Prior to the Governor’s speech, Speaker Lujan opened with remarks and stated that the budget had been “cut to the bare bones” and that “we” (the legislators) “must look to revenue generators” to ensure no more cuts.  He asked that everyone have an open mind.

The full content of the Governor’s speech can be found here.  An excerpt referring to his budget plan follows:

My budget plan for the next fiscal year reduces spending by five hundred and ten million dollars through the following measures:

First, make permanent the two hundred and eighteen million dollars in cuts we made during the special session and by executive order.

Second, reduce costs by another one hundred and fifty-eight million dollars – by cutting spending across state government.

Third, eliminate stalled capital outlay projects and end the practice of double dipping.

Last, streamline and merge government functions, based on recommendations from my Committee on Government Efficiency.  By consolidating agencies, as well as boards and commissions with overlapping functions, we can save at least twenty-five million.

In regards to taxes, he stated:

I will also oppose any tax increase that hurts our efforts to keep the state economically competitive and create new jobs – such as:

Increasing personal income taxes

Rolling back our capital gains tax cuts or

Decreasing business tax incentives or credits that are working to create jobs

Nor will I support reinstating the food tax.

In addition to the budget, the Governor can place additional items on his “call” for items that the legislature may consider during a budget session.  Those items for the 2010 Session include:

• Ethics reform measures
• Hispanic Education Act
• Drunk driving initiatives
• Domestic violence initiatives
• Cell phone use while driving ban
• Environmental issues, including cap and trade for the state
• Tax lightening fix for property tax
• Creation of a Tribal Infrastructure Fund
• Domestic Partnership rights

It is obvious that in addition to grappling with a huge budget deficit, much more is being asked of the legislative delegation for this session.  We will keep you informed through this daily blog, our Member Alerts, and our weekly Teleconference (Alerts and Teleconference for members only).

Amendment 1 introduced by Sen. E. Griego adds a temporary provision to require that $150 million of voidable capital outlay projects be identified by the effective date of this special session act and legislation be submitted to the next legislative session to void the projects. The Legislative Council Service, Legislative Finance Committee and Department of Finance and Administration are to review all unexpended capital outlay projects funded by GF appropriations and make the recommendations from there.  The amendment actually passed twice after being called back to the floor for reconsideration. The amendment ultimately passed. The House concurred with this amendment.

Amendment 2 introduced by Sen. T. Keller holds harmless all school site children's programs from the public school support reductions made in the bill.  he House did not concur with this amendment.

Amendment 3 introduced by Sen. N. Rodriguez removes the 2% hold harmless budget-cut designation for the School for the Deaf and the School for the Blind and Visually Impaired as presented in the bill. The sponsor explained that the schools do not qualify for stimulus and other federal funding that served as the basis for the hold-harmless provision.  The House concurred with this amendment.

Amendment 4 introduced Sen. S. Rue limits budget cut to 2% for law enforcement programs in Department of Public Safety.  The House concurred with this amendment.

Amendment 5 introduced by Sen. J. Ryan reduces the number of exempt employees under the control of the governor by another 22 (saves another $2 million), bringing the total number of exempt employees being cut to 102.  The House concurred with this amendment. The bill passed on a 31-9 and now must go back to the House for concurrence.

It should be noted that this bill does NOT address the entire shortfall, and even less so with the hold harmless amendments that were adopted.  The thought is that increasing taxes in January will address the other shortfall. Reserves are now at the 2.3% range—less than $200 million dollars.  The amendments that failed were those that would remove restrictions from oil & gas drilling which would help generate revenue.

The Senate also passed HB6: Fund Transfers for FY2009 Budget Shortfall sponsored by Rep. N. Espinoza.  This bill is considered the 2009 “fix” and transfers $110 million from the operating reserve to the state General Fund to meet fiscal year 2009 obligations. In addition, the Governor is empowered, with State Board of Finance approval, to transfer up to an additional $115 million to meet fiscal year 2009 obligations. The bill now goes to the Governor.

The House met until late into the night, debating a House Appropriations and Finance Committee substitute for HB17 & HB33.  This substitute is the House compromise for the shortfall, and if passed by the Senate today, will signal the end of the Special Session.

HB17: House Leader’s Fiscal Year 2010 Budget Reductions introduced by Rep. L. Varela provides for across the board budgets cuts.  HB33: School Capital Outlay Funds to Pay Insurance Premiums introduced by Rep. R. Miera appropriates $29 million from the Public School Capital Outlay Fund to the Public School Insurance Authority to pay FY2010 public school property insurance premiums, and of that amount, $7 million is earmarked for the Albuquerque Public School District. The Committee substitute represents a 38% decrease in spending of recurring revenue.

