Revenues weaken, more state budget cuts loom

The Associated Press

SANTA FE — Gov. Bill Richardson’s administration said Wednesday it will cut spending on state programs and services, including public schools, by about 3 percent to help erase a budget shortfall caused by lower-than-expected revenues in the newly started fiscal year.

Katherine Miller, secretary of the Department of Finance and Administration, said the cuts will start in September and will apply to all parts of state government, except Medicaid and some services to the developmentally disabled. The judiciary and the Legislature will share in the latest round of reductions.

Miller made her comments as she and other administration officials outlined an updated financial forecast that showed the state with a more than $200 million budget shortfall in the fiscal year that started this month.

Revenues are projected to be almost $160 million lower than what had been anticipated this year, and $32 million short in the fiscal year that ended in June.

A budget law requires the governor to cut spending if revenues and transfers of money from state reserves won’t cover spending. The law exempted only Medicaid and some services to the developmentally disabled from the reductions. The administration can take about $130 million out of the state’s cash reserves to balance the budget this year and cover the revenue shortfall in last year’s budget.

Miller estimated that about $150 million must be cut from this year’s nearly $5.4 billion budget.

Her agency must get approval from the state Board of Finance before it can start reducing the monthly allocations of money that go to agencies. A special meeting of the board will be held in August to deal with the budget shortfall.

The reductions come on top of about $800 million in spending cuts during the past two budget years and about $180 million in tax increases, according to Rep. Luciano “Lucky” Varela, a Santa Fe Democrat and committee chairman. However, the state has used federal economic stimulus aid to offset reductions in state money for some programs, mainly public schools and Medicaid, which provides health care for the poor and uninsured children.

The slide in revenues is caused by continued weakness in the state economy.

Even with the upcoming cutbacks, lawmakers were warned, more budget problems loom later this year because of uncertainty over how much federal aid New Mexico and other states will receive for Medicaid.

It’s possible the next governor and the Legislature, which convenes in January, will have to decide whether to make deeper spending reductions if Medicaid funding falls short.

New Mexico built its budget on an expectation that Congress would continue higher Medicaid matching payments, which were part of an economic stimulus package. Now it appears the state will get much less than it had anticipated, Miller told the committee. Additional state budget cuts of $47 million to nearly $180 million might be required depending on how much federal aid is approved by Congress.

A reduction of $47 million, lawmakers were told, would mean an extra 1 percent cut in spending on schools and other government programs this year.