New fiscal year with $10.2B budget starts

Monday was the start of a fresh fiscal year, meaning the state's new $10.21 billion budget is now in effect.

And with the kickoff of fiscal year 2025, New Mexico officials should also be making some headway on crafting a new budget for the next fiscal year.

The FY25 budget is set at $10.21 billion in recurring spending, a nearly 7% increase from the previous fiscal year.

The fiscal year is from July 1, 2024, to June 30, 2025.

The $10B breakdown

Rep. Nathan Small, D-Las Cruces, who's the chair of the House Appropriations and Finance Committee, said the FY25 budget makes major strides in areas that include jobs and workforce, housing, education, health care and public safety.

The budget prioritizes increasing jobs, he said, with $30 million for the new Workforce Development and Apprenticeship Fund and $20 million over the next three years for community colleges.

"Really for the first time, we can say to all New Mexicans who are interested in learning a trade, gaining a certificate, perhaps upscaling, there is funding to support that," Small said, "whether through apprenticeships, through community colleges or other training programs."

Small also highlighted housing investments, including $125 million for new housing and infrastructure and $75 million for single- and multi-family housing.

More than $500 million is allocated for behavioral health care, he said.

"There's still a lot of work to do, but we're aiming to have the strongest behavioral health care system and health care system in general," Small said.

On education, the budget includes a 3% raise for teachers, he said, and lowered the expected insurance increase for educators. He added that the universal school meal program is fully funded, and the state's summer reading program got an extra $70 million.

And, top of mind, Small said, is public safety. The budget fully funds pretrial detention services, he said, which he described as critical.

He said lawmakers also included more than $50 million to recruit and retain law enforcement, correction officers and firefighters as well as $10 million for transitional housing for domestic violence victims.

A major theme during the 2024 Legislature was a sentiment that the state needs to save some of its record-breaking revenue rather than spend it all now.

Small touted various funds that help do that, including the Early Childhood Education and Care Fund, the Land of Enchantment Legacy Fund and a new expendable trust fund.

"It comes down to making sure our state's record revenues are working for all New Mexicans in the short and in the long term," he said.

Crafting the next budget

It took more than a year's work to finalize the FY25 budget. As it kicks into effect, state officials need to start looking now at what money they'll need after June 2025.

It's nearly a 13-month-long process to craft the state budget, according to a recently released budget guide from the Legislative Finance Committee.

The first step in the timeline began last month. Mid-June is when the state's Department of Finance and Administration sends out instructions to state agencies on budget requests, according to the guide.

Not much happens for a few months while state agency leaders start thinking about budget needs.

Then, in August, state experts from the LFC, the Department of Finance and Administration, the Taxation and Revenue Department and the Department of Transportation gather to come up with new budget forecasts.

The most recent 2023 forecast predicted a General Fund revenue of $13.3 billion for FY26. An updated forecast should come out in August.

The legislative budget guide notes that an important piece of information from the forecast relates to the difference in expected revenue and actual revenue.

When the amount is larger than expected, budget drafters can increase reserves and one-time expenses, according to the guide. If it's lower, the guide says, reserves usually cover the shortcomings but it can also mean budget cuts.

The oil and gas industry, which the state is dependent on to generate revenue, is the biggest risk to the forecasts, according to the guide.

"Forecasting oil prices is especially difficult because demand and supply can change with the weather, geopolitics and other unpredictable conditions," the guide states.

Most state agencies have to submit their budget requests by September, and the LFC and the DFA separately review the requests.

In early January, with the start of a new calendar year, the LFC releases its budget recommendation, as does the governor's office, so legislators have the recommendations before the Legislature goes into session. New Mexico is one of five states where both entities recommend different budgets, according to the legislative guide.

Then, it's either a one-month or two-month process, depending on the year, for lawmakers to pick apart the budget recommendations and finalize a budget to send to the governor for approval.

Small said he hopes the next budget can continue expanding on the expendable trust fund and addressing insurance costs. He also said he hopes the tribal education trust fund will come to fruition, which only passed the House in 2024.

The governor has the power to sign all of the budget into law, veto parts of it or even veto the entire thing.

Gov. Michelle Lujan Grisham didn't have many line-item vetoes in the FY25 budget, though that's not always the case.

New Mexicans can likely expect the next signed budget - for FY26, which covers July 2025 to June 2026 - to come out in March or April of 2025.