EXECUTIVE BUDGET RECOMMENDATION HIGHLIGHTS

The Executive Budget Recommendation proposed by Governor Michelle Lujan Grisham and her Administration fulfills the promise to bring change to New Mexico.  The Executive Recommendation focuses on the most critical areas in our state including a moonshot for public education in New Mexico.  Additionally, it leverages New Mexico’s competitive advantages in our landscape, weather, and workforce to take our economy into the 21^st century, while expanding health care services for more New Mexicans.

General Fund Expenditures and Reserves

The Executive Recommendation includes an overall General Fund recurring budget of $7.1 billion, a 13 percent increase with a 25 percent General Fund reserve target.

New Mexico Economy and General Fund Revenues

The outlook for New Mexico’s economy calls for moderate growth, in line with the national economy.  Employment is expected to grow 1.5 percent in year FY2020 and range from 1.0 to 1.3 percent growth in the following three fiscal years.  After a strong year of growth in FY2019, overall recurring General Fund revenues are forecasted to decline in FY2020. Most revenues are expected to grow in FY2020; however, overall revenues decline only due to an unusually high Bureau of Land Management lease auction sale that occurred in FY2019, which is not expected to recur at such a high level (almost half a billion dollars for New Mexico’s General Fund in FY2019).  Beyond FY2020, recurring revenues are expected to return to be more in line with long-term trends with growth between 3.2 and 4.6 percent in the next few years.  Based on the Consensus Revenue Estimating Group, the state of New Mexico revenues and budget are, more than ever, driven by global oil prices, which can be volatile.  Accordingly, the Executive Recommendation allocates only 70 percent of the “new money” for recurring expenditures and targets 25 percent General Fund reserves for FY2020.

The Executive Recommendation includes a handful or revenue actions that take steps to level the playing field for and encourage New Mexico businesses, modernize our State’s tax code, and help New Mexico families.  It recommends updating our tax code to align with recent U.S. Supreme Court rulings and current technology by extending internet taxation to all online vendors and platforms. The Recommendation proposes to simplify and equalize the taxation of hospitals in New Mexico. In response to marketplace changes, the Recommendation updates New Mexico’s tobacco taxation to include e-cigarettes and nicotine vaping. The Recommendation revives and expands two tax credits that have proven to help our businesses and families; it reinstates New Mexico’s recently expired solar tax credit and increases our State’s Working Families Tax Credit.

A Moonshot for Public Education

New Mexico’s children are the No. 1 priority in the Executive Recommendation for the upcoming fiscal year.  The data shows that school achievement in New Mexico is still lagging far behind the rest of the country.  As such, the Executive Budget dedicates more than $500 million in additional funding for a total of $3.29 billion in recurring General Fund expenditures for the public school support budget in the areas of supporting teachers, principals, and education personnel, building a sustainable multicultural and multilingual framework, increasing learning time and college preparation, moving toward universal Pre-K, and promoting a fair and balanced system of accountability.

Supporting Teachers, Principals, and Education Personnel ($194 million)

The Executive Recommendation supports teachers, principals, and education personnel through increased pay, professional development, and additional funding for the Teacher Supply Program.  The recommendation includes a six percent pay increase for all teachers, principals and education personnel.  Additionally, teacher minimum salary levels for the three-tier licensure program will be raised to $41,000, $50,000, and $60,000 for Tiers I, II, and III, respectively.  The Recommendation raises the minimum salaries for principals to $60,000.  Additionally, to help the lowest-paid educational personnel, the Executive Recommendation includes funding for the implementation of a $12 per hour minimum wage.  More than $7.5 million has been allocated for high quality professional development and mentoring and $5 million for the Teacher Supply Program to support educators who have had to fund supplies out of pocket.

Building a Sustainable Multicultural and Multilingual Framework ($128.6 million)

Based on the findings that our schools have failed to provide our students with sufficient educational opportunities, creating educational disparities, we must do a better job supporting low-income, Native American, and Hispanic students, English language learners, and students with disabilities.  This requires the State to provide a multicultural and multilingual educational framework for schools.  The Executive Recommendation includes an increase of approximately $7 million in Bilingual and Multicultural Programming and an increase of $3.5 million for a total of $6 million for the Indian Education Fund, which is intended to, among other areas, ensure equitable and culturally relevant learning environments, educational opportunities and culturally relevant instructional materials for Native American students enrolled in public schools; ensure maintenance of native languages; and provide for the study, development and implementation of educational systems that positively affect the educational success of American Indian students.

There is $2.5 million to fund English Learners and Bilingual Multicultural Education Program Evaluation and Support. In order to develop a framework and monitor progress in this area, the Public Education Department would be reorganized to include a new Deputy Cabinet Secretary to oversee student language, culture, and identity.

Lastly, the Executive Recommendation includes an additional $113.2 million to increase the at-risk index in the funding formula from 0.13 to 0.25 to provide funding to better serve low-income students, minority students, English language learner students, and students with disabilities.  This funding could be used, among other areas, for items such as expanding the community schools model to integrate health, social services, and community development into our schools.

