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Democratic Sen. John Arthur Smith, of Deming, at center with microphone, guides a $700 million annual spending increase from New Mexico's general fund through approval by the state Senate on Wednesday, March 13, 2019, in Santa Fe, N.M. The House and Senate are moving closer to agreement that would increase spending on public education by nearly half a billion dollars and channel a windfall in tax income toward infrastructure and economic stimulus. (AP Photo/Morgan Lee)

SANTA FE, N.M. (AP) — New Mexico legislators inched closer Wednesday to an annual budget agreement that is likely to increases spending on education by nearly half a billion dollars and channel a windfall in tax income toward infrastructure and economic stimulus.

The $7 billion general fund spending bill for the fiscal year starting July 1 was referred to a conference committee to resolve differences between House- and Senate-approved versions, including how to distribute a 6 percent increase funding for public school teacher salaries.

The two versions share the same basic outline for a roughly $450 million spending increase to public education funding — a 16 percent boost over the current fiscal year.

House leaders including Democratic Rep. Patricia Lundstrom of Gallup have sought an across-the-board 6 percent raise for school staff, while Senate amendments allow for an average increase of 6 percent — leaving individual raises to the discretion of school districts.

The House also is pushing for a slightly larger rise in contributions to the state's two major public pension plans by employers.

"This isn't war or anything," Lundstrