David Arkin: PNT Correspondent
A financial committee’s prediction that New Mexico might face up to a $170 million budget shortfall by 2006 would create difficult spending decisions for the state, a local lawmaker said.
The Legislative Finance Committee, which released on Tuesday its five-year forecast, claims government spending is expected to outpace revenues by about $170 million in another year. And LFC officials said by 2008 that figure could hit $380 million.
Rep. Brian Moore, R-Clayton, said if the LFC’s prediction rings true, spending practices for lawmakers would have to significantly change.
“This indicates to me that we can’t spend what we did last year,” he said. “If the numbers stay where they are we will have to figure out how to operate with the same amount of money we are working with now. I think the tendency of all Legislatures — not just ours — is to spend money.”
Rep. Anna Crook, R-Clovis, said parts of LFC’s prediction didn’t surprise her.
“I could see this coming throughout the last session,” she said. “Former Gov. Gary Johnson kept a tight reign on things. He cut staff and would cut in every place that he could. With all of the spending that’s going on now, I wasn’t surprised that we would be facing a shortfall. But I was surprised with the amount. I knew it was going to happen, I just didn’t know to what degree.”
Crook said she recently spoke to a group and told them how pleased she was that New Mexico was one of the few states in the country that wasn’t facing a major budget crisis.
“I was fearful that this was going to be short lived,” she said. “You just can’t spend more than you earn. It just doesn’t work that way. We spend rather freely and I use the term ‘we’ loosely.”
The LFC forecast is intended to illustrate potential financial troubles and difficult budget choices that could confront lawmakers and the governor if revenue and spending trends continue.
In its forecast issued in 2003, the LFC projected spending would outpace revenue by almost $140 million in the upcoming fiscal year. However, that didn’t happen because of an improved revenue outlook and actions by lawmakers and the governor.
For the 2005 fiscal year, which begins in July, the Legislature and Gov. Bill Richardson agreed on a nearly $4.4 billion budget for public education and general government operations. That’s 6 percent higher than this year’s spending.
The LFC uses currently approved spending as a starting point for its forecast and then assumes increases — averaging about 3.9 percent — to cover inflation and population growth in 2006-2008.
The revenue projections take into account state personal income tax reductions for individuals enacted last year, which will lower projected revenue growth by $158 million in 2006 and $351 million when the tax cuts are fully implemented in 2008.
Moore said the LFC’s projections could change if gas continues to soar. State government has been reaping a revenue windfall recently because of high prices for oil and natural gas, which translates into more money for the state from production taxes and royalties.
“During the last several years we have been more conservative with LFC projections than we need to be,” Moore said. “But oil and gas can send you south in a hurry.”
And because betting on oil and gas carrying the state through the next few years is not a safe practice, lawmakers know that cuts will be coming.
“This is no different than your household budget,” Crook said. “In my book you always plan for the unexpected.”
Moore said lawmakers would need to cut the growth in spending.
“If we come in to the session saying we can’t spend another dime more than last year, I think we’ll be OK,” he said. “It’s not cutting spending, but cutting the growth in spending.”
The Associated Press contributed to this report.