Learning Time and College Preparation ($160.1 million)

The Executive Recommendation includes funding in the amount of $119.9 million for the K-5 Plus formula factor, which will allow for and require all eligible schools to add 25 days to the school year.  An additional amount of $18.7 million is included to fund the Extended Learning Time formula factor in order to add three school days to all schools for a total of 183 days.  The Recommendation provides $6 million in funding to support competency-based science, technology, engineering, arts, and math (STEAM) standards in classrooms across New Mexico; $5 million for career technical and vocational education and apprenticeships programs build-up; $1 million for after school and summer enrichment programs; $6 million for an attendance success initiative; $1.5 million for college preparation, career readiness, and dropout prevention; and $2 million for a community school rollout.

Moving toward Universal, High Quality Pre-K ($60 million)

The Executive Recommendation puts New Mexico on the path to make universal access to high-quality Pre-Kindergarten (Pre-K) a reality for every New Mexico family, with a specific goal of increasing our statewide enrollment from 42 percent to 80 percent over the next five years. High-quality Pre-K education for three- and four-year-old children makes a measurable difference in cognitive and social development and long-term educational outcomes. By getting to kids during the most crucial stages of brain development, we can give children the tools they need to succeed through high school, college, and beyond. Kids in Pre-K will have more economic opportunities and higher incomes later in life. With these outcomes in place, we will reduce costs to our criminal justice, welfare, and health care systems.  The Executive Recommendation includes a total investment of $60 million, which includes funding for increasing the number of Pre-K slots in both PED and Children, Youth and Families Department (CYFD), the number of high-quality Pre-K educators, and financial aid for early childhood educators through the Higher Education Department.  The Executive Recommendation also includes $5 million for Pre-K classrooms in the capital budget.

Fair and Balanced System of Accountability ($7.8 million)

New Mexico’s current evaluation system does not effectively measure the impact that teachers and schools have on students and discourages the best teachers from taking positions in challenging classrooms.  The Executive Recommendation provides funding to identify and/or develop an improved evaluation system that prioritizes professional growth, tracking students’ skills and competency, and supporting locally developed classroom performance measures.  $1.5 million in funding will be provided to engage parents, communities, and students as substantive partners.  Parental and family involvement in students’ education is consistently associated with higher achievement.  A total of $4.3 million is included in the Recommendation for reviews in key areas including one-time appropriations for work on aligning public school curricula with post-secondary requirements, a fair and meaningful teacher development and evaluation system, a new standards-based assessment, special needs and special education in public schools, a survey of Pre-K transportation needs, and an expenditure review of low performing school districts.

Lastly, as part of increased accountability, $2 million in additional funding is included in the Public Education Department for improved compliance.  The Public Education Department will take more of a proactive role to support, monitor and report on the additional funds allocated to ensure compliance and progress in each of the areas noted above.  Reports on how the funding is used will be required after the second reporting date and at the end of the fiscal year.

Creating Jobs and Building our Workforce

In order to tackle high poverty rates, spur robust job creation, and put an end to the brain drain, the Executive Recommendation includes significant investments in the areas of employer recruitment and retention with emphasis on the following sectors: film and television, intelligent manufacturing, sustainable and green energy, cybersecurity, aerospace, sustainable and value added agriculture, bioscience, global trade, and tourism in relation to our outdoor economy.  A particular emphasis will be placed on creating job opportunities in rural areas of New Mexico.

Funding in the amount of $75 million is included in the capital budget for Local Economic Development Act projects for the recruitment and retention of economic base jobs.  The Executive Recommendation proposes lifting the cap on film credits to unleash and support the burgeoning film industry in New Mexico.  Tax revenues will be estimated accordingly.

The Recommendation also includes $11 million for New Mexico’s Job Training Incentive Program (JTIP). An additional $6 million in funding is included for tourism marketing with an emphasis on promoting the outdoor economy.  This will compliment a new outdoor recreation office to be established within the Economic Development Department.

Other programs funded include $1.3 million for MainStreet, $140,000 for trade offices, $500,000 for the Office of Science and Technology with an additional $300,000 for the Science and Technology Research Collaborative, $230,000 to support business incubators in rural areas and small towns, and funds to reduce the vacancy rate in the Economic Development Department specifically to improve services in rural areas.

Funding for two additional positions is added to the Department of Public Safety for the extension of hours of commercial operation at the Santa Teresa port of entry.

Building up our workforce is just as important as creating jobs. In addition to the $11 million JTIP funds noted above, the Executive Recommendation includes $25 million in funding to reinstate the College Affordability Act and $2 million for the Higher Education Department to develop centers of excellence in the areas of bioscience, cybersecurity, agriculture and sustainable and renewable energy. There are currently 20 loan repayment and loan for service programs funded in the Recommendation within the Higher Education Department, which includes $3.2 million for a new financial assistance program geared toward early childhood educators, $2.5 million for teacher training, as well as increases in the amount of $400,000 for the social worker loan repayment program and $500,000 in additional funds for the health professional loan repayment program. The teacher training funds will be used to increase the number of students entering the teacher pipeline and to accelerate the number of graduates ready to staff the state’s increased number of 3- and 4-year old students enrolled in Pre-K. In addition these funds will be used to implement best practices in Pre-K teacher education and professional training.

