With a $454 million budget deficit facing the state in 2009, New Mexico legislative leaders are considering dipping into $1.7 billion of unspent capital outlay funds to erase it.

Politically, the move may be difficult, because the capital outlay funds are reserved for 3,000 local projects farmed out to legislative districts. Rep. Edward Sandoval, D-Albuquerque, said he fears the state will just randomly choose to preempt projects that he considers economic development efforts.

Examples of the projects for which money could be diverted include $21 million for an equestrian center at the state fairgrounds in Albuquerque.

Gov. Bill Richardson’s administration has complained for years that spreading capital money into small pieces for projects in lawmakers’ districts is ineffective and short-sighted. The state raises the money for the projects through bond issues in its own name, then parcels the funding to local governments.

Rep. Luciano “Lucky” Varela, D-Santa Fe, vice chairman of the Legislative Finance Committee, says lawmakers will begin discussing the capital outlay portion of the solvency plan even before session begins Jan. 20.

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