The thrust of Hyde’s message was summed up on page 8: “Unless We See A Positive Turnaround In Expenditures or Revenue for FY10, Significant Cost Containment Efforts Will Be Necessary Beginning This Fall.”

Because of a confluence of factors, New Mexico’s Medicaid program could face a $200 million to $300 million shortfall come Jan. 1, 2011, mostly due to the disappearance of federal stimulus Medicaid dollars at the end of 2010, Hyde said in an interview with the Independent last week.

Barring a big infusion of cash, the state will likely make some tough cost-cutting decisions that could affect the state’s low-income population, people with disabilities, as well as public schools and hospitals across the state.

Hyde said that no decisions had been made yet as to how to address the potential budget gap. But she acknowledged that the changes being contemplated are of a different magnitude than those considered in previous budget crunches.

“They are much more drastic than we’ve had to do in the past,” Hyde said.

Hyde’s presentation made an impression on lawmakers.

“I think it (the presentation) was designed to be scary and it was scary,” said state Sen. Dede Feldman, D-Albuquerque. “She was telling (the committee that proposes a state budget) what are the consequences if they put no new money into this budget or what the choices would be if they did not put any new money into the program.”

Cost-cutting suggestions in the presentation included reducing benefits, decreasing rates paid to medical providers, slowing enrollment into the program and making administrative changes.

Programs to be possibly cut, according to Hyde’s presentation to lawmakers, included vision benefits for adults; adult dental benefits, except in emergency; nursing services in schools; hospice services; hearing aids and hearing evaluations for adults; and physical, occupational and speech therapy for adults.

To hammer home the seriousness of the coming shortfall, the presentation included two options for fundamentally restructuring Medicaid: “Eliminate Whole Programs That Have High Costs;” and “Eliminate All But Mandatory Services for Mandatory Populations.”

The implications of the coming Medicaid shortfall are potentially dire for New Mexico, where one in four residents gets health coverage in whole or part through some form of public assistance.

The Medicaid budget is a microcosm of the state’s shaky finances. Earlier this month revenue estimates projected that the money New Mexico will take in through taxes and other revenue is more than $400 million short of what was anticipated this fiscal year, which ends June 30, 2010. The state is collecting less than it projected in income and sales taxes, officials said.

That makes the loss of federal stimulus dollars for Medicaid particularly alarming in 2011, when Hyde’s agency predicts it will lose roughly $115 million.

Many states around the country are concerned about similar revenue “cliffs” when federal stimulus money runs out at the end of calendar year 2010, Corina Eckl of the National Conference of State Legislatures said this weekend.

At the same time federal rules don’t allow states to make changes to who is eligible for Medicaid through Dec. 31, 2010. Determining who is eligible is one way states can save money, officials said.

Meanwhile, the bad economy is fueling Medicaid enrollment in New Mexico as more people find themselves out of jobs and struggling financially, which is driving up the program’s costs.

Also, state officials underestimated the popularity of a new program — Coordination of Long-Term Services – that has seen more people sign up and use its services than projected, Hyde said.

Shrinking revenues have additionally eaten away at a pot of money that Hyde’s agency had contributed to cushion state government through the bad economy.

More than $100 million from the Human Services Department budget was put in a special fund created by the Legislature this past session, Hyde said. The fund was created to capture unspent state dollars as a result of the infusion of federal Medicaid dollars as part of the federal stimulus program. But that money has been used to shore up other parts of the state’s general fund, Hyde said last week.

David Abbey, director of the Legislative Finance Committee, said last week that lawmakers understood the situation the Human Services Department faces in the near future.

“I believe the Legislature plans to replace the federal funds as best they can given the budget restraints,” Abbey said.

Abbey was named the 2009 winner of the Legislative Staff Achievement Award by the National Association of Legislative Fiscal Officers, according to a news release.

In addition, Erlinda Campbell, analyst and administrator for the Senate President Pro Tem office, received the leadership staff award for her contributions to the New Mexico Senate and the National Conference of State Legislatures (NCSL) leadership staff section.

Abbey, who has been LFC director for 12 years, was recognized “for his work on the solvency plan for the 2009 budget shortfall and for his ongoing work on public policy and the legislative process,” the release states.