Expanding Health and Human Services for New Mexicans

The Executive Recommendation includes significant investments in health services for New Mexicans, with the largest components being Medicaid enrollment growth, Developmental Disabilities Waiver, and funds to address the behavioral healthcare system.  Within the Human Services Department (HSD), the Executive Recommendation includes $8.1 million to cover the projected base enrollment shortfall in FY2019. The Executive Recommendation includes $27 million for Centennial Care enrollment and utilization growth. Much of this growth is anticipated due to estimates for a more aggressive marketing program to identify and enroll an additional 28,000 New Mexicans eligible for Medicaid but not enrolled.

The Executive Recommendation includes $300,000 in HSD’s Behavioral Health Services Division base for Enhanced Care Coordination with 16 group health homes across the state.  This funding is specifically for the accreditation of these homes to comply with the new Medicaid 1115 Waiver.  This will provide additional evidence-based substance use disorder treatment services provided by these group health homes and through the new Medicaid Waiver to allow for reimbursement of these services through Medicaid.  $300,000 is included for the Corrections Department for the increase in the behavioral health contract for inmate healthcare for a total contract amount of $2.6 million.

A recent study found that allowing New Mexicans to buy into Medicaid could help close the gap in insurance coverage for patients who make too much to qualify for Medicaid but too little to afford private insurance.  The Recommendation includes $2 million in funding for a Medicaid buy-in implementation planning phase, which covers legal, actuarial, and project overview consulting expenditures.

The Recommendation includes a total increase of $25.7 million for the Department of Health.  This includes increased funding in the amount of $6.3 million for early intervention services in the Family Infant Toddler Program.  The Recommendation includes $7 million to get more families on the Developmental Disabilities Waiver and enrolled in the Program.  The Recommendation also includes $1.5 million for the supportive services waiver and $500,000 for receivership funding to assist struggling health care providers and increases funding for staff to ensure health facilities are properly surveyed.

The Recommendation includes funding as part of a larger policy to strengthen our state laws to address the opioid epidemic. The Department of Health recently received a $4 million federal grant, which is partially intended to expand program funding for overdose prevention.  The Recommendation includes $200,000 in the base budget for the purchase of naloxone for distribution to increase access to this life-saving drug that reverses the effects of an overdose.

Protecting our Children and Youth

The Recommendation includes an increase of $36.5 million for the Children, Youth and Families Department (CYFD), of which $18.5 million of that increase is earmarked for expanded Pre-K.  Additionally, the Executive Recommendation funds $3.9 million for 102 new positions in the CYFD Protective Services Division to improve services to families. The Executive Recommendation brings the vacancy rate within the Protective Services Division from 9.5 percent down to 6.1 percent in addition to adding the 102 positions.

Kinship care providers are the backbone of our child welfare and juvenile justice systems.  Over 51,000 children live with grandparents or other relative caregivers in the state of New Mexico.  Increasing and better supporting these kin placements are keys to a healthy youth services system.  The Recommendation includes $500,000 for kinship recruitment incentives and a $2 million increase for the home visiting program to serve an estimated 350 additional families.

Several national studies show that outcomes among older court involved youth are concerning as far too many are homeless or unstably housed, disconnected from education and employment, and struggling with poor physical and mental health. Intentional coordination across systems and genuine engagement with the youth experiencing these barriers is necessary to develop a comprehensive support system that is effective in supporting these youths’ transition to healthy and contributing adults.  The Recommendation includes one new position and associated funding to oversee transition aged youth, including youth with disabilities, across all departments.

The Administration intends to re-establish the state’s Children’s Cabinet to assure coordination among agencies affecting children, and demand results from multiple stakeholders.

Compensation

A major part of the Executive Recommendation is to compensate state employees for their hard work and dedication to serving New Mexico.  The Recommendation includes tiered salary increases of 4 percent, 3 percent, and 2 percent for those making less than $25,000, $25,000 to $50,000, and over $50,000, respectively.  The Executive Recommendation also increases the minimum wage for all state employees, including those employees in public schools and higher educational institutions to $12 per hour.  Additional compensation increases and targeted raises are included for teachers, principals, educational personnel, as noted above, and judges.  Lastly, the Recommendation includes funding to increase the employer contribution to Public Employees Retirement Association and Educational Retirement Board pension funds by 0.5 percentage points.

Solvency of Funds

In the process of preparing this budget, a few critical areas came to light that need to be addressed in the coming year.  This includes an estimated $300 million backlog in film tax credits, an underfunded Health Care Fund and an underfunded Risk Fund.  The Executive Recommendation includes one-time funds to repay the film backlog in its entirety immediately.  With respect to the insolvent state funds, a team will be appointed to review and propose solvency measures.  Additionally, needed pension reforms are being proposed during the 2019 legislative session and the Administration will closely examine those proposals to determine the best course of action for long-term solvency.