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AP New Mexico

New Mexico lawmakers seek preschool expansion with oil money

Democratic state Rep. Patricia Lundstrom of Gallup, chairwoman of the Legislature's lead budget-writing committee, outlines public spending priorities amid a windfall in state government income, at a news conference Thursday, Jan. 12, 2023, in Santa Fe. Leading New Mexico legislators recommended a billion-dollar increase Thursday in annual state spending to expand preschool access and increase mandatory classroom instruction time at K-12 public schools. (AP Photo/Morgan Lee)

SANTA FE – Leading New Mexico legislators recommended a billion-dollar increase Thursday in annual state spending to expand preschool access and increase mandatory classroom instruction time at K-12 public schools.

The budget proposal would increase general fund spending by 12%, or just over $1 billion, to $9.4 billion for the fiscal year that runs from July 2023 to June 2024.

That tally hews closely to a budget plan from Democratic Gov. Michelle Lujan Grisham at the start of her second term in office. The Legislature convenes Tuesday to craft the state's annual budget during a 60-day legislative session.

The Legislature's proposal, announced at a news conference, suggests a slightly higher, 5% increase in public-sector salaries for state employees and educators. The governor is seeking 4% raises and wants to state to pay for individual health insurance premiums for teachers.

New Mexico's government expects a windfall in revenue tied closely to surging oil and natural gas production. Government economists anticipate the state will take in $12 billion during the coming fiscal year.

Annual spending on prekindergarten would increase by nearly $110 million, with an additional $8 million dedicated to home visits and counseling for parents of infants to improve early childhood well-being.

“We really recognize how important it is to invest in our children in New Mexico, especially in those early years when so much brain development occurs,” said Democratic state Sen. Siah Correa Hemphill of Silver City. “That really sets the foundation for children for the rest of their lives.”

Lawmakers are wary of spending commitments that would turn into liabilities when energy prices falter. An industry downturn in 2016 prompted the Legislature to slash funding to state universities and increase entrance fees at public museums. State government income has nearly doubled since then, propelled by record-setting oil production.

New Mexico already is scheduled to set aside more than $3 billion in surplus oil- and gas-related income this fiscal year in a recently created trust to underwrite early childhood education. Legislators say they want to replicate that model – using investment earnings to underwrite state spending – for other government priorities related to public health, infrastructure and more.

“You’re going to hear a lot of different funds,” said Senate Majority Leader Peter Wirth, a Santa Fe Democrat. “Park money, do a spinoff on an annual basis, and all of a sudden, you’ve got something that’s really sustainable.”

At the same time, lawmakers are under pressure from voters and a court order to spend more on public education. The latest standardized test results showed just 26% of students in third through eighth grades were proficient in math and only 34% were proficient in reading.

Voters in November approved a constitutional amendment to increase annual withdrawals from a $26 billion state trust for public education that predates the early childhood education fund.

General fund spending on Medicaid would increase by $258 million – or nearly 22% – under the Legislature's budget outline, as the federal government phases out extra payments liked the COVID-19 pandemic.

Legislators hope to devote at least $76 million to increasing payment rates for medical care providers under Medicaid insurance.

“We've got doctors leaving the state,” said Republican state Rep. Gail Armstrong of Magdalena. “Increasing the Medicaid reimbursement rate is at the top of our priority list.”

Proposed spending increases on public safety include 18 new staff positions to bolster police training and oversight, including personnel for a new Law Enforcement Certification Board created under 2022 legislation.

Legislators also are suggesting at least $1 billion in tax relief through a combination of cash rebates and changes to tax rates.

Lujan Grisham is recommending $1 billion in tax rebates of up to $750 per individual and companion tax cuts.