SANTA FE, N.M. (AP) — The Democratic-controlled Legislature and Republican Gov. Susana Martinez’s administration are at odds over the state’s revenue outlook.
The Department of Finance and Administration reported Monday that there’s no reason to change the most recent revenue forecast calling for the state to have about $283 million available for budget increases and to offset any tax cuts in the next fiscal year.
However, legislative staff has raised questions about the state’s financial outlook, and the Legislature’s budget panels plan to make their spending decisions using estimates that revenue will be $24 million lower next year and $41 million lower in the current fiscal year.
Having less revenue available could make it harder for Martinez to win legislative approval of corporate income tax cuts she’s proposed as an economic development incentive.
The House Appropriations and Finance Committee is working on a budget proposal to spend nearly $5.9 billion on government programs and public education in the fiscal year that starts July 1.
Rep. Luciano “Lucky” Varela, a Santa Fe Democrat and committee deputy chairman, said it’s prudent for lawmakers to base their spending and tax decisions on what they see as the most likely revenue figures for the upcoming year.
The committee is considering a proposal for 1 percent salary increases for public employees, and Varela said that shouldn’t be jeopardized by the prospect of lower revenue collections in the coming year.
Administration and legislative economists prepare a revenue forecast and update it periodically through the year. Those historically are used by lawmakers as they make spending decisions during legislative sessions.
In a memorandum to leaders of House and Senate budget committees, Finance and Administration Secretary Tom Clifford said certain tax revenues, such as from energy production, appear higher than what was projected by economists in December. However, that likely will be offset by lower revenues from other taxes.
Staff of the Legislative Finance Committee, the Legislature’s permanent budget oversight committee, has expressed concern that revenues from some taxes could drop significantly because businesses are making higher than expected claims for tax credits, including one that offers an incentive for companies that create jobs.
The LFC staff, in a memo to budget committee leaders, said tax credits paid by the state could be about $55 million higher than what had been anticipated next year.
If revenues end up lower in the current fiscal year, the state would end up with smaller cash reserves.
Lawmakers consider the reserves as a financial safety net, which could be particularly important if federal spending is slashed by Congress to trim the nation’s deficit and New Mexico needs to boost its spending to offset those cutbacks.