On January 16 the 2024 New Mexico legislative session began at noon and it ends on February 15 at noon. The 2024 legislative session is a 30-day short session dedicated to financial matters where much of the session is devoted to exclusively approving the state’s annual budget.
On January 31, halfway through the session, the New Mexico House of Representatives voted 53-16 to send its nearly $10.2 billion 2024-2025 budget spending plan to the New Mexico Senate for approval and perhaps further amendments. House Bill 2 and House Bill 3 were combined for final approval by the House. The $10.18 billion budget has a 6.5% recurring increase from last years budget. On January 29, the bill passed the House Appropriations and Finance Committee on a 13-3 vote.
The overall $10.18 billion budget is very similar to the Legislative Finance Committee’s own recommended budget than the $10.5 billion proposed budget submitted by Gov. Michelle Lujan Grisham. It’s a 6.5% recurring increase from last year, which is slightly more than the Legislative Finance Committee recommended and less than what the Governor’s Office wanted.
PRESS CONFERENCE HELD
Prior to the House floor session, Democrats from the House Appropriations and Finance Committee held a press conference to discuss the contents of the budget. House Appropriations and Finance Committee Chairman State Representative Nathan Small (D-Las Cruces) said this:
“We have worked hard through the interim hearing from state agencies and talking with New Mexicans from all across the state on how to build the most dynamic, durable budget that we’ve yet had. … [the budget process was] the most open and transparent process we’ve had [to date]. … We had lots and lots of public comments, over 60 public comments. This is only the second year where the public has rightfully been able to [comment] on agency budgets … . This is a $10.18 billion budget which is a 6.5% recurring increase from last year. We’re investing heavily in areas like community safety, education, infrastructure, health care, housing, and much more.”
OIL PRDUCTION LEVELING OFF REDUCING REVENUES
The proposed budget 6.5% increase is smaller than double-digit expansions enacted by lawmakers last year and the year before as New Mexico’s unprecedented surge in oil production begins to level off. Lawmakers are preparing for an eventual decline amid major U.S. government investments and incentives toward a transition away from fossil fuels. Members of the House Appropriations and Finance Committee, which assembles the proposed budget, acknowledged the increase in spending over the past few years was largely due to the oil and gas industry.
Recent Legislative Finance Committee projection suggest that the cash revenues from oil and gas production will begin drying up in the coming years. That’s why Democrat leaders say this year’s budget invests more than a billion dollars in trust funds and other endowments to be used in the future.
Notwithstanding, the budget still includes multi-million-dollar funding boosts for almost every state department, including a 4% pay raise for public school employees and state workers. Lawmakers highlighted major investments in career technical education programs, pre-K expansion, road maintenance projects, Medicaid reimbursement rate increases, and statewide conservation funds – all while keeping roughly a third of the budget in reserves.
HOUSE BUDGET PASSES
On January 31, after one hour of introduction and two hours of debate by the House, the bill passed will fund state government for the next fiscal year which commences on July 1, 2023 and ends on June 31, 2024. The budget passed on a 53-16 vote with a handful of Republicans joining the heavily Democrat majority.
Democratic leadership and sponsors are touted the budget as a historic investment in state programs. It is also a budget that reflects the end of record revenues the state has enjoyed in recent years. According to State Representative Nathan Small, the budget enacted by the house represents an effort to spend the projected $3.4 billion budget surplus while also limiting spending growth to prevent sharper cuts in the future. He touted the House budget as the product of hundreds of hours of work and the most transparent budget process in history, giving credit to the amount of public comments the committee solicited in recent months.
Representative Small told lawmakers when asking for their votes at the end of debate:
“We are continuing to make new investments in the places that matter most for New Mexicans from economic diversification and new jobs, to health care professionals, our education system, public safety, infrastructure and housing. … This budget reflects all of those priorities in a considered and collaborative way.”
