SANTA FE, New Mexico — New Mexico would set aside well over $1 billion to guarantee free tuition and support government spending in case its oil production bonanza fades in the transition toward cleaner energy sources, under an annual spending plan approved by the state Senate on Monday.
The Senate’s 31-10 vote sends the bill back to the House for adoption of amendments. The Democratic-led Legislature has until noon Thursday to send a budget bill to Democratic Gov. Michelle Lujan Grisham, who can approve or veto any provision.
The bill as amended would increase annual general fund spending by $653 million, or 6.8 percent, to $10.2 billion for the July 2024 to June 2025 fiscal year.
The increase in state spending is dwarfed by more than $1.3 billion in general fund transfers to new foundations and trusts designed to bolster scholarships for college and career training, housing construction , outdoor conservation programs, and Native American self-sustaining education programs.
Lawmakers project a $3.5 billion budget surplus for the next fiscal year, driven largely by oil and natural gas production in the Permian Basin that straddles southwest New Mexico and western from Texas.
Republican Sen. William Burt of Alamogordo urged his colleagues to support the bill “because oil and gas won’t always be there for us.”
“We need to look beyond the next few years. We need to look at the long-term future of New Mexico,” said Burt, one of six Republicans who voted for the spending bill.
The budget plan includes a new $959 million trust to permanently guarantee free tuition for New Mexico residents – an initiative championed by Grisham since taking office in 2019. Public scholarships are still funded in partly through the sale of lottery tickets.
The bill allocates $512 million to a “government outcomes and opportunities” trust that would fund a variety of new programs during a three-year audit period before future funding is guaranteed.
Another $75 million fund would help state and local governments compete for more federal infrastructure spending under the Inflation Reduction Act, the Biden administration’s signature relief package. climate, health care and taxation.
A conservation fund created in 2023 would receive an injection of $300 million. Democratic Senate Majority Leader Peter Wirth said it would guarantee annual distributions of about $21 million to a range of conservation programs within state natural resource agencies, from soils in agriculture to the conservation of endangered species and big game.
A revolving loan fund to finance construction would receive a $175 million infusion to increase housing and commercial building stock.
“New Mexico, you are not a poor state,” said Sen. George Muñoz of Gallup, the Senate’s lead budget negotiator, urging his colleagues to approve the budget and its investment strategy.
Democratic Sen. Bill Soules of Las Cruces voted for the bill, but cautioned that the state should not lose sight of such pressing concerns as child poverty as it builds up savings and investments. The bill includes funding for universal free school breakfasts and lunches.
“Are we afraid of the future, so much so that we have to save money for the future instead of meeting the needs of today? said Soulès. “Ensuring that children in New Mexico don’t go hungry, aren’t abused, and have a place to sleep at night – all of that is our obligation.”
Major annual spending increases include a 6.1% increase in funding for K-12 public schools, to $4.4 billion.
Medicaid spending would increase by $180 million, or 11%, as federal pandemic subsidies for the program decline and New Mexico increases payment rates for medical providers, including care for women with newborns. The budget bill also increases the salaries of state employees and staff at elementary and secondary schools, state colleges and public universities by 3 percent, at an annual cost of $214 million.
This would channel more money to rural hospitals, literacy programs, state police salaries, welfare programs for the elderly and road construction and maintenance.
Several provisions of the budget depend on the approval of the complementary legislation:
— New Mexico would become the 14th state to guarantee paid leave for workers when they are seriously ill or to care for newborns and their loved ones, under a bill that advanced Monday toward a decisive vote in the House after Senate approval. The budget would provide at least $24 million to launch the program, with funds provided through a combination of employee and employer contributions.
— Final adoption of changes that would reduce personal income taxes across the board, collect more taxes on investment income and provide tax credits for the purchase of new electric vehicles and second-hand that can be combined with federal grants is still awaiting final adoption. State government would forgo about $220 million in annual revenue. The bill passed the Senate 26-13 on Monday and awaits House approval.
—Final approval was also pending Monday for several new endowments and trusts.