N.M.: 6.4 percent budget increase proposed

State spending on public education and general government operations would increase by slightly more than 6 percent next year under a budget proposal outlined Tuesday by a legislative committee.

The spending recommendations of the Legislative Finance Committee typically serve as the foundation of the state budget that the full Legislature will assemble in the upcoming 30-day session. Lawmakers convene Jan. 15.

The committee called for spending about $6 billion from the state's general budget account in the fiscal year that starts in July 2008. That's almost $365 million, or 6.4 percent, higher than amounts provided for agencies and programs in the current budget year.

"The committee took a cautious approach with this budget, a reflection of the state's weakening financial position," Sen. John Arthur Smith, a Deming Democrat and committee chairman, said in a statement. "This plan takes care of the state's most important needs without breaking the bank."

Since late October, economists have lowered estimates of how much new money will be available to lawmakers and Gov. Bill Richardson for budget increases next year or to offset tax cuts.

Key provisions of the committee budget:

—About $2.6 billion for operations of public schools, the Public Education Department and education-related programs. That's about a 5 percent increase in spending, or $124 million. That includes money for school districts to provide 2 percent average salary increases for teachers and school workers. The budget also provides for a 0.75 percent boost in employer contributions to a financially troubled education retirement fund. About $4 million is to shore up a retiree health care plan.

—$25 million is included in the education budget proposal to start implementing revisions to a school funding formula, which have been recommended by a task force to better equalize the distribution of state aid to school districts. The changes in the formula are estimated to cost more than $300 million to fully implement over several years.

—2.4 percent pay raises for most state employees, but staff attorneys in district attorney offices are in line for an additional 2 percent salary increase, or 4.4 percent overall.

—About $883 million for the state's higher education network, an increase of slightly more than 4 percent or $36 million. Included is money for 2 percent pay increases for faculty and staff along with the 0.75 percent retirement system boost. The budget assumes that colleges and universities will raise tuition by 1.5 percent to provide additional revenues for their operations.

—About $790 million in state money for Medicaid. That's an increase of about $83 million, or nearly 12 percent. Much of that is to cover the anticipated enrollment of more uninsured children and lower-income adults in the program, which provides medical care. Part of the increase is to offset a drop in the rate of federal matching funding.

—$300 million for the Department of Health, which is about a $13 million or 4.7 percent increase. Included is money to reduce a waiting list for services for developmentally disabled individuals.

—$277 million for the Department of Corrections. That's about a 6 percent, or $17 million, increase. Much of that is to cover higher costs of medical care for inmates. Of the slightly more than $360 million in proposed increased spending, $20 million was not earmarked for specific programs. Lawmakers will decide during the session how to allocate that money, which probably will be done through a separate spending bill called the "junior" budget.

The committee proposed to expand several education initiatives with federal block grant money that states can use for services to low-income families with children. About $2 million of the grant money is for more pre-kindergarten programs across the state and $3 million for extending the school year for children in kindergarten through third grade in high-poverty schools.

The committee recommended about $150 million for one-item projects and programs using surplus money from the state's reserves. About $50 million of that would go to the Transportation Department for highway maintenance. The agency faces a financial squeeze because of rising construction costs and it's getting less federal money that had been expected.

Rep. Luciano "Lucky" Varela, a Santa Fe Democrat and committee vice chairman, said the $50 million won't solve the department's financial problems and that legislation will be needed to provide new sources of revenue for transportation.

"We're hoping that with this message that we're sending that the executive and the Legislature can work together to try to stabilize the revenue picture for the Department of Transportation," Varela said at a news conference.

Committee members said it was important to control spending next year so that programs can be sustained in the future if revenue growth slows as expected in the next several years.

"We do have a downturn in the economy right now and we need to recognize that," said Rep. Jeannette Wallace, a Los Alamos Republican.

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