BUDGET BASICS
So, your state government is about to spend nearly $11 billion of taxpayer money just in the general fund. Who comes up with this budget anyway? Is it a bunch of people with green eye shades in the back rooms cranking out numbers on a well-worn calculator? Maybe in days gone by, but the truth about New Mexico’s budget process is that it is amazingly sophisticated and transparent – transparent if you want to attend committee meetings and plow through a mountain of data. That’s what your elected representatives do on your behalf – listening to state agencies, utilizing program evaluations performed by the Legislative Finance Committee (LFC) and gathering input from interested parties including private entities, citizens, local governments, tribal representatives, teachers and school officials – basically anyone that has a dog in this fight.
New Mexico is one of only five states where both the governor (executive branch) and the Legislature develop independent budgets and where the Legislature has an independent staff for program evaluation and analysis. It’s a terrific check-and-balance system. Often, the two budgets are pretty close – in other times they may be far apart. It depends on philosophy and priorities.
WHEN’S THIS FISCAL RODEO GET STARTED?
The process of budget development and evaluation is ongoing. In terms of actually developing the next fiscal year budget, the graphic below (extracted from an excellent LFC document) depicts the budget cycle. The state’s fiscal year begins July 1 and ends on June 30. The current budget year is FY 25. The Legislature and governor are now working to build the FY 26 budget.
Of course, we’re at the step where the Legislature is in session and is working to construct the General Appropriations Act, referred to as HB 2. Right now, HB 2 is kind of a placeholder. When the committee finishes its work, it will develop what’s known as a committee substitute (really just a set of amendments) that will propose to the full House a spending plan. The House can accept, amend or reject the bill. Most often the bill is accepted, maybe with a floor amendment or two. HB 2 then goes to the Senate Finance Committee, where members will amend the bill reflecting Senate priorities. It’s then returned to the House. If the House agrees (concurs) with the Senate amendments, the bill goes to the governor. If it doesn’t, then a committee (known as a conference committee) is appointed to work out a compromise. Once both chambers agree on the compromise (a set of amendments known as a conference report), then the bill is off to the governor. The governor can sign, veto or veto parts of the bill (known as line-item veto). The latter is what usually happens.
HOW DO WE KNOW HOW MUCH MONEY THERE IS TO SPEND?
New Mexico has come up with a very smart answer to this question. It’s called a consensus revenue estimate. There’s a group of high-powered economists from both the legislative and executive branches. They work together to prepare an economic forecast from which they derive how much revenue will be available to the state. They’re professional, nonpartisan and are insulated from outside influence to keep the politics out of the process. They are known as the Consensus Revenue Estimating Group (CREG). CREG issues a preliminary estimate in August, updates it in December and updates it once more about the middle of the session. The process brilliantly avoids a pea and shell game with different sides arguing different numbers. Whatever CREG says, goes, period.
WHAT’S ALL THIS ABOUT FINDING ‘NEW MONEY?’
New money is simply the difference between the ongoing cost of running the government and the amount of revenue available. If the revenue available exceeds the ongoing costs, then there is “new money,” or uncommitted funds, that can be spent. Here’s a chart from the LFC that illustrates the point.
In the last several years, thanks to high oil and gas production, the state has been awash in cash. Quite strategically, significant amounts of the new money have been squirreled away in permanent funds that are invested and then generate more income. Earnings from these funds can then be used to support programs like early childhood education, lowering the amount of tax money needed. In the event of an economic downturn, the funds can be used to backfill lost revenue, ensuring program continuity.
While we’ve grown accustomed to lots of cash, that has not always been the case, and at some future point, oil and gas revenues could decline. During Gov. Susana Martinez’s administration, for example, a weak economy forced some very serious budget cuts. There is volatility in the economy and, therefore, there is volatility in state revenues. Note in the LFC chart below that the future revenue forecast shows a flattening of revenue growth. Accordingly, the LFC has established a budget growth rate of no more than 6% to avoid or mitigate future budget cuts.
If you’re curious to know more detail, the LFC has produced an excellent document entitled the “Citizens’ Guide to the New Mexico State Budget” – click here to view.
HOUSE AND SENATE ACTION
As we noted yesterday, the legislative wheels grind slowly at the beginning. In the House, a short morning session was devoted entirely to bill introduction. Some committees are meeting for organizational purposes today and more tomorrow. No word yet on whether the House will be in session on Friday.
In the Senate, as with the House, today was relatively quiet. The Senate Finance Committee met and quickly considered the so-called “Feed Bill”, or HB1. The Feed Bill funds the legislative session and is customarily the first bill heard and passed in both chambers. The biggest item of discussion centered around the new Legislative district offices and the aides that lawmakers are hiring across the state to help them serve their constituents.