REPUBLICAN BUDGET SUBSTITUTE REJECTED
Members of the House Republican minority introduced an amended budget that they said would better reflect their priorities, seeking the consideration of a 238-page budget that would replace the majority’s 255-page budget. House Minority Leader T. Ryan Lane, R-Aztec, said that although he understands that the legislature is on a deadline, he had a floor substitute due to a worry that the proposed budget is “growing government, instead of growing the economy.” Lane’s substitute kept the recurring funds intact while removing non-recurrent spending deemed unnecessary by Lane while adding more funding for roads. Small considered the substitute unfriendly due to it leaving out funding for Water Trust Board projects. The House quickly voted to table the substitute on a 43-to-25 vote.
Rep. Larry Scott, R-Hobbs, introduced an amendment that would have prevented the New Mexico Environment Department from implementing or enforcing any rule establishing a new vehicle emission standard including an electric vehicle mandate. Small asked Scott if this was the appropriate place for a policy discussion, to which Scott answered in the affirmative. The House tabled Scott’s amendment on a 43-25 vote.
As in recent years, it is the oil and gas industry that has contributed historic revenues to the state’s general fund. The fossil fuel field works on a boom-and-bust cycle. State officials are now preparing to see a sharp decline in oil and gas revenues. According to a December report of the Legislative Finance Committee (LFC), state economists project general fund revenue growth will shrink 2.2% in fiscal year 2025, then return to a growth of over 3% in fiscal years 2027 and beyond
During the January 31 press conference, House Appropriations and Finance Committee Chairman State Representative Nathan Small touted trust funds included in the budget. He said these efforts will help protect the state when oil and gas revenues aren’t booming as they are now. Small said this:
“We’re at a unique moment in our state’s history, where we can be less fearful and more focused — less fearful on that roller coaster up and down; more focused on getting the very best bang for each buck and improving the lives of New Mexicans.”
There’s $1.2 billion in transfers from the general fund to trusts and other funds under the House approved budget bill, including $512 million for the government accountability trust fund. Small described the expendable fund as a reserve for the state should anything unforeseen happen. Of that, $216 million would be set aside and appropriated over a three-year period for evidence-based programs and approaches. Small said that would address things like an aging population, workforce and education. All of the appropriations are dependent on the passage of House Bill 196, or similar legislation, creating the government accountability and improvement trust and program fund, according to the bill.
Minority Floor Leader Rep. Ryan Lane, R-Aztec, said this expendable trust fund actually feels like recurring requests and would boost the budget’s recurring expenses to 8.35%. He said in an interview he supports project funding that impacts local communities but wants to be transparent about what it is. Lane said this on the House floor
“I don’t even know that I have an issue with the concept of the fund itself. … I just think that we should call it what I think it is, which is recurring funding.”
In contrast, Small said it would amount to less than 1% annually, at less than $100 million each year. In addition to the trusts, Small noted the $1.26 billion in nonrecurring special and supplemental appropriations.
MAJOR HIGHLIGHTS OF HOUSE APPROVED BUDGET
Major highlights of the House approved budget include the following:
- $1.2 billion for natural resources, housing and innovation
- $24 million to judicial branch agencies
- $7 million to support victim advocates, sexual assault victims and supplement federal grants for crime victims
- $11.7 million for the New Mexico Department of Health
- $1.96 billion to the Health Care Authority Department and $180 million for Medicaid
- $3 million for tribal health councils
- $19.6 million to expand Pre-K
- $4.43 billion in recurring funds for public schools. Annual spending on K-12 education would increase by 6.1% to $4.43.