The bill still is not a permanent “fix” for the budget.  It still leaves a $240 million shortfall that will have to be addressed in the January session.  This buys the legislators time in order to consider tax increases.

Cuts to the budget and appropriation of stimulus money include:

• 2% judicial agencies, district courts, Bernalillo County Metro Court, district attorneys and the Administrative Office of DA’s.

• 4% state agencies under the control of elected officials other than the governor

• 2% attorney general’s office

• 7.6% in the aggregate (or $98 million) for state agencies under the control of the Governor, with the first reduction to be in personal services and employee benefits for 80 exempt positions.

• 2% public defender department

• “Other Financing Uses” category in Developmental Disabilities Support Program is reduced by $2 million, which will be offset by $2 million from Federal Funds

• HSD Medical Assistance Program reduced by $16 million to be offset by $12 million from Federal Funds

PUBLIC SCHOOLS BUDGET REDUCTIONS

• 2% Public School Support State Equalization Guarantee Distribution (Note: further reduced by $45.5 million in GF and restored with federal ARRA funding in the same amount for distribution to school districts and charter schools.)

• 4% each public post‑secondary educational institution in Instruction and General Purposes category and 6.5% in every other category, including research and public service projects, with the institution determining reductions in each item of the category

• 4% Public Schools Transportation Distributions, including operational, school‑owned bus replacements and rental fees.

• 6.5% for supplemental distribution, including out‑of‑state tuition and emergency supplemental; the Instructional Material Fund, dual credit instructional materials, the Educational Technology Fund, the schools in need of improvement fund, PED special appropriations, apprenticeship assistance, and regional education cooperatives.

STIMULUS APPROPRIATIONS TO GENERAL FUND

• $20 million appropriated to the Appropriation Account of the General Fund for FY2010 from the amount remaining from the public safety and other government services allocation.

PUBLIC SCHOOL FUND APPROPRIATION EMERGENCY DISTRIBUTIONS

• $3 million from the General Fund appropriated to the Emergency Supplemental Distribution of the Public School Fund for use in FY2010 by the Public Education Department to make emergency distributions to school districts or charter schools under specified conditions.

• $29 million appropriated from Public School Capital Outlay Fund to the Public School Insurance Authority for use in FY2010 to reimburse or pay property insurance premiums of school districts and charter schools. Of that amount $7 million is set aside for Albuquerque Public School District.

• $2 million to Workforce Solutions Department for operating expenditures in FY2010 is appropriated from the federal ARRA unemployment insurance modernization fund.

The bill passed 37-31, with 8 Democrats voting and all Republicans voting no.  (Two legislators were excused)

In an earlier floor session, the House also passed two bills that will be considered by the Senate today:

HB6: Fund Transfers for FY 2009 Budget Shortfall introduced by Rep. E. Sandavohl which transfers $110 million from the operating reserve to the state General Fund to meet fiscal year 2009 obligations. In addition, the Governor is empowered, with State Board of Finance approval, to transfer up to an additional $115 million to meet fiscal year 2009 obligations. The bill passed on a 45-24 vote.

HB10: Public School Solvency: Flexibility Measures (committee substitute) introduced by Rep. R. Miera which provides fiscal solvency flexibility to the public schools. Four provisions were removed from the original bill, the most significant of which is the permissive waiver of requirements for class size and teaching loads. Also, deleted is the limitation of size adjustment program unit increases for smaller schools to only rural isolated public schools. Gone is the provision prohibiting emergency supplemental distributions to schools that have not adopted cost-saving measures. Also not appearing in the substitute is a lowering of the math requirement for the award of the high school diploma of excellence.

Remaining in the substitute are provisions for the suspension until the start of school year 2011-2012 of the readiness assessment system for grade 11, permitting the use of excess transportation allocation balances for the purchase of instructional materials and for operating expenses other than salaries and benefits, and the requirement that school boards are required to hold public hearings prior to the implementation of solvency measures.

ACI opposed the provisions that were removed from the original bill believing that it did not help public schools be more efficient or produce better outcomes.

The Senate passed two bills which are heading to the Governor for his signature.

HB3: Program and Cash Balance Money Transfers and Appropriations Voided sponsored by Speaker B. Lujan is an effort to balance the FY 2010 budget by providing for the cumulative transfer of $108,059,337 from various funds and agencies into the General Fund and voids the authorization for unspent appropriations.  The bill passed 36-5.

