee Distribution for the necessary adjustment to 180 classroom days
- $58.1 million for structured literacy, including $30 million for a new Structured Literacy Institute
- $43.5 million for healthy, universal school meals
- 3% pay increase ($96 million) for all educators
Health Care, Behavioral Health & Child Well-Being
- $2.15 billion in recurring general fund for the Health Care Authority, formerly the Human Services Department
- $100 million for the Rural Healthcare Delivery Fund
- $87.9 million for Medicaid provider rate increases to 150% for maternal/child health, primary care, and behavioral health
- $24.7 million to create a new Family Services division at the Children, Youth and Families Department
- $35 million for corrections and law enforcement recruitment statewide
- $5 million for the Governor’s Commission on Organized Crime
- $35 million for the Firefighter and EMT Recruitment Fund
Economic Development & Infrastructure
- $100 million to launch the New Mexico Match Fund, which will leverage federal funding for infrastructure investments, including roads, bridges, water, energy and broadband
- $25 million for the Local Economic Development Act Program (LEDA)
- $9.7 million for the Job Training Incentive Program (JTIP)
- $5 million in total funding for the New Mexico Media Academy
- $1.5 million special to the Economic Development Department to broaden New Mexico’s international market reach
COMMENTARY AND ANALYSIS
In the weeks during the session, state agencies will make presentations to the various legislative standing committees during the session including the House Appropriations and Finance Committee to discuss their budget requests. The hearings will allow for public comment and amendments and changes to the budget.
One thing is for certain, the governor’s proposed budget is ambitious because of the 9.9% increase she is proposing but the job of promoting her programs during the 2024 legislative session will be made much easier because of the oil boom that has propelled New Mexico’s government revenue to record highs.
The record surplus should allow the Governor to virtually fund all the education programs she wants, invest in capital projects and infrastructure but only if the legislature allows her.