- $50 million to the tribal Educational Trust Fund
- $20 million to pilot and evaluate evidence-based strategies to improve the Children, Youth and Families Department
- The Higher Education Department will receive $1.3 billion in recurring funds
- $100 million to develop a strong workforce
- $10 billion to establish a new Green Bank
- $300 million in the Lands of Enchantment Legacy Fund for water conservation, outdoor recreation, agriculture, and wildlife protection
- $150 million to the Department of Transportation for major infrastructure, maintenance and road improvements
HIGHLIGHTS IN SPECIFIC AREAS
Below are more details about how the House Budget in specific areas:
Under the House plan, the state will spend about $13.2 billion in recurring money each year on health care, along with more than $206 million in one-time spending called “special appropriations.” That figure includes the budgets for the newly created Health Care Authority, the Department of Health, the Retiree Health Care Authority, the Office of the Superintendent of Insurance, the Vocational Rehabilitation Division of the Public Education Department, the Miners’ Hospital of New Mexico, the Workers’ Compensation Administration, the Medical Board, the Board of Nursing and the Governor’s Commission on Disability. The House’s budget for health agencies is about $17,000 larger than the LFC’s recommendation, but $250,000 smaller than Lujan Grisham’s.
Prisons will get $372.8 million each year, along with $16.2 million in special appropriations. That includes spending for the New Mexico Corrections Department, the juvenile justice facilities run by the Children Youth and Families Department, the Sentencing Commission and the Parole Board. The House budget for the Corrections Department is the same as LFC’s proposal but nearly $21 million smaller than Lujan Grisham’s.
Overall, the House budget for the state’s judicial branch is $5.8 million larger than the proposal from the Legislative Finance Committee, but about $11,000 smaller than Lujan Grisham’s. The courts would receive $294.7 million annually, along with more than $26 million in special appropriations. That includes every district court in the state, the Bernalillo Metropolitan Court, the Court of Appeals, the Supreme Court, the New Mexico Compilation Commission and the Judicial Standards Commission.
The House budget for public safety is $2 million larger than the LFC suggestion, and $25,000 smaller than Lujan Grisham’s. Police and military would get $240.3 million each year, and more than $29 million in special appropriations. That includes the Department of Public Safety, the Department of Military Affairs and the Office of Military Base Planning and Support.
Prosecutors will receive $147.8 million every year, and about $14.4 million in special appropriations. That includes all 14 district attorneys’ offices across the state, the Administrative Office of the District Attorneys and the New Mexico Department of Justice.
Public defenders and family advocates will get $87.2 million each year, along with nearly $2.6 million in special appropriations. That includes the Law Offices of the Public Defender and the Office of Family Representation and Advocacy.
HOUSING TRUST FUND
The four parties who have so far recommended spending to address New Mexico’s housing crisis offered four very different numbers for how much that will cost. Sen. Nancy Rodgriguez (D-Santa Fe) is asking lawmakers to deposit $500 million in the state’s Housing Affordability Trust Fund, overseen by the New Mexico Mortgage Finance Authority. She doesn’t expect the Legislature to ultimately fulfill that request, but she said the trust fund has proven itself effective with a little more than $60 million it’s received over the last 17 years. The trust fund uses public money to support an array of government, nonprofit and private entities with developing affordable housing complexes, helping first-time buyers afford down payments and other programs. Officials claim the program has a 16-to-1 return on investment.
The House education budget largely reflects the Legislative Finance Committee’s recommendations, bucking some of Lujan Grisham’s proposals. Among notable absences is the governor’s proposed literacy institute, for which she requested $30 million to build. The Legislative Finance Committee recommended $3 million for planning and design.
The House budget adopts the following investments in line with both House and Senate Education Committee priorities:
- $49 million for literacy, career technical education and community school programs
- $14 million in early literacy support
- $55 million for culturally relevant and bilingual materials
- $62.7 million for 2% salary increases, bringing all school personnel up to $15 per hour
- $43 million to expand early childhood care
- $750,000 to support adult literacy programs
- $2 million for attendance programs
The $201 million total budget for the New Mexico Environment Department, smaller than the $215 million ask from the governor, was enacted. The 19% increase go toward staff salaries and rental costs, and help “bolster “ the agency’s regulatory responsibilities, according to the budget summary.
