Pay cuts loom for many state workers

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SANTA FE — A top legislative committee is urging a 2 percent salary cut for New Mexico government workers and educators next fiscal year, but tax increases might be needed to bring state spending in line with sagging revenues, even with those and other cuts.
The 2 percent salary cuts would be worth about $76 million, to go along with nearly $200 million in agency and program cuts recommended by the Legislative Finance Committee.

Even with slashing that much, about 5 percent from this year’s total spending, the LFC said another $200 million would have to be made up for through higher taxes or even deeper spending reductions.
The LFC’s $5.3 billion budget proposal for the fiscal year starting in July shows what most people at the Capitol have known for months: The state’s revenue shortfalls and budget problems show no signs of letting up in 2010 and will have to be dealt with through higher taxes, lower spending or both.
“I don’t know that we’re going to get over this budget situation in a year or a year-and-a-half,” said Rep. Luciano “Lucky” Varela, D-Santa Fe, chairman of the LFC, which makes the Legislature’s initial budget proposal each year.
Gov. Bill Richardson has said he plans to support a “temporary tax increase” to help the state plug a budget deficit that’s expected to be at least $500 million in the coming year. However, there doesn’t appear to be unanimous support for tax hikes among the state’s 112 citizen lawmakers.
Though it doesn’t call for any specific tax increases, the LFC’s budget plan would exceed projected revenue levels by about $200 million.
“We have an obligation to carry on state government,” House Speaker Ben Lujan, D-Santa Fe, told a news conference with LFC members.
In addition to the 2 percent salary cut for state employees and educators in public schools and higher education, which would generate an estimated $76.2 million in savings, other components of the LFC budget plan include the following:
• Cut state Medicaid spending by 2 percent, saving about $17 million, on top of about $30 million in Medicaid cuts this year.
• Trim the state payroll by scrapping 950 state employee positions, most of which are currently vacant.
• Cut higher education 4 percent.
• End the return-to-work law that allows for “double dipping” in state government, which occurs when employees retire for a short period then return to the state payroll while simultaneously collecting pension benefits.
• Reduce vision and dental health insurance benefits for state workers by 50 percent.
Salaries for New Mexico state workers, and teachers, have increased significantly in recent years, with the average annual salary for classified employees rising from $32,718 in 2003 to slightly more than $42,000 in 2008.
However, the state’s economic woes have already led to an ongoing state hiring freeze and more than 17,000 state workers being ordered by Richardson to take five unpaid furlough days before July 1.
The LFC budget plan says the 2 percent salary cut would be implemented for schools by reducing the state equalization guarantee and adjusting the unit value that determines how much funding each of the state’s 89 districts receives.
Districts would be directed to absorb the salary cut by eliminating three professional development days, though school boards would have the ultimate say as to whether to heed such advice.
Some lawmakers appear dead set against enacting broad-based tax increases during a recession that’s caused unemployment numbers to spike.
“I think we should take this as an opportunity … to look for saving rather than do revenue enhancements,” said Rep. Don Tripp, R-Socorro.
In addition to individual workers, state agencies have also felt the brunt of a budget tightening that’s seen general fund spending go from about $6 billion in 2008 to this year’s projected spending level of $5.1 billion.
Compounding the problem, the LFC budget recommendation also assumes the loss of $288 million in federal stimulus money that has partly offset budget decreases during the past two years.

Journal staff writer Hailey Heinz contributed to this report.