By Margaret O’Hara
The Santa Fe New Mexican
A presentation Monday before the Senate Finance Committee offered the clearest picture yet of how changes in federal funding under President Donald Trump might impact New Mexico.
The state’s revenues are slated to remain relatively consistent with projections from before the start of President Donald Trump’s second term, Legislative Finance Committee chief economist Ismael Torres explained to lawmakers.
Cuts to federal funding pose an “even more immediate risk” to the state’s budget, potentially threatening dollars destined to pay for everything from medical care to school meals, Torres added. The specifics of those cuts, though, will be determined over the next few weeks of congressional debate.
New Mexico’s budget wonks promised to keep a close eye on financial policy changes at the federal level, with Senate Finance Committee Chair George Muñoz, D-Gallup, asking Legislative Finance Committee officials to run the numbers on a few initial scenarios.
In addition to regular updates, New Mexico lawmakers can likely expect a special session to be called ahead of the start of the federal fiscal year in October.
“I don’t think we should show up here after the barn is burned down,” Sen. Michael Padilla, D-Albuquerque, said. “We should show up here ahead of time — in maybe a special [session] — to work on what we expect those things to be.”
New Mexico is likely to experience federal funding shifts in two main ways, categories Torres called revenue risks and budget risks.
Revenue risks refer to possible changes in state revenue. New Mexico’s revenue — secured from elements like taxes, and oil and gas royalties — is slated to slow in coming years, but in a way that’s consistent with existing expectations.
“From what we can tell, a lot of these indicators continue to show that the U.S. economy is performing the same — the same as we expected, on track with what we expected,” Torres said.
Economic changes like the imposition of new tariffs and federal job losses could result in revenue loss in the manufacturing sector and in gross receipts and personal income taxes, respectively
However, the Trump administration’s more-friendly approach to oil and gas production could result in more revenue for the state, Torres said. Inflation, while challenging for consumers, does result in more gross receipts and personal income taxes for the state.
The real challenge for New Mexico will come from what Torres called budget risks, or federal dollars that could stop flowing to the state.
Congressional Republicans in late February passed a budget resolution to provide $4.5 trillion in tax breaks and $2 trillion in spending cuts. The resolution requires U.S. House committees to trim hundreds of billions of dollars from the agencies they oversee, including $880 billion in cuts by committee overseeing Medicare and Medicaid, $230 billion in cuts by the committee overseeing agriculture and the Supplemental Nutrition Assistance Program, and $330 billion from the committee overseeing education, school meals and the workforce.
After being adjusted for New Mexico’s size and population, Torres said those cuts could amount to a loss of more than $1 billion in federal funds for Medicaid spending alone.
The state also would see significant losses in federal money for the Supplemental Nutrition Assistance Program, school lunches and social services grants, he added. And the initial estimates don’t include decreases in federal education spending.
However, Torres noted those anticipated budget risks come with a big caveat: it is still unknown how, exactly, the cuts will be made. The details likely will be ironed out as Congress debates the matter.
“Devil’s in the details. It is very unlikely that these cuts happen proportionally, either on a revenue or per capita basis, but this is the best we can do to give you all a sense of magnitude,” Torres said.
Leaders from New Mexico institutions voiced their concerns about the loss in federal funding before the committee, saying the cuts could slash everything from public health initiatives to student support and diversity initiatives at universities.
Dr. Michael Richards, senior vice president of the University of New Mexico’s Health Sciences Center and CEO of the UNM Health System, said he’s particularly concerned about reductions to the system’s annual Medicaid reimbursements, which sit at about $864 million per year.
“There is no unessential care being provided, so if this reduction in Medicaid or Medicare happen, we will still have to provide the care because these New Mexicans need this care,” Richards said. “We will ultimately be providing it but without any reimbursement.”
For his part, Muñoz said he doesn’t think Medicaid will get hit, based on his experience meeting with finance committee officials from states across the country.
Notably, Trump and congressional Republicans have promised not to touch Medicaid spending.
The committee’s Republican members urged the state to tighten its pursestrings now, rather than moving forward with the establishment of new programs.
“To me, it’s a pretty black-and-white deal here,” Sen. Pat Woods, R-Broadview said. “We don’t know the exact amount, but we know for a fact that we can’t just keep increasing new programs.”