Governor's $10.9 billion budget plan would boost spending on homelessness, road repairs and early childhood programs

SANTA FE — Big spending infusions for New Mexico road construction, homelessness, child care and the state’s long-term water supply would be authorized under a $10.9 billion spending plan Gov. Michelle Lujan Grisham rolled out last month.

The budget proposal would boost overall state spending by about $720 million — or 7% — over current levels and would also provide pay raises for state employees and public school workers.

While teachers and other education employees would get 3% raises, the increases for state workers could be targeted at specific employee classifications.

The Democratic governor and top administration officials described the budget plan as prudent, even though recurring state spending has increased by 45% since Lujan Grisham took office in 2019.

“This fiscally sound budget proposal prioritizes early childhood education, clean energy, infrastructure, affordable housing, and expanded healthcare access to build a stronger foundation for New Mexicans,” Lujan Grisham said in a statement.

“My administration looks forward to discussing these proposals with state lawmakers and reaching consensus on the priorities that matter most to our state,” she added.

While the governor’s budget plan typically is not unveiled until January, just before the start of the legislative session, he said the decision was made to release it earlier this year.

“We feel that in the interest of transparency and to give time for public input ... there’s no reason to wait until a week before the session,” state Finance and Administration Secretary Wayne Propst said Thursday.

Homelessness would be a spending target under the governor’s budget plan, which contains $50 million that could be used on rental assistance and expanding shelters for homeless individuals amid a statewide housing shortage.

The budget plan does not call specifically for tax cuts or rebates, though top Governor’s Office aides said those proposals could be considered during the upcoming 60-day legislative session.

The state has issued several rounds of tax rebates in recent years amid an ongoing revenue boom, including $500 per taxpayer rebates that were sent out in the summer of 2023.

But Sen. George Muñoz, D-Gallup, the chairman of the Legislative Finance Committee, said during budget hearings last week the past rebates were “pretty much a waste of money.”

He said the state could have better put the money to use by funneling into trust funds to be invested for future use.

Surging revenue allows for spending growth

The state’s increased spending has come as revenue collections have exploded to record-high levels.

Revised estimates released last week predicted legislators will have $892.3 million in “new” money available next year — a figure that represents the difference between projected revenue and current total spending levels.

The budget surplus is part of a multi-year revenue bonanza, fueled primarily by record-high oil and natural gas production in southeast New Mexico’s Permian Basin.

The state is the second-largest oil producer in the nation — behind only Texas — and oil and gas revenue make up about 35% of the state’s total revenue collections, according to legislative data.

While state spending has increased, lawmakers have also set aside millions of dollars from the revenue windfall in trust funds. The money in those funds is then invested for future use.

An early childhood trust fund established with a $300 million appropriation in 2020, for instance, has ballooned to a projected $9.6 billion balance in the current fiscal year.

The governor’s spending plan would allocate more money to several existing funds, including $50 million for a rural hospital fund and $110 million for a matching fund that provides money for state agencies, cities, counties and tribal governments to leverage against federal dollars.

It also calls for $100 million to be spent on expanded behavior health care programs, which could include new mental health and substance abuse facilities. That money could be set aside in a new trust fund, or spent directly.

Rep. Nathan Small, D-Las Cruces, the chairman of a House budget-writing committee, said lawmakers are also eying “very significant” investments in behavioral health programs.

“We’re focused on making sure our strong revenues support New Mexicans today and into the future,” he said in a Thursday interview.

The Legislative Finance Committee is expected to release its own spending plan in early January, and Small said he’s hopeful the governor and lawmakers will find areas of agreement.

“We have to make progress and we have to find common ground for the sake of New Mexico,” he said.

Child-related programs could get big boost

Public school spending currently makes up about 44% of the state’s budget, and the governor’s plan would increase education spending despite a statewide enrollment drop.

That would include more money for a state-subsidized universal school meals program and funding to expand a summer reading initiative.

In addition, the budget plan would earmark $98 million to expand a child care program for an additional 5,100 children.

A separate hefty appropriation would increase minimum pay levels for early childhood workers from $15 to $18 per hour. Similar pay stipends had previously been funded using federal pandemic funds.

As the state struggles to comply with a landmark 2018 court ruling, the governor’s spending plan also calls for $150 million to be funneled into a Native American education fund over the next three years.

The 60-day legislative session begins Jan. 21.