New Mexico governor’s budget includes $200M tax increase, 3 percent spending cuts next year

New Mexico governor proposes $200M tax increase

SANTA FE, N.M. — Gov. Bill Richardson on Tuesday proposed a $200 million tax increase — which he called temporary — to shore up state finances and balance next year’s budget.

The tax proposal was part of $300 million in additional revenues that Richardson factored into his budget recommendations to the Legislature.

The governor’s financial blueprint provided for $510 million in savings and budget cuts, and nearly $389 million in spending increases on programs. The upcoming 2011 fiscal year starts in July.

Lawmakers convene Jan. 19 for a 30-day legislative session and their top assignment is to prepare a balanced budget during a time of weak revenue intake. Lawmakers look at budget recommendations from the governor and the Legislative Finance Committee in making their decisions.

Richardson proposed spending more than $5.3 billion in state revenue next year on public education and general government programs such as courts and prisons. That’s close to the spending suggested by the Legislative Finance Committee, which released its budget proposals on Monday.

Public schools account for the largest share of the budget, nearly $2.5 billion as proposed by Richardson.

“As New Mexico continues to recover from the global recession, our top priorities must be to provide critical services to our citizens, preserve and create jobs and manage state government in a fiscally responsible way. Our budget requires additional sacrifices from everyone, but it achieves our goals in a fair and balanced manner,” Richardson said in a statement.

The Democratic governor did not identify which taxes should be raised to provide the $200 million and Richardson stressed that he would only support a temporary increase, which would expire when the economy recovers.

The $200 million figure matches an amount the Legislative Finance Committee left in its budget for lawmakers to decide in coming weeks whether to come up with the money through tax increases or additional spending cuts.

Besides a tax increase to help balance the budget, Richardson proposed freeing up $100 million by swapping short-term bond proceeds — what’s called sponge bonds in New Mexico — for revenues allocated previously for some capital improvement projects. The move would provide a one-time infusion of general tax revenues, which could be used to pay for government operations.

Of the $510 million in savings, about $218 million comes from extending cuts that were made in this year’s budget during a special legislative session and through an executive order by Richardson. The governor recommended new spending cuts of 3 percent or $158 million.

Richardson proposed to save $67 million through cost controls on Medicaid and services to the developmentally disabled, and $25 million through government efficiencies recommended by an administration task force.

Medicaid provides health care to about a half million needy and uninsured New Mexicans, many of them children.

A large part of the governor’s increased spending is to provide state revenues to programs — schools and Medicaid — that have been operating with federal economic stimulus money. Part of the federal money lapses next year. The state is using $400 million in federal aid this year to avoid deep budget cutbacks in state services.

The governor recommended canceling $150 million in capital improvement projects, with the money going to replenish the state’s cash reserves.