In one-time appropriations, House lawmakers agreed to give the environment department $1 million for pollution accountability, $1 million to “develop and implement initiatives that protect the public” from per- and polyfluorinated alkyl substances – also known as “forever chemicals.”
The surface water discharge permitting program is getting a boost. State officials raised concerns over the vulnerability of New Mexico’s waters after the U.S. Supreme Court last year changed what constitutes pollution-protected waters.
In addition to carrying over $680,000 from last year and accepting the executive’s ask for another $600,000, lawmakers added $7 million from the water quality management fund to develop and implement state surface water and groundwater permitting programs.
State lawmakers increased the Energy, Minerals and Natural Resources Department budget by 12% to $188 million which is smaller than the governor’s $198 million request.
In one-time money, the House committee allocated $250,000 for legal counsel, $1.7 million to match federal funds, an additional $2.5 million to address inspection and compliance backlogs in the oil conservation division and $225,000 to create a Rio Grande trail commission office.
Lawmakers approved another $10 million for a contract to provide low-interest loans for low-income communities for wind, solar, weatherization and geothermal energy intended to reduce carbon emissions.
There’s another $5 million for geothermal projects – half for a loan fund, and the other $2.5 million for development – contingent on several pieces of legislation passing.
For the New Mexico Office of the State Engineer, the House Appropriations and Finance Committee followed the LFC recommendation of $49.5 million, just under the $50 million request from the executive request. The agency requested a flat budget for most of its programming, but asked for $3.4 million for 38 more staff to implement and negotiate water rights. The Legislative Finance Committee recommended a $2.2 million increase from the General Fund.
Some one-time funds include $20 million over the next two years to settle water rights disputes with Pueblos and tribes.
The quoted breakdown of the budget is here.
Rep. Nathan Small said he wants the House to get the budget back from the Senate by the 21st day of the session, which is February 6.
WHAT’S NOT IN THE BUDGET
Gov. Michelle Lujan Grisham asked state lawmakers for much more in her proposed budget, including $30 million for a new literacy institute. That’s not in the budget, but lawmakers did include millions for literacy programs. The governor also asked for $500 million for affordable housing initiatives. House lawmakers only included about $120 million, but they say that’s still a monumental investment.
The House voted to approve a general fund budget of $10.18 billion, an increase of $621 million, or 6.5%, over last year. It’s less than the $10.5 billion Governor Michelle Lujan Grisham wanted to spend in the 2023-2024 fiscal year, but slightly more than what the nonpartisan Legislative Finance Committee recommended. The budget also maintains nearly one-third in reserves of the total recurring funding approved.
HOUSE REJECTS 180-DAY MINIMUM SCHOOL YEAR
A proposal from Governor Michelle Lujan Grisham would require schools across the state, including some in rural areas that historically have only met four days a week, to meet the 180-day minimum. The change drew major skepticism and opposition from rural Democrats and Republicans and many voted together add a clause to the budget bill that money appropriated to the New Mexico Public Education Department not be used to require school districts to meet for 180 days a year.
It was Gail Armstrong (R-Magdalena) who convinced lawmakers to adopt the one-sentence amendment to the budget to address how the state would fund public education. Armstrong told colleagues that putting the language in the budget was a way for the Legislature to assert its powers and show a unified voice against the governor’s policy. A bipartisan group of representatives voted to include the amendment in the House budget bill.
Links to quoted news sources are here:
COMMENTARY AND ANALYSIS
Wednesday, January 31 was the halfway point of the 2024 Legislature. Lawmakers will likely be having longer days and nights and packed schedules getting bills through the House and Senate committees and ultimately voting on the chamber floors. Legislation that will likely consume a large percentage of the remaining time is all the gun control legislation that is still pending and awaiting committee hearing. A related blog article on crime and gun control legislation can be found below.
There is very little doubt that the Senate will want to make changes, additions and deletions to the final budget. Notwithstanding, the House approved budget can be described as a very reasonable budget and it is likely to be approved quickly by the Senate.
Links to related blog articles are here: