BACK TO SQUARE ONE: Governor Vetoes Legislative Appropriations of Federal Funds

Of all the 158 bills Governor Michelle Lujan Grisham acted on from the 2021 legislative session, one particular action has attracted particular criticism: line-item vetoes of appropriations of federal funds in the state budget.

In the final days of the legislative session, amounts of federal COVID-19 relief funds became clearer and the Senate Finance Committee wrote it into the budget. Most notably, the appropriations included a $900 million infusion – $300 in state appropriations bolstered by another $600 million in federal funds – to the unemployment compensation fund, wiping out the fund’s federal debt and restoring a healthy reserve to mitigate rate spikes for businesses that pay into it. But Lujan Grisham vetoed all federal appropriations in House Bill 2.

In her veto message, she explained it this way:

“As an initial matter, the Legislature lacks the authority to direct the executive’s administration of federal funds. Appropriating these funds in this manner is also premature. As of this writing, the state has yet to receive any portion of the state and local fiscal recovery fund, and the federal government may withhold up to 50% of the state’s allocation for another year, putting in doubt when it will be available to spend. The United States Department of Treasury has yet to issue any guidance on the allowable uses of these funds and will require repayment of any improper expenditures. Finally, the uncertainty of the COVID-19 pandemic and the need to potentially repay these federal funds require a flexibility that the appropriation contingency fund does not allow.”

Legislators – on both sides of the aisle – took issue with the move, claiming it amounts to unconstitutional overreach by infringing upon the Legislature’s prerogative to direct state expenditures. One of the most vocal critics has been Senator Jacob Candelaria (D-Bernalillo), who called it an “unconstitutional power grab.”

Last fall, the Governor called a special session so the Legislature could direct some CARES Act funding to various state programs and local governments. No plans to convene another session have been announced, though it’s expected a special session will be called later this year to take on post-Census redistricting.

The Chamber advocated for a $300 million appropriation to the fund and helped stave off a rate hike that would have paid off federal unemployment insurance debt by burdening our communities’ still-struggling businesses. Yet while the $300 million in state appropriations remains intact, we hope the Governor has a plan to direct some of these federal funds to fully replenish our state’s unemployment fund.

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