DALLAS — New Mexico Gov. Susana Martinez proposed a 2.3% increase in state spending under a $6.29 billion budget as falling oil prices continued to undermine the fiscal outlook.
"Since taking office and working with the Legislature to resolve the state's largest structural deficit, we've taken a responsible approach to spending that prioritizes available dollars on reform in education and improving economic growth," Martinez said during a budget presentation Monday at an elementary school in Las Cruces.
"I am confident that we will once again be able to come to agreement with the Legislature on a responsible budget that continues to prioritize these critical goals and keep moving New Mexico forward," she said.
New Mexico is one of the most dependent states on oil and gas revenue.
Each $1 drop in the price of oil results in a $7.5 million loss of revenue to the state, according to the Legislative Finance Committee.
Martinez's budget and a similar one from the legislature are based on a revenue estimate generated when oil was selling for $66 a barrel.
As of Jan. 12 when Martinez unveiled her budget, February futures contracts on West Texas Intermediate crude produced in New Mexico's Permian Basin were trading at around $45 per barrel on the Nymex Exchange.
About 19% of New Mexico's general fund revenue comes directly from oil and gas taxes and royalties.
As recently as August, the Legislative Finance Committee was estimating revenues based on $95.75 per barrel oil.
New Mexico has not seen a strong recovery from the recession, according to the LFC.
"New and more reliable data suggests earlier evidence of job growth was overly optimistic, and the economy may again have begun contracting," the LFC reported. "Employment in the New Mexico remains more than 4% below its pre-recession peak."
Martinez proposes issuing $60 million per year in severance tax bonds for three years to leverage federal and other funds in order to complete large-scale, major highway construction projects throughout the state.
The governor's budget calls for $25 million in non-recurring spending and $25 million in capital outlay bond funding for economic development projects through the Local Economic Development Act.
For the first time in four years, the governor is calling on the state to contribute to operational funding for Spaceport America, with a request for $1.7 million.
"This is the first year that any kind of funds from the state have actually been proposed to be spent on the spaceport, and it has been difficulty in the revenue that was expected to be generated by now at the spaceport," Martinez said. "But we are optimistic, and that is why we are investing."
The Legislature will reconcile the two spending plans when it meets for a 60-day session starting Jan. 20.
New Mexico carries general obligation bond ratings of Aaa from Moody's Investors Service and AA-plus from Standard & Poor's.
S&P changed its outlook to negative from stable on Nov. 26.
"Despite the strong output forecast, the Mountain region is not yet firing on all cylinders, with New Mexico's recovery lagging the otherwise robust regional performance," according to a Dec. 10 report. "The state's large federal government presence means that payrolls have not yet recovered from massive cuts during the downturn, and its dependence on the energy sector may expose it to risk from falling energy prices in the coming year."