Here They Come

On Tuesday, Jan. 16, New Mexico's 112 lawmakers will descend on the Roundhouse like a plague of well-intentioned locusts for the annual legislative session. It's an even-numbered year, so they are constitutionally limited to passing and paying for a budget and whatever else the governor decides to put on their plates for the next 30 days.

While she hadn't released her agenda by press time, Gov. Susana Martinez has revealed her budget plans and anti-crime wishlist. Many of those crime bills won't go anywhere because she and the Democrats who control the Legislature are fundamentally at odds. We've mined her other proposals and talked to Republicans and Democrats in the Legislature to get a handle on what else to expect.

Check out the big budget

After two years of turning over the proverbial couch cushions to find every last cent, New Mexico legislators will have $200 million more to spend, and possibly more. Despite efforts by Gov. Susana Martinez to diversify the state's economy away from the government and oil and gas, we're still largely dependent on both. Oil prices have rebounded and seem to have stabilized (SFR will have more on that next week), so there are whispers that the budget could get quite a bump when economists update lawmakers in February.

"What a difference a year makes," says a relieved-sounding Senate Majority Leader Peter Wirth, D-Santa Fe. "Literally, we were sitting here a year ago with a $69 million shortfall in the current year's budget and a huge hole to fill for 2018."

"We've had to make some pretty tough decisions," Sen. Stuart Ingle, R-Portales, explains on the phone as he's driving back to his eastern New Mexico district. "But this year, we should be able to fund raises for state employees and schools and things like that. … And I think we're going to have enough to get our reserves built back up to 10 percent."

Election year sessions like this one can be controversial, but the budget rolled out by the governor and the one proposed by lawmakers are eerily similar. Both suggest across-the-board raises for state employees—Martinez suggests 1 percent and lawmakers add an additional half a percent to that. They both provide extra money for government-funded health care, though at different amounts.

Martinez wants to raise taxes on nonprofit hospitals and use that money to leverage matching dollars from the feds. Republicans have bristled at that suggestion, and Democrats might be actually be closer to the governor on the issue. They see it as a way to potentially boost Medicaid reimbursement rates to those very same hospitals, thereby giving a nod to medical providers who've been complaining about those rates for years.

Expect more than $60 million to go toward stuffing money back into the couch cushions to replenish various accounts that were cleaned out in tough times.

"There's a bunch of money we have to put back into all these funds so that they can fulfill their functions," says Speaker of the House Brian Egolf, D-Santa Fe. Both he and Wirth pointed to the need to replenish the public financing fund that pays for campaigns of Public Regulation Commissioners and judicial races. Money will also go back into reclamation funds for environmental cleanup.

"Anything beyond a flat budget would be a bonus. It would be gravy," Egolf tells SFR. "And anything above that should go to public education, public safety and health care."

Like Ingle, the Speaker says he's anticipating a relatively calm legislative session.

"My Spidey sense for conflict and rancor has not been going off," he says. Other longtime legislators have told him they expect an angry governor who intends to go out with a bang, but, he says, "I didn't get any indication from her that she's going to do that."

Learn ‘em up

Last year, the big issue was how much to scrape from cash balances maintained by schools. Districts keep fairly robust cash accounts to do things like pay for insurance, utilities and unexpected costs during the school year. The governor urged lawmakers to sweep those accounts to pay for the budget. They negotiated, but ultimately complied.

This year, lawmakers will try to provide money to help bring those accounts back up to a more comfortable level.

Teachers also stand to see a pay increase. Martinez is proposing a 2 percent raise for teachers, with bonuses for highly effective educators. Lawmakers have offered a 1.5 percent hike, plus a boost to the base salary for all three levels of the state's tiered teacher pay structure.

"We're in trouble in our educational system because we're not paying very well and yet our expectations are very high," says Albuquerque Democratic Sen. Mimi Stewart. She points out that fewer college students are on track to become teachers, and current teachers are leaving for greener pastures or greener paychecks.

Lawmakers have proposed $27 million more for early childhood education programs, including the governor's pet K-3 Plus program, which tries to narrow the achievement gap for at-risk students by lengthening the school year from kindergarten through third grade.

Martinez has focused her additional funding on material for classroom instruction as well as some of her other favorite programs. The state will be rolling out new science standards for the first time in 15 years, and there's a significant cost that goes along with that.

The governor has also proposed spending $6 million to install security systems in some schools.

Save it for a rainy day

The Legislature has never had a true rainy day fund. What's that? You've just heard a politician say we do? Well, chances are you've heard them refer to the state's permanent funds as rainy day funds. That's a misnomer at best and deliberate obfuscation at worst.

Before you grab your pitchfork and torch and head to the Roundhouse, allow us to explain—because, in fact, there is now a true rainy day fund that you and every other policy-minded person should know about.

The permanent funds, the two largest of which total about $22 billion, aren't there for rainy days. They're in place for every day; hence the name "permanent fund." They deliver a ton of money (likely more than $950 million this year) to the state and save us a lot of tax in doing so. Spending more from them requires a constitutional amendment.

The real rainy day fund is called the Tax Stabilization Reserve. It's so sexy you may not be able to handle reading further, but please do. The general principle is that whenever oil and gas revenue to the state exceed the five-year rolling average, the excess gets lopped off the top and tossed into a savings account.

During the last special session, lawmakers eliminated the possibility that extra money could be automatically refunded to taxpayers if it reached a certain level. That may not sound like a good thing, but the reality is that, wary of losing revenue, the Legislature never—not one single time—allowed the reserve fund to get that high. They spent everything they had.

Now, they can only spend it if there's broad agreement between the governor and the Legislature. If they'd done this a decade ago, there would have been $365 million to help bail out the state instead of cutting budgets and clearing out reserves.