In a recent development, leading lawmakers in New Mexico have recommended a 5.9% increase in general fund spending for the upcoming fiscal year. This increase comes as the state experiences a windfall in oil-related income. However, lawmakers are also expressing caution about the future of the state's petroleum bonanza and are setting aside more money in savings and investment accounts.

The proposal put forth by the budget writing committee, which is led by Democrats, suggests increasing general fund spending by $566 million to reach $10.1 billion for the fiscal year from July 2024 to June 2025. It is important to note that this increase in general spending represents only a fraction of the anticipated $3.5 billion surplus of state income beyond current tax obligations.

The budget blueprint focuses on various key areas, such as improving student achievement in public education, bolstering healthcare for those living in poverty or on the cusp, and providing pay raises averaging 4% to state employees. Additionally, compensation boosts at public schools and colleges are also included in the proposal. Childhood wellbeing is also a priority, with a recommendation to increase spending from an early childhood education trust to expand prekindergarten and home visits from nurses for parents of infants and toddlers. It is worth mentioning that the early childhood education trust was established in 2020 and currently holds around $6 billion.

Despite the positive outlook, State Sen. George Mu?±oz of Gallup has issued a warning regarding the state's heavy reliance on income from oil and natural gas. Mu?±oz, who chairs two lead budget-writing committees, highlighted the volatile nature of oil and gas pricing and production, calling it a "very dangerous situation." However, he also commended the budget proposal, stating that it allows the state of New Mexico to continue growing without the need for massive future budget cuts.

The legislative session is set to begin on January 16th, with a focus on rapid-fire budget negotiations. Governor Michelle Lujan Grisham holds the power to veto any budget provisions approved by legislators. Republican state Sen. Pat Woods of Grady, who is outnumbered nearly 2-1 by Democrats in the chamber, is urging his colleagues to be reasonable and slow down the pace of recent budget increases. Woods questions whether the funding is being utilized effectively and suggests holding off on further big expenditures to gain a general understanding of where the funding is working.

Under the proposed budget, spending on public schools would increase by $243 million, or 5.8%, reaching $4.42 billion. The plan also includes significant increases in spending on the state courts system, local prosecutors, and public defenders, addressing concerns about crime and gun violence in Albuquerque.

State Rep. Derrick Lente of Sandia Pueblo revealed that the budget plan allows for $200 million in tax reductions and incentives. However, Governor Lujan Grisham scaled back a tax relief package last year, citing concerns that it could undermine future spending on public education, healthcare, and law enforcement. Vetoed items included reduced tax rates on personal income, sales, and business transactions. This year, credits for the purchase of electric vehicles and related charging equipment are back on the negotiating table.

Interestingly, Lujan Grisham's rival budget proposal suggests a more dramatic increase in general fund spending, amounting to approximately $950 million, or nearly 10%, reaching $10.5 billion. This proposal includes major initiatives aimed at strengthening homeownership and affordable housing opportunities. Both budget proposals indicate a likely end to three consecutive years of bulk state money transfers to New Mexico households. In 2023, individual payments of $500 exceeded $600 million in rebates.

As the legislative session approaches, all eyes are on the budget negotiations and the decisions made by lawmakers and Governor Lujan Grisham. The future of New Mexico's economy and the allocation of funds to various sectors, including education, healthcare, and public safety, hang in the balance.