Governor signs $7.4 billion budget bill

Apr. 10—SANTA FE — On her final day to act on bills passed during this year's 60-day legislative session, Gov. Michelle Lujan Grisham signed off on a $7.4 billion budget plan that will boost state spending and provide 1.5% pay increases to state employees and teachers.

However, the Democratic governor used her line-item veto authority Friday to strike down legislative earmarks for more than $1 billion from a federal stimulus plan for various state programs — including a largely depleted state unemployment fund, a popular college scholarship program and highway repairs.

Specifically, Lujan Grisham said in an executive message to top-ranking lawmakers that legislators' attempt to appropriate the funds were an infringement into her executive authority. She said a state Supreme Court ruling has upheld the Legislature's power of the purse strings does not apply to federal dollars. "This budget is responsible and responsive to the needs of New Mexicans right now and in the future," Lujan Grisham said in a statement Friday after signing the budget bill.

While the line-item vetoes do not mean New Mexico's state government will lose its $1.6 billion under the latest federal pandemic relief package, they could set off another tug-of-war between the Governor's Office and legislators.

Lujan Grisham's use of an emergency declaration to access federal funds last year prompted some lawmakers to question the legality of the action, and Sen. William Sharer, R-Farmington, on Friday described the governor's latest line-item vetoes as irresponsible and possibly unconstitutional.

"We are the ones directly responsible to the citizens for how taxpayer dollars are spent and I am disappointed in what appears to be yet another power grab by this governor," Sharer said.

Rep. Patricia Lundstrom, D-Gallup, the chairwoman of the House Appropriations and Finance Committee, said it's likely lawmakers will once again vote to appropriate the federal dollars during next year's 30-day legislative session.

"We think it's our responsibility to make sure that all funds are budgeted responsibly," Lundstrom told the Journal.

And Sen. George Muñoz, D-Gallup, disputed the governor's contention the Supreme Court has given the governor authority over spending federal funds.

He also expressed concern about Lujan Grisham's veto of a proposed $600 million appropriation of federal dollars to shore up the state's unemployment fund that has been under strain during the COVID-19 pandemic.

That veto could lead to an increase in the unemployment tax rate for businesses that pay into the fund, Muñoz said.

But a Lujan Grisham spokeswoman suggested some of the federal dollars could, in fact, end up being funneled into the unemployment fund once the state gets clear guidance from the federal government on how the infusion of federal funds can be spent.

"The state has not yet received guidance from the U.S. Treasury Department on how the federal funds may be used, and allocating those funds before knowing exactly how they are permitted to be used may in fact not be legal," Lujan Grisham spokesman Nora Meyers Sackett told the Journal.

Revenue swings

The budget bill signed Friday will take effect July 1, which is the start of the state's new fiscal year.

Under the final version, state spending will increase by 4.8% — or roughly $373 million — over current levels, with funding increases slated for college financial aid and mental health and substance abuse programs.

With New Mexico weathering huge revenue swings in recent years due to fluctuating oil prices and the pandemic, the budget plan also calls for about $1.7 billion — or about 24% of state spending — to be set aside in cash reserves in case of a revenue shortfall.

Some lawmakers have also called for more sweeping changes to the state's tax code in an attempt to reduce the year-over-year revenue volatility.

"I'm tired of the roller coaster," Muñoz said Friday.

Currently, New Mexico is awash in short-term money, as increases in oil production and market prices, along with the federal stimulus funds, have improved the state's revenue outlook.

That allowed legislators to approve a pandemic relief package during this year's session that included $600 rebates for low-income workers, a four-month tax holiday for restaurants and creation of a new $200 million small business grant program.

But Muñoz and some other lawmakers have cautioned the state could face difficult decisions in future years, when the federal funds are no longer available.

Capital outlay

The governor also signed two other spending measures Friday — a $511 million capital outlay package and a supplemental appropriations bill.

The latter bill, Senate Bill 377, includes $110 million to fund efforts to improve broadband connectivity — there's also more money for broadband included in other measures — and up to $300 million to repay a federal loan that was used last year to keep paying jobless benefits out of the state's unemployment fund.

As for the capital outlay bill, it includes funding for a new multi-use event center and soccer stadium in Albuquerque and new facilities to assist homeless individuals, among other projects.

For the first time, lawmakers' individual capital outlay appropriations for this year's session will be published later this month.

That's because legislators overwhelmingly approved a separate disclosure bill that was also signed by Lujan Grisham this week.

Meanwhile, the governor still has until April 20 to act on cannabis legalization and expungement bills passed by lawmakers during a two-day special session last week.