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FARMINGTON – With the state of New Mexico facing a possible half-billion-dollar budget shortfall for the next fiscal year, local officials fear lawmakers in Santa Fe will turn to city and county coffers to fill the gap.

"Based on recent trends, they're going to go after local government," San Juan County Executive Officer Kim Carpenter said at a July 26 County Commission meeting. "We're going to have to get our armor on and push back."

Carpenter and other officials across the state have pointed to a downturn in the oil and gas industry, which accounts for a large part of New Mexico's tax revenue, as the reason for the deficit. The industry's struggles have had an impact on other sectors, directly and indirectly decreasing the money local governments have to fund their operations.

"There's a ripple effect," Sen. Steve Neville, R-Aztec, said in a phone interview. "Santa Fe and Albuquerque don’t think they are affected, but they are just as dependent as we are."

On July 21, Sen. John Arthur Smith, the chairman of the Senate Legislative Finance Committee, urged Gov. Susanna Martinez to hold a special legislative session to address what could amount to a $500 million shortfall.

"If those numbers are actual, we're going to have to do something," said Neville, who also serves on the finance committee. Neville said the lawmakers are in a tough position though, having already shaved 2 percent from the budget during the last legislative session.

"We’ve already trimmed a lot," he said. "There’s not much left to cut."

Moreover, the alternative of increasing revenue is politically difficult. Neville said raising taxes can be a tough sell during an election year.

The situation has local officials worried that the state will set its sights on another target.

In a phone interview, Carpenter said his biggest concern is that the state would immediately repeal "hold harmless" subsidies for cities and counties. The program was created to offset revenue lost from legislation passed in 2004, which exempted food and some medical services from the gross receipts tax. In 2013, the state voted to phase out the payments over a 15-year period after lawmakers said they were not sustainable. Carpenter said that now there's talk among legislators of ending the subsidies all at once, which would deal a $2-million blow to the county's budget.

Farmington City Manager Rob Mayes said he has similar concerns that the state will once again look to local government to fix the problem.

"It is imperative to understand that whatever economic conditions the state is experiencing, we at the local level are already experiencing the same or worse," Mayes said in an email. "I am hopeful our state leaders will take a higher and longer view."

In addition to providing "hold harmless" payments, the state also funds medical and educational services in the region. Officials worry those may also be subject to cutbacks.

"San Juan College already took a big hit," Neville said.

The college was notified in March that it would not receive $151,000 in state funding during the next school year, according to Daily Times archives.

Carpenter said that when addressing the anticipated shortfall, legislators should take into consideration the important services local governments provide.

"I would encourage the state to look into their own departments," he said.

Brett Berntsen covers government for The Daily Times. He can be reached at 505-564-4606. 

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