When the price of oil tanked in early March, I was relieved that the governor had not yet signed the state’s fiscal year 2021 budget. With a line item veto, Gov. Lujan Grisham could easily stem the damage from a $20 price cut per barrel of oil. The budget as passed by the Legislature was based on about a $50 price per barrel. The generally agreed-to formula is that for every dollar change, up or down, in the price of oil, New Mexico’s state revenues change by $22 million in the same direction.
So the simple fix was to simply strike out enough budget items to cover the shortfall. With a $20 price decrease, the budget needed to be reduced by about $440 million. I was shocked when the budget was signed with only a $100 million decrease, all of it from local infrastructure projects. The vetoes were ill-conceived for two reasons: first, they were nowhere near enough to cover the loss in revenue; second, infrastructure projects—i.e., construction—can help absorb the inevitable job loss in the oil patch as U.S. producers have to slam the brakes on production.
So the line item veto was at best a missed opportunity. Fast forward to this week, where oil prices have dropped further to $22/barrel. Let’s be real clear about this: OPEC (that is, Saudi Arabia) and Russia want to shut down the Permian Basin. They tried this in the period from 2014-2016. U.S. producers survived then by responding with aggressive streamlining of operations and accrual of private capital to open new rigs. In 2020, there isn’t much left to streamline, and, well, we know where private investment is.
I’ll put it this way: Very soon, Hobbs motels won’t have any problem staying under 50% capacity to comply with state social distancing orders.
With the latest price drop, New Mexico can expect a $600-$700 million hit in revenues, which does not include gross receipts and income taxes taking a hit from sudden unemployment. The state easily needs to find a billion dollars in savings before the fiscal year starts on July 1.
We have to have a special session of the Legislature, and sooner rather than later. The budget will have to be reworked and reduced significantly. The minority has already sent their proposal to the governor; I am sure the majority is also working revisions. My hope is that infrastructure and any other job-creating measures are restored or preserved; new spending, including the early childhood investment fund, must be jettisoned for now.
So the question isn’t if we need a special session of the legislature, or even when. It’s how. If you haven’t spent much time in the Roundhouse, good for you. The ventilation system in our state Capitol is notoriously bad. It’s dirty. It’s old. Pack it full of legislators and lobbyists, it’s a petri dish. Notice everyone coughing and sneezing every February? It’s called the Capitol Crud for a reason.
That statement might even be insulting to petri dishes. My sister at the height of her “Girl Scientist” period actually grew strep and botulism under her bed for the science fair one year. This was way back in the late 1970s; Tylenol didn’t have safety seals back then, and I am pretty sure Tyvek hadn’t been invented yet. With no protection (or for that matter, knowledge), we all fared much better with bacteria being deliberately cultured in our house than the average legislator does during a 60-day session. A handful of legislators in the last decade have even been hospitalized for pneumonia during the session.
A special session would be a problem in any building during the COVID-19 pandemic; in the germ laboratory that is the Roundhouse, we are truly putting lives at risk by convening the Legislature. I guess it’s possible that the nasty vents in Santa Fe could have grown some pretty awesome bugs capable of annihilating COVID-19, but then I have to consider the possibility of a super-immune posse of unpaid legislators roaming the streets and I think none of us want that.
Like it or not, we are going to have to look at remote or live-streamed (live video and audio via the internet) meetings and hearings. We have a pretty awesome tech and film community here; we should ask them how best to create a safe special session with the required transparency. We should spend money up front to quickly put in place remote streaming capability for our legislators, and make the hearings, meetings and floor sessions available via livestream.
In the grimmest possible sense, our state depends on our government and Legislature this year. Let’s help them stay alive to serve.
Merritt Hamilton Allen is a PR executive and a former Navy officer. She lives amicably with her Democratic husband and Republican mother north of I-40 where they run two head of dog, and one of cat.