New Mexico legislators consider how to use multibillion-dollar oil surplus as spending plan advances

New Mexico’s strategy for spending and investing a multibillion-dollar annual surplus linked closely to oil production came into sharper focus Saturday, as a legislative panel advanced an annual spending plan toward a Senate floor vote.

Legislators are tapping the brakes on recent double-digit budget increases in the nation's No. 2 state for oil production behind Texas, while setting aside money in endowments and investment accounts to ensure funding for critical programs in the future — in case the world’s hunger for oil weakens.

Advancing on an 11-0 committee vote, the amended budget proposal would increase annual state general fund spending by roughly 6.8%, to $10.2 billion, for the fiscal year that runs from July 2024 through June 2025.

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Proposed changes from the Senate add $32 million to the spending package, setting average public salary increases at 3% for state employees and staff at K-12 schools, state colleges and public universities.

New Mexico Gov. Michelle Lujan Grisham has advocated for a more robust spending package, a 10% annual spending increase that would shore up housing opportunities, childhood literacy and health care access.

New Mexico’s Legislature assembles its own budget — a bill that currently includes the governor's $30 million request to establish a literacy institute and bolster reading programs, along with $125 million in new financing for housing development projects.

Democratic state Sen. George Muñoz of Gallup, chairman of the lead Senate budget-writing committee, said the budget plan slows down spending increases and still funnels more money to rural hospitals, the new literacy institute, state police salaries, safety-net program for seniors and increased highway spending to overcome inflationary construction costs.

A monthly payment of $25 to impoverished seniors and the disabled from the Supplemental Nutrition Assistance Program would increase to $100, he said.

"You can leave at the end of the day and say we helped the poor, we helped the seniors, we helped law enforcement, you fixed a lot of things," Muñoz said.

Legislators also want to help the state and local governments compete for a greater share of federal infrastructure spending from the Inflation Reduction Act, the Biden administration’s signature climate, health care and tax package. Senate budget amendments apply $75 million in state matching funds to the effort.

Under another $1.5 million budget provision, New Mexico would for the first time help compensate landowners and agricultural producers when wolves are confirmed to have killed livestock or working animals.

Wolf-livestock conflicts have been a major challenge in reintroducing endangered Mexican gray wolves to the Southwest over the past two decades. Ranchers say the killing of livestock by wolves remains a threat to their livelihood despite efforts by wildlife managers to scare the wolves away and reimburse some of the losses.

Separately, a conservation fund established in 2023 would get a new $300 million infusion. The fund underwrites an array of conservation programs at state natural resources agencies, from soil enhancement programs in agriculture to conservation of threatened and big-game species.

Leading Democratic legislators also say they want to ensure that new initiatives at agencies overseen by the governor are cost-effective and responsive — especially when it comes to public education, foster care and child protective services — before future funding is guaranteed.

The state House on Friday endorsed the creation of the "government results and opportunity" trust that would underwrite pilot programs during a three-year vetting period, with requirements for annual reports to the Legislature’s accountability and budget office. The Legislature's budget bill would place $512 million in the trust.

"It gives us funding for several years to solve problems," said Rep. Nathan Small of Las Cruces, a cosponsor of the initiative. "It gives us a quick ability to analyze whether or not, and how, that’s working."

Legislators have until noon Thursday to deliver a budget to the governor, who can veto any and all spending items.