State Revenues Are Low: Special Session, Anyone? Not Likely Until the Election is Over
With gross receipts, property, and gasoline tax revenues down in New Mexico this year, it looks like expenditures for FY 2016, which ended on June 30, will fall about $100-$135 million short. One possible fix would be to raid the Tobacco Settlement Fund, which has about $230 million in it. But this would leave only about $100 million in the fund, and as of now estimates of revenues available for 2017 will not cover somewhere between $300 and $500 million of the budget passed in the 2016 legislative session. Since the state cannot run a deficit, something has to give.
But this is an election year, and neither the Governor's Office or the Legislature want to be on record either raising taxes to cover the shortfall or cutting programs, the only options open to them. A legislator who votes to cut programs may feel the wrath of affected voters in November, and voting to raise taxes is just as risky. And with the House of Representatives up for grabs this fall, the stakes are even higher than normal for members of both parties. The longer we postpone the reckoning, the more painful it is likely to be, since state agencies are already near the fourth week of FY 17. If three months pass in the fiscal year (this would be October 1) without a special session, a quarter of the budget will already have been spent, making cuts or hikes in taxes even higher. But this is an election year. Expect a lot of talk about a special session, but in the end the likely outcome will be postponement until the elections are over.
I would be nice to think the legislature might try to fix the rickety tax structure to meet what appears to be the new reality of a flagging state economy. After all, in spite of knee-jerk protestations to the contrary in some quarters of the political arena, New Mexico taxes are in fact not noticeably higher than those of most other states: Property and gas taxes are much lower than most states, as are corporate taxes, leaving only gross receipts taxes relatively high. It would be nice, too, if the legislature insisted on greater accountability to the public for the fruits of taxpayer-funded expenditures. Education, for example, gobbles up half the budget with very little in the way of results to show for it. New Mexico's education system languishes at the bottom of the barrel in performance, both in public and higher education, and evidence suggests it is getting worse.