SANTA FE – New Mexico Gov. Susana Martinez directed most major state agencies on Tuesday to institute spending cuts in response to a sharp downturn in tax receipts and other state revenues tied to weak energy prices.
In a memo to state agencies under her control, the Republican governor called for preparations to reduce general-fund spending by at least 5 percent during the budget year that began in July. Executive agencies also were directed to spend no more than 45 percent of their general-fund budgets during the first half of the current fiscal year.
Martinez said she expects the directives to involve changes to hiring practices, overtime, travel and many other aspects of agency management. Some exceptions may be made to preserve public health and safety.
Martinez recommended identical spending reductions at agencies outside her direct control that are overseen by the Legislature, judiciary or other elected officials. She attributed faltering state revenues to a downturn in the energy sector, describing “the largest crash in oil and gas prices in our lifetime.”
“In the weeks ahead, it is critical that we manage through this challenging fiscal environment in a way that protects those areas of our economy that are strong and growing,” Martinez wrote. “A key first stop in this process is to ensure that government lives within its means, which requires state agencies to tighten their belts.”
Legislative analysts say the state general fund was short an estimated $150 million for the budget year that ended in June and faces potentially greater shortfalls this year.
Democratic Sen. John Arthur Smith, chairman of the Senate Finance Committee, said Tuesday that he fears the governor’s spending reductions will not be enough to address budget gaps. He said the true magnitude of the problem will be better known when new revenue figures are released in late August.
He repeated a recent warning that a special legislative session may be necessary to shore up state operating reserves, even though lawmakers may be reluctant to sign on to budget cuts or revenue increases in an election year. The entire House of Representatives and Senate are up for election in November. Martinez, who won re-election in 2014, opposes any tax increases.
Smith previously warned that anywhere from $300 million to $500 million in revenue could fail to materialize during the current budget year. The governor’s office did not provide a specific estimate of savings under the new directive for spending cuts.
New Mexico is one of several states dealing with general fund revenue declines linked to energy production. For example, North Dakota this month reconvened its Legislature and cut spending at most state agencies to help cover a $310 million budget shortfall.
Where some states have tapped rainy-day funds or raised taxes, New Mexico has allowed its operating reserves to be virtually erased. The state also has swept small piles of cash from idle accounts and given state agencies authority to transfer funds between programs in an effort to cope.
In February, lawmakers and the governor approved a $6.2 billion general fund budget that shaved overall spending, while shifting more money toward state prisons, police, teachers and child protective services.
