New Mexico budget solvency plan clears Legislature

The New Mexico Legislature approved a $216 million budget solvency plan Wednesday that would fix a current-year deficit and help shore up reserves, as the state wrestles with plunging tax revenues.

Newly approved bills target $46 million in local school district reserves to beef up the state general fund, along with transfers of $81 million from dozens of state accounts and select programs.

A measure that calls for tapping tax payments by insurance companies immediately instead of waiting for the next fiscal year also won final approval in the Senate, freeing up $88 million for the general fund.

Republican Gov. Susana Martinez has three days to consider the legislation.

Under the proposals, school districts are expected to offset the 2 percent funding reduction with cash from reserves. An exemption was included for districts with low reserves of 3 percent of annual expenses or less.

Rio Rancho Superintendent Sue Cleveland said the move is going to push Rio Rancho, one of the state's largest districts, close to insolvency. District administrators have tried to keep previous cuts from the classroom but they might not be able to do it this time, she said.

"Everybody's hurt. Every single district has its stories. Every single district is impacted," she said.

Albuquerque schools are bracing for the cuts as well, and options like furloughs and four-day weeks have been discussed but no decisions have been made.

A conference committee of House and Senate lawmakers brokered compromises on several solvency provisions, including the school exemptions. Other compromises resulted in a roughly $7 million cut to a fund that supports businesses that expand in New Mexico — a much smaller reduction than initially proposed.

The Public Education Department was given broad latitude to implement an $8 million cut to performance-based programs in an effort to preserve early childhood education initiatives.

The solvency measures would fill an $80 million shortfall for the current fiscal year ending June 30 and boost reserves to 2.3 percent of annual spending.

Spending across state agencies was slashed by 2.4 percent during a special legislative session in October, without fully addressing the deficit. The state's credit rating was downgraded last year.

Martinez had proposed taking $120 million directly from school district reserves to address the budget crisis. Republican lawmakers unsuccessfully introduced an alternative that would have suspended $63 million in local capital spending to free up money for the state's general fund.

The budget crisis is linked to a downturn in the oil and natural gas sectors that has sapped the state economy and tax revenues.

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AP writer Susan Montoya Bryan contributed to this report from Albuquerque.