SANTA FE, N.M. — New Mexico's governor is proposing a nearly 10% increase in general funds for the coming fiscal year to strengthen housing options, children's literacy and access to health care, with additional payouts for the purchase of electric vehicles.
Democratic Gov. Michelle Lujan Grisham on Thursday released the $10.5 billion budget plan for the fiscal year that runs from July 2024 through June 2025. It would increase general spending by about $950 million over current annual commitments.
The Democratic-led Legislature is developing its own competitive spending plan ahead of a 30-day legislative session that begins Jan. 16. Lujan Grisham can veto any budget provisions approved by lawmakers.
The nation's No. 2 oil-producing state expects a multibillion-dollar surplus for the next fiscal year, driven largely by oil and natural gas production in the Permian Basin that underlies southeastern New Mexico and western Texas.
The Governor has identified affordable housing as a key priority and is proposing one-time spending of $500 million to expand options through down payment options and to finance affordable housing and related infrastructure. The state would separately use $40 million to launch a statewide homelessness initiative.
In November, voters expressed frustration over rising home prices in fast-growing Santa Fe by approving a tax on townhouses to fund affordable housing initiatives.
Spending on public education would increase by $283 million (6.8%) to nearly $4.5 billion – the largest share of the annual general fund.
One goal is to strengthen specialized literacy programs and establish a state literacy institute. Additional funds would help extend annual instructional time in public schools across the state. Republicans in the legislative minority are resisting the push to expand public school calendars.
The Lujan Grisham administration hopes to add 2,000 childcare spots for infants and toddlers and expand preschool by 1,380 spots through increased state spending, while also boosting assistance to children raised by grandparents.
Lawmakers in recent months have expressed frustration with the results of the continued increase in public education spending. Statewide, the share of students who can read at their grade level is 38%. Mathematics proficiency is at 24%. The high school graduation rate hovers at 76% – well below the national average of 87%.
Lujan Grisham pledged in a statement to “continue to spend within our means, responsibly and with accountability in mind.”
Her budget proposal includes a 3 percent pay increase for employees at executive agencies and public schools statewide — and larger pay increases of 8 percent for corrections officers and 14 percent for state police.
Economists at state agencies say income growth in New Mexico is slowing but far from over, as lawmakers grapple with how much to spend now or set aside for the future in case the world's oil appetite falters.
The governor's budget outline leaves as much as $500 million in wiggle room for lawmakers to approve tax cuts and tax incentives that encourage the adoption of electric vehicles and other low-polluting cars and trucks.
New Mexico regulators recently adopted an accelerated timeline for automakers to nearly phase out gasoline- and diesel-powered cars and trucks — amid concerns about the affordability of electric vehicles in a state with high poverty rates.
In many other states, an era of rising budget surpluses and broad tax cuts could end this year as pandemic-era revenue growth fueled by federal spending and inflation fades.