Expectations high as Lujan Grisham enters second term

Jan. 1—As Gov. Michelle Lujan Grisham takes the stage Sunday at the Lensic Performing Arts Center to be sworn in for a second term, expectations of the nation's first and now twice-elected Democratic Latina governor are running high.

Democrats and Republicans alike say Lujan Grisham, who is heading into her next four years in office amid record revenue projections for the state — driven in large part by the oil and gas industry — has both an opportunity and a challenge to put New Mexico on strong financial footing and end its heavy dependence on fossil fuels to fund its budget.

"The No. 1 thing I'd like to see in her next term is fiscal responsibility," said state Sen. George Muñoz, a Gallup Democrat who chairs the influential Senate Finance Committee.

"How do we set New Mexico up?" he asked. "Oil and gas is not here forever."

But for now, oil and gas is expected to provide the state an unprecedented revenue windfall — and a chance to make long-lasting investments during Lujan Grisham's second term.

Steve Pearce, chairman of the Republican Party of New Mexico, said he hopes the governor "would begin to acknowledge" the industry that provides almost 45% of the state's budget "instead of talking about doing away with it."

He, too, expects fiscal restraint from the Lujan Grisham administration.

"I would hope that in these massive surpluses that the oil and gas industry is bringing to the state that they would be very cautious about dipping into" a permanent fund that receives revenue from oil and gas leases and royalties, Pearce said.

"They're going to have access to that money, but I really, really do urge caution because those funds were set up for rainy day purposes," he said. "Rainy day means when we're out of oil and gas, when that $3 [billion] and $4 [billion] or $5 billion a year disappears. So with the tremendous surpluses that we've seen the last two or three years and I expect this year, I would hope that they would be cautious about dipping into those permanent funds."

Recurring revenues for fiscal year 2024 are projected to reach close to

$12 billion, including $3.6 billion in "new money," which is the difference between the current budget and expected revenues in the next fiscal year.

"I think we're all going to be challenged to decide how to spend, save and invest this revenue that's coming in," Senate President Pro Tem Mimi Stewart, D-Albuquerque, said.

"This revenue will not be coming in forever," she added. "I believe we're approaching peak oil, and I think that revenue will go down — not soon, not in the next few years, but perhaps by the end of her four-year term. It's going to be challenging to figure how to invest for the future, how to spend now for these problems that we've had forever and how to save for when we don't have it."

Stewart said the governor recently met with members of the Senate and House Democratic caucuses to lay out the issues she wants to tackle.

"She is very concerned about the same issues that we are," she said. "Health care, especially behavioral health care. We're going to try to improve [the Children, Youth and Families Department]. She's interested in continuing her work in education. Certainly, she agrees with the majority of us moving forward that we really need to work on ensuring we have students in school enough time to make up some of the learning loss that we've had through the pandemic. Affordable housing is big on our agenda to try to deal with the root causes of our homeless population."

State Rep. Ryan Lane, an Aztec Republican who was recently elected House minority leader, said Lujan Grisham hasn't met with members of the House GOP.

"It doesn't bother me," he said. "I understand the numbers, so it makes sense that she would meet with the Democratic caucus."

Lane said his expectation of the governor is to focus on improving education in the state, which consistently lands at or near the bottom in national rankings.

"That needs to be the top priority because that's the foundation for everything else, whether it's economic development or crime," Lane said. "It doesn't matter [the issue]. Education is the foundation."

Lane believes the state needs to invest more resources in career and technical education and provide better mentoring to principals and teachers.

"We need a model of implementation that all school districts can follow," he said.

Addressing the state's water needs and tackling climate change are also on the governor's list of priorities, according to lawmakers.

Lucas Herndon, energy policy director for ProgressNow New Mexico, said the advocacy organization expects the governor to continue her "excellent legacy" of good climate policy.

"We were so excited to help support the Energy Transition Act and her work on the methane rules over the last four years," he said.

The Energy Transition Act is designed to move the state's electric utilities from coal to renewables and zero-carbon resources by 2045.

While the Lujan Grisham administration has delivered wins for the environment, Herndon said there are expectations for more to be done.

"We are looking forward to seeing a comprehensive climate bill introduced into the Legislature and be supported by the governor, as well as other energy bills that would help move New Mexico off of the fossil fuel train and into the renewable future that most New Mexicans when polled are supportive of," he said.

Senate Majority Leader Peter Wirth, D-Santa Fe, wrote in a statement Lujan Grisham's second term provides an "incredible opportunity" for the state.

"It feels like the stars have aligned," he wrote. "The accomplishments in the first four years cannot be understated given the hurdles faced — the coronavirus pandemic, fires, floods and a prior administration that dismantled key government functions. Now, we have an opportunity to work collaboratively to make the cradle to career type investments that can truly transform our state."

Muñoz, the Senate Finance Committee chairman, said he gave the governor credit for all the changes she's spearheaded in her first term.

"She's probably the governor that I've seen make the most change that I've been under and tackle some of the toughest issues," including the coronavirus pandemic and catastrophic wildfires, he said.

But Lujan Grisham hasn't had much experience with major revenue slumps and drastic budget cuts, he said.

"She's never been there to talk about cutting a billion dollars out of the budget, and she's never been there to talk about pay cuts and recessionary pressures," he said. "Fiscal responsibility really needs to happen. We can't go off on these wild ideas of $40 million for this or that and no results."

Lujan Grisham was unavailable for comment, according to her press office, which declined repeated requests from The New Mexican for an interview with the governor starting a day after the Nov. 8 midterm election. Each time, a spokeswoman for the governor said Lujan Grisham was too busy for an interview.

"Unfortunately with required interviews for appointments and preparations for the upcoming legislative session, the governor will not have press availability before the end of the year," Nora Meyers Sackett wrote in a Dec. 19 email.

After she was declared the winner of the governor's race, Lujan Grisham promised "four more years of progress" and "four more years of rebuilding our beloved state."

"New Mexicans tonight said, 'We believe in a better future for all of us,' and I say to you, 'We will unequivocally achieve just that — and then some,' " she said to cheers and applause during an election night watch party at the Clyde Hotel in Albuquerque.

While the governor touted successes during her first term in office, saying her administration has created the "economic jumpstart" New Mexico needs and deserves, she also said her next four years would still be difficult.

"Every single investment, every single strategy, every single effort you make and you commit to tonight — and me, too — means that we create the kind of change and the economic stability and the future for our families that lasts more than just one generation and more than two, but it lasts for the next 50-plus years," she said.

Follow Daniel J. Chacón on Twitter @danieljchacon.