HB16: Legislative Branch Appropriations Reduction introduced by Rep. K. Martinez would further reduce General Fund appropriations made to the Legislative Branch of government for fiscal year 2010 by 5.3 percent rounded to the nearest $100. The Senate passed the bill on a unanimous vote.

While there was some thought that an agreement would be reached and the legislators would go home, the votes are not there in the House to pass a compromise.  The “Progressive” wing of the legislature does not want to make the cuts necessary to balance the 2009 and 2010 budgets.  In addition, the “Progressives” have launched robo calls in the districts of those more moderate Democrats from both the House and Senate targeting them for future elections by accusing them of being anti-education, anti-Medicare, and pro-business. The debates center around the 40% increase in government spending in the past seven years and the refusal by the “Progressives” to make any cuts, as well as using non-recurring funds as a “fix” for recurring budget items.

The Senate was successful in passing three bills yesterday, two of which head to the Governor’s desk for signature. Only one of those bills, HB3, addresses the budget shortfall and is the first bill to do so that has passed both the House and Senate and now goes to the Governor for consideration.

HB1: Special Session Legislative Feed Bill sponsored by Rep. K. Martinez that appropriates $369,950 from the FY2010 cash balances (or an average of $36,995 per day for 10 days) from legislative cash balances to cover expenses of the October 2009 special session.  The bill passed on a vote of 36-0 and now heads to the Governor’s desk for signature

HB3: Program and Cash Balance Money Transfers and Appropriations Voided sponsored by Speaker B. Lujan as amended. This bill is an effort to balance the FY 2010 budget by providing for the cumulative transfer of $108,059,337 from various funds and agencies into the General Fund and voids the authorization for unspent appropriations. Seven amendments were debated and failed.  Sen. J. Sapien introduced an amendment that passed. This amendment revises the appropriation reduction to $68 million from $76 million for the College Affordability Fund in a compromise effort.  This bill passed on a 36-5 vote and now heads to the Governor’s desk for a signature.

SB13: Public Education Staffing and Instruction Waivers introduced by Sen. V. Asbill would require the Public Education Department to temporarily waive requirements of the Public School Code regarding class and teaching loads, length of school day, staffing patterns, subject areas, instructional materials purchases and their adoption cycle, personnel evaluation, school principal duties and driver education. Applies to school years 2009-2010 through 2011-2012 and cites fiscal solvency issues as the basis for the waiver. Sen. C. Nava introduced an amendment that was adopted that changed the Cabinet Secretary’s approval for such waivers from mandatory to discretionary.  The debate on this bill centers on allowing districts to ignore accountability measures such as a limits on classroom size. The bill passed on a 32-9 vote and heads to the House for consideration.

The House Education Committee (HEC) convened yesterday to continue the discussion on HB10: Public School Solvency: Flexibility Measures introduced by Rep. R. Miera. This bill basically does away with many of the accountability measures for public schools, including limiting class size. It is similar to Sen. V. Asbill’s SB13 but is broader in scope. It would give individual districts the authority to make budget cuts without any oversight, other than public hearings.

Members discussed ways to manage costs, look for efficiencies, and allocate resources.  They agreed that while standards did exist related to performance, there was not an adequate means of enforcing those standards, and not a means of enforcing fiscal accountability, including the completion of timely audits.

All committee members agreed that the smaller districts had more difficulty in complying with the accountability standards driven by a general lack of resources to do so.  They agreed that the funds allocated to all districts needed to be tracked and the expenditures need to be properly documented.  They also agreed that the smaller districts were not complying sufficiently.

The committee allowed ACI’s Lobbyist, Art Hull, to address the concerns of business owners, and the perception of mismanaged funds and their relation to the solvency issues. Art stated that the business community was frustrated with the perception of mismanaged funds in the education sector.  He stated that when the business community mismanages funds or is negligent, there are consequences and actions must be taken to address the mismanagement. If the business community is going to be asked to provide additional funds through tax increases to address the solvency issues in the education system, there needs to be more enforcement of accountability and performance standards.

The discussion continued on how to address the funding problems, short of eliminating funding to small schools which would result in closing them. The committee realized that the measures they were proposing would be permanent solutions based on language in HB10.  Many of the members began to question whether or not they should be supporting permanent solutions when their original task was to only address the immediate solvency issues and the $12 million supplemental appropriations being requested by small districts.  They argued that it might be better to address permanent solutions in the 30 day session where they would have more time. It was agreed that the changes to the bill were so significant that a committee substitute would be more appropriate.  The committee agreed to work on a substitute and reconvene today, October 22.

The House will convene at 11 a.m. today.