New Mexico Governor Michelle Lujan Grisham delivers her State of the State speech for the start of the 56th Legislature at the Capitol, Tuesday, Jan. 16, 2024, in Santa Fe, N.M. (AP Photo/Roberto E. Rosales)

SANTA FE, N.M. (AP) — New Mexico would set aside well over $1 billion to guarantee tuition-free college and sustain government spending in case its oil production bonanza fades in the transition to cleaner energy sources under an annual spending plan endorsed by the state Senate on Monday.

The 31-10 Senate vote sends the bill back to the House for concurrence on amendments. The Democratic-led Legislature has until noon Thursday to send a budget bill to Democratic Gov. Michelle Lujan Grisham, who can approve or veto any provisions.

The bill as amended would increase annual general fund spending by $653 million, or 6.8%, to $10.2 billion for the fiscal year running from July 2024 through June 2025.

The boost in state spending is dwarfed by more than $1.3 billion in general fund transfers to new endowments and trusts designed to bolster scholarships for college and professional training, housing construction, outdoor conservation programs and autonomous Native American education programs.

Legislators anticipate a $3.5 billion budget surplus for the coming fiscal year, driven largely by oil and natural gas production in the Permian Basin that overlaps southwestern New Mexico and western Texas.

Republican state Sen. William Burt of Alamogordo urged colleagues to support the bill “because oil and gas won’t always be there for us.”

“We’ve got to look farther than the next few years. We’ve got to look at the long … future of New Mexico,” said Burt, one of six Republicans who voted for the spending bill.

The budget plan includes a new $959 million trust to permanently underwrite tuition-free college without fees for New Mexico residents — an initiative championed by Grisham since taking office in 2019. Public scholarships still are supported in part by lottery ticket sales.

The bill allocates $512 million to a “government results and opportunity” trust that would underwrite a variety of new programs during a three-year vetting period before future funding is guaranteed.

Another $75 million fund would help state and local governments compete for more federal infrastructure spending from the Inflation Reduction Act, the Biden administration’s signature climate, health care and tax package.

A conservation fund established in 2023 would get a $300 million infusion. Democratic Senate Majority Leader Peter Wirth said that would guarantee annual distributions of about $21 million to an array of conservation programs at state natural resources agencies, from soil enhancement programs in agriculture to conservation of threatened and big-game species.

A revolving loan fund to finance construction would receive a $175 million infusion to expand both housing and commercial building inventory.

New Mexico, you are not a poor state,” said state Sen. George Muñoz of Gallup, the Senate’s lead budget negotiator, urging colleagues to endorse the budget and its investment strategy.

Democratic state Sen. Bill Soules of Las Cruces voted for the bill but cautioned that the state shouldn’t lose sight of such urgent concerns as childhood poverty as it builds up savings and investments. The bill includes funding for universal free school breakfasts and lunches.

“Are we afraid of the future and so afraid that we’re going to put money away for the future instead of addressing the needs today?” Soules said. “Making sure children don’t go hungry in New Mexico, aren’t abused and have a place to sleep at night — all of those are our obligations.”

Major annual spending increases include a 6.1% boost to K-12 public school funding, to $4.4 billion.

Medicaid spending would increase by $180 million, or 11%, as pandemic-era federal subsidies for the program recede and New Mexico increases payment rates to medical providers, including care for women with newborn children. The budget bill also increases pay by 3% for state employees and staff at K-12 schools, state colleges and public universities at an annual cost of $214 million.

It would funnel more money to rural hospitals, literacy programs, state police salaries, safety-net programs for seniors and road construction and maintenance.

Several provisions of the budget are contingent upon approval of companion legislation:

New Mexico would become the 14th state to ensure paid time off to workers when they’re seriously ill or to care for newborns and loved ones under a bill that advanced Monday toward a decisive House floor vote after Senate approval. The budget would provide at least $24 million to launch the program, which funds leave through a combination of employee and employer contributions.

—Final passage is still pending on changes that would reduce personal income taxes across the earnings spectrum, collect more taxes on investment income, and provide tax credits toward the purchase of new and used electric vehicles that can be combined with federal subsidies. State government would forgo about $220 million in annual income. The bill passed the Senate on a 26-13 vote Monday, and awaits a House concurrence vote.

—Final approval also was pending Monday on several new endowments and trusts.

News from © The Canadian Press, 2023. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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