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Legislators React to State Revenue Forecast

By Jim Owen

Should state officials spend "new money" projected for next year on programs and services, save it for future needs, or take advantage of the opportunity to reduce taxes? Legislators representing Grant County have differing opinions.

Members of the Legislative Finance Committee (including Sen. Howie Morales, D-Silver City) learned about the latest state revenue forecast during their meeting in Las Vegas, NM, on Monday.

Officials of Gov. Susana Martinez's administration reported that, based on current trends, $285 million in additional funds will be available for the 2015-16 fiscal year. The main reason for the increase is that oil and gas extracted in New Mexico are being sold at higher prices.

Morales warned against spending too much of the money. He stressed the importance of maintaining the state's 10 percent budget reserve.

"With the volatility of oil and gas revenues, the reserve needs to be at a healthy level," Morales told the Beat. "I would caution about new initiatives or programs. We haven't fully recovered from the recession."

He said lawmakers need to "keep in mind" that next year's budget could be negatively affected in three ways:

1. A court will soon decide the cost of a settlement with state employees, who won a lawsuit to earn back pay.

2. The federal government, which found New Mexico non-compliant with special-education funding regulations, could demand as much as $60 million from the state.

3. New Mexico might not receive its share of tobacco-settlement money ($24 million to $40 million), because the state was deemed non-compliant with the settlement agreement.

Morales said some of the new revenue should be used to restore 2008 budget cuts that affected services for seniors and disabled people; as well as public schools, early-childhood development programs and higher education.

He also supports pay hikes for teachers and other state employees, whose salaries have been cut in recent years. Morales pointed out that the rising cost of insurance wiped out the 3 percent raise educators received last year. He said salaries should "keep up with inflation."

Rep. Dianne Hamilton, R-Silver City, said some of the additional revenue should be used to enact tax cuts for businesses. She suggested that a more competitive tax structure could lure companies to New Mexico.

"The more businesses we have, the more jobs we create," she said. "That means more taxes being paid. Small businesses must be taken care of first. They are the backbone of the state. We should move away from gross-receipts taxes."

Hamilton favors giving some financial incentives to businesses to prompt them to set up shop in New Mexico. However, when it comes to the benefits enjoyed by the film industry, she said she is "not certain that they have paid off."

While she believes incentives can be useful, the state cannot always compete. She cited as an example California's aggressive pursuit of a Tesla Motors plant, which New Mexico officials also covet.

Another problem, according to Hamilton, is that "we don't have the greatest work force in the world."

Regarding proposals to use the new revenue to boost spending on schools, she said: "I'm afraid that putting more money into education, except for teacher salaries, is not a grand idea. Research has shown that schools do not necessarily do better with more money. I would be happy to see the teachers receive a pay increase. Their costs for medical care, and any kind of insurance, has gone up so much."

Hamilton called for placing some of the additional money in the state's land-grant permanent fund, to provide for education and other needs during lean years in the future.

Grant County's other legislator, Rep. Rudy Martinez, D-Bayard, was not available for comment.

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