Confronted by a huge budget deficit caused by rapid spending increases in high-revenue years, New Mexico’s governor approved a bill significantly reducing government spending.
Gov. Susana Martinez (R) signed Senate Bill 9 into law in late October, approving across-the-board spending cuts for almost every state government agency to close a projected $450 million deficit.
State Sen. John Arthur Smith (D-Deming), a sponsor of the bill, says New Mexico lawmakers in both parties worked together to help solve the state’s spending problem.
“The bottom line was, as chair of the Senate Finance Committee, I had met several times with the minority leader on that,” Smith said. “We came up with a consensus revenue solvency package where we could have enough votes to have the emergency clause on, which means it also had to have a lot of bipartisan support.”
Smith says the state government has become too reliant on taxes on oil and gas production.
“The reason we’re in this position, principally, is the collapse of the oil and gas revenues from the extracting industries,” Smith said. “As a result, we had smoked through all of our reserves. Typically, New Mexico keeps about 10 percent in reserves. Most states keep around 5 percent, but we do that because of the volatility of oil and gas. We smoked through that.”
Spending Too Much
Paul Gessing, president of the Rio Grande Foundation, says the bill for past spending increases is now coming due.
“The general fund grew quickly under Gov. Bill Richardson, until the budget crisis of 2008,” said Gessing. “It has ebbed and flowed but shrunk somewhat overall since then. That said, when you compare New Mexico’s per capita spending to other states, and especially our neighbors, we are quite high.”
Calls for Leadership
Gessing says Martinez should take a more active role in the budget process.
“Martinez has been unwilling to outline a clear, coherent strategy for reducing the budget,” Gessing said. “To her credit, she has taken a strong stance against raising taxes, but she has relied on the legislature to come up with specific cuts. What we’ve seen are ‘across-the-board’ and position vacancy cuts when what we need are targeted cuts to address bloated and unnecessary spending that make government operate more efficiently.”
Gessing says lawmakers should look for ways to make the state’s workers freer and more productive in 2017.
“Martinez has endorsed right to work, which is great,” Gessing said. “We need to look at tax reform and consider broad regulatory reform on everything from Davis-Bacon to occupational licensing. Both issues need to be addressed: [improving the] private sector while right-sizing government.”