New Mexico Senate endorses budget bill emphasizing savings during oil sector windfall

SANTA FE, N.M. — New Mexico would set aside more than $1 billion to guarantee tuition-free education and maintain government spending in case oil production fades in the transition to cleaner energy sources, under an annual spending plan approved by the Senate on Monday.

The 31-10 Senate vote sends the bill back to the House for agreement on the amendments. The Democratic-led Legislature has until Thursday afternoon to send a budget bill to Democratic Gov. Michelle Lujan Grisham, who can approve or veto any provisions.

The bill, as amended, would increase annual general expenditures by $653 million (or 6.8%) to $10.2 billion for the fiscal year running from July 2024 through June 2025.

The increase in state spending is dwarfed by more than $1.3 billion in general fund transfers to new endowments and trusts intended to support college and job training scholarships, housing development, conservation programs and autonomous Native American education programs.

Lawmakers expect a budget surplus of $3.5 billion for the coming fiscal year, largely driven by oil and natural gas production in the Permian Basin that overlaps southwestern New Mexico and west Texas.

Republican Sen. William Burt of Alamogordo urged his colleagues to support the bill “because oil and gas won’t always be there for us.”

“We have to look beyond the coming years. We need to look at the long future of New Mexico,” said Burt, one of six Republicans who voted for the spending bill.

The budget plan includes a new $959 million trust to guarantee permanent tuition-free education at no cost to New Mexico residents — an initiative championed by Grisham since he took office in 2019. Public scholarships are still supported in part by lottery ticket sales.

The bill allocates $512 million to a “Government Results and Opportunity Fund” that would underwrite a variety of new programs during a three-year vetting period before future funding is guaranteed.

Another $75 million would help state and local governments compete for more federal infrastructure spending from the Inflation Reduction Act, the Biden administration’s signature climate, health care and tax package.

A nature conservation fund set up in 2023 would receive an infusion of $300 million. Democratic Senate Majority Leader Peter Wirth said this would guarantee annual payouts of about $21 million to a range of conservation programs at state natural resource agencies, from agricultural soil improvement programs to the conservation of endangered and big game species.

A revolving loan fund to finance construction would receive an infusion of $175 million to expand the inventory of both residential and commercial buildings.

“New Mexico, you are not a poor state,” said Sen. George Muñoz of Gallup, the Senate’s chief budget negotiator, urging his colleagues to endorse the budget and its investment strategy.

Democratic Sen. Bill Soules of Las Cruces voted in favor of the bill, but warned that the state cannot lose sight of pressing concerns like child poverty while building savings and investments. The bill includes funding for universal free school breakfasts and lunches.

“Are we afraid of the future and so afraid that we start putting money aside for the future instead of meeting the needs of today?” Soules said. “Ensuring that children in New Mexico don’t go hungry, aren’t abused and have a place to sleep at night – these are all our obligations.”

Major annual spending increases include a 6.1% increase in K-12 public school funding, to $4.4 billion.

Medicaid spending would increase by $180 million, or 11%, as federal subsidies for the pandemic-era program decline and New Mexico increases payment rates to medical providers, including care for women with newborn children. The budget bill also increases wages by 3% for state employees and staff at K-12 schools, state colleges and public universities, at an annual cost of $214 million.

It would funnel more money to rural hospitals, literacy programs, state police salaries, safety net programs for seniors and road construction and maintenance.

Several provisions of the budget are subject to the adoption of accompanying legislation:

– New Mexico would become the 14th state to guarantee paid time off to workers if they are seriously ill or care for newborns and loved ones, under a bill that heads to a decisive vote in the House of Representatives on Monday after approval by the Senate . The budget would provide at least $24 million to launch the program, with the money remaining through a combination of employee and employer contributions.

– Final approval is still pending on changes that would lower personal income taxes across the income spectrum, collect more taxes on investment income and provide tax breaks for the purchase of new and used electric vehicles that can be combined with federal subsidies. The state government would lose about $220 million in annual revenue. The bill passed the Senate on a 26-13 vote on Monday and is awaiting a vote in the House of Representatives.

– Final approval was also awaited on Monday for a number of new donations and trusts.