New Mexico is one of the few states in which the Legislature proposes a state budget. Abbey, in his role as LFC director, helped legislators develop a package of revenue increases, budget reductions and reversions to help prevent a shortfall, the release states.

In addition, the release states, Abbey and his staff have developed a performance-based budget system that “has become a model for other legislatures,” and a range of materials from post-session reviews to agency report cards that explain the role and status of government and fiscal policies to the public.

Campbell became a member of the NCSL leadership staff section executive committee in 2007 and has served on the outreach, awards and newsletter committees. She was instrumental in planning a national leadership staff professional development seminar that was held in Santa Fe in 2006.

Illustration by Keith Lewis

SANTA FE — A potential showdown is emerging between state lawmakers and Washington-bound Gov. Bill Richardson over where to look for cost savings.

State lawmakers, grappling with a projected half-a-billion-dollar budget shortfall, were told Tuesday they could limit the pain by retrieving nearly $200 million in unspent money locked up in 7,800 state-funded but unfinished brick-and-mortar projects around the state.

But whose projects would the money come from — the governor’s, state agencies’ or from lawmakers’ projects?

Richardson’s views still matter. Even though President-elect Barack Obama nominated the governor as U.S. commerce secretary on Wednesday, Richardson will retain his position in New Mexico for a portion of the 2009 legislative session. The governor said in a press release Wednesday that he isn’t resigning as the state’s chief executive until he’s confirmed by the U.S. Senate.

New Mexico finances brick-and-mortar projects through a process called capital outlay in which the Legislature and the governor divvy up the money. In recent years, the money earmarked each year for brick-and-mortar projects –- also called “pork” by critics -– often eclipsed $500 million.

Legislative staff said 130 projects deserved scrutiny, most of them sponsored by Richardson and state agencies. Tapping those projects alone could produce more than $170 million for the state’s general fund, which funds day-to-day operations, said David Abbey, the director of the Legislature’s budget arm –- the Legislative Finance Committee.

But among the potential targets is a multimillion-dollar equestrian facility proposed for the state fairgrounds in Albuquerque — a project Richardson supports, even putting $25 million of capital funds toward the project.

His spokesman and budget director have both publicly stated the governor thinks placing it there makes sense because the fairgrounds can accommodate such a project, they say. It is unclear how the governor might react to the project winding up as a potential target for cutting.

But one thing is clear. Even as legislative staff crafts a list of potential targets, the governor’s staff is busy putting together its own list of possible cuts. Rick Martinez, deputy secretary at the state Department of Finance and Administration, told state lawmakers Tuesday that the agency would like to present its list when it is complete.

An updated revenue forecast is due next week and that will give lawmakers and Richardson new estimates of how much money the state should expect in the current fiscal year and in the 2010 budget year, which starts in July.

Meanwhile, oil and natural gas prices, a major barometer for state revenues, remain volatile after falling in recent months, leading some to predict much lower revenues from broad-based taxes — gross receipts and income taxes.

In October, Richardson ordered executive branch agencies to trim spending and impose a freeze on hiring. The governor also said he would ask the Legislature to eliminate some previously approved capital improvement projects to save money.

Universities and other institutions of higher learning have already frozen wages and cut back on travel and other expenses. Senate President Pro Tem Tim Jennings, D-Roswell, meanwhile, has told school districts in a letter to prepare for spending cuts and possible layoffs to cope with the state budget gap — a move Richardson criticized as “irresponsible and premature.”

That state lawmakers pulled out the budgetary pruning shears on Tuesday, a month and a half before the Capitol’s quiet, art-lined hallways transform into bustling avenues teeming with lobbyists and spectators, spoke of how serious the situation is. The session starts Jan. 20.

“There’s obviously a lot of sensitivity about whose ox will be gored in this effort,” Abbey told lawmakers Tuesday.

It was apparent not everyone was entirely comfortable with taking money out of unfinished projects.

“What if people lose their jobs because we are moving that money?” asked Rep. Edward Sandoval, D-Albuquerque.

Sen. Diane Snyder, R-Albuquerque, added that people in small communities around the state “are hysterical” because they are worried they will lose state money for authorized projects.

“There is a big rush to get their RFPs and contracts ready so the money is encumbered,” Snyder said.