DISTRICT AIDES
So let’s talk about this new effort to modernize our state Legislature and perhaps provide better services to the people each of these legislators represent. Last summer lawmakers OK’d a proposal to hire one staff member for each representative and senator. The concept is that having an assistant or professional staff member will help legislators provide better services back home.
Up until now, legislators have had very little support when the Legislature is not in session. While most legislators are very responsive to people in their district, there is a certain limitation to how much a single legislator can do.
Duties are very loosely defined, and each district aide works at the direction of the legislator who hired them. Presumably, each aide will help by answering phone calls and letters, researching policy issues, coordinating town halls and meetings, etc.
Hiring more than 100 new legislative aides doesn’t come cheap, of course. HB 1 includes $14 million for the effort, which includes salaries and benefits and ancillary costs like computers and furniture.
If you want to find your legislator’s new staff member, look here for the Senate and here for the House.
HB 1 passed the Senate unanimously and is on its way to the governor for signature.
NEW LEGISLATORS
There are 16 new members of the Senate this session and 13 new members of the House with one vacancy pending. Today, we’ll begin to give you a brief introduction to these new members.
HOUSE
District 59: Mark Murphy, R-Chaves
Republican Mark Murphy, an oil and gas executive, was appointed by Chaves County commissioners on Jan. 16 to fill the vacancy left by Jared Hembree, who resigned in early January due to health concerns. Murphy will serve the full two-year term and then will have to stand for election in 2026 if he wishes to continue to represent District 59, which includes most of Chaves County.
- Murphy, like Hembree, is a past president of the Independent Producers Association of New Mexico (IPANM). He has presented IPANM positions to the Legislature and has formed many relationships with legislators on both sides of the aisle.
- He is the president of Strata Petroleum, an oil and gas exploration company.
- He is native of Roswell, having received his education in public schools and a degree in general studies from New Mexico Institute of Mining and Technology.
- Obtaining aid for rebuilding housing in Roswell due to the flooding is a top priority for him.
District 4: Joseph Hernandez, D-San Juan
Rep. Joseph Hernandez will represent District 4, which covers Shiprock and significant territory in San Juan County west of Farmington. He won his primary, and in the general election he secured the seat previously held by Rep. Anthony Allison, who retired from the Legislature.
- Hernandez is a community organizer who has served on various local committees and organizations.
- He serves as Diné Energy Organizer for the NAVA Education Project and N.M. Native Vote, focused on renewable energy.
- Hernandez was born and raised in Shiprock and graduated from Shiprock High School in 2006.
- He is a member of the Navajo Nation and says he was inspired to service by his parents, who were community advocates.
SENATE
District 2: Steve Lanier, R-San Juan
Republican Steve Lanier, a teacher and former San Juan County Commissioner, will represent District 2, which now covers eastern San Juan County including Bloomfield, Aztec and the Navajo Dam areas. He won the general election and replaces longtime Republican state Sen. Steven Neville, who announced his retirement during the 2024 Legislative session and had served the area since 2005.
- The district was redrawn to include more of the Navajo Nation.
- Lanier’s wife, who ran unopposed, will take his county commission seat.
- He is a teacher from Aztec with more than 20 years’ experience in the field.
District 9: Cindy Nava, D-Bernalillo and Sandoval
Democrat Cindy Nava, executive director of Transform Education New Mexico, will represent District 9, which now covers parts of Bernalillo and Sandoval counties including Corrales, Bernalillo, Placitas and Algodones. She won the general election and replaced Democratic Sen. Brenda G. McKenna, who did not seek re-election.
- Nava is the first in her family to graduate college.
- She is the first Dreamer (DACA recipient) in the country to be appointed by the White House, where she served as senior policy advisor at the U.S. Department of Housing and Urban Development.
- She expanded HUD resources to support affordable housing across the department’s 64 field offices, the implementation of innovative methods to address homelessness, and ongoing tribal engagement in partnership with the Office of Native American Programs and the first-ever HUD Tribal Intergovernmental Advisory Committee.
- She is not related to former Sen. Cynthia Nava.
SIGNING OFF FROM SANTA FE
Looking down the road, we expect that tomorrow will be about as placid as today. On Friday, we’ll be releasing the Chamber’s complete Legislative Agenda for the 2025 session following final approval by the Board of Directors. The agenda will have all the specific issues of concern identified and the Chamber’s approach to addressing these issues. Thanks for being with us today, and until tomorrow, have a very pleasant evening.
