SANTA FE – The New Mexico state Legislature moved closer Monday to approval of a solvency package to fix a budget deficit and shore up depleted reserves, with the endorsement of school district spending cuts by the House of Representatives.

The House approved funding cuts of 2 percent to most school districts across the state, while exempting districts with low cash reserves. The Senate approved slightly deeper school spending cuts last week.

Lawmakers in both chambers of the Legislature are working to close an $80 million deficit for the current fiscal year ending June 30 and build a financial cushion, before tackling next year’s budget plan.

A package of four proposed solvency bills would pump as much as $262 million into the state’s general fund by targeting school district reserves, postponing infrastructure projects and tapping tax payments by insurance companies immediately instead of waiting for the next fiscal year. By Monday evening, the House had endorsed three out of four bills with some amendments that require further Senate approvals.

School districts would provide $43 million to the state general fund by reducing program spending to public schools, under the House-approved bill. Districts would have to offset the one-time cuts using cash reserves.

Exemptions were provided for schools that rely on emergency allocations or have reserves of less than 4 percent of annual program costs. Other schools would be allowed to maintain reserves of at least 4 percent.

That and other one-time budget fixes would ensure that New Mexico can continue to pay its bills on time and allow the Legislature to begin drafting a budget for the new fiscal year – when some new agency spending cuts are likely. Depleted state reserves prompted a downgrade of the state’s credit rating last year.

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

Agency spending was slashed by 2.4 percent during a special legislative session in October, without fully addressing the deficit.

Lawmakers in the Democrat-controlled House and Senate have postponed most work on policy initiatives as they try to close the books on the current fiscal year. The state constitution requires a balanced budget, and statutes make it illegal for the state finance secretary and treasurer to continue writing checks when it becomes obvious that the state has run out of money.

Other Senate-approved proposals would transfer cash balances from various state accounts into the general fund, including money earmarked for merit pay for teachers and an economic development fund that rewards businesses that expand or move to New Mexico by offsetting infrastructure costs.

Other measures would postpone construction projects, freeing up money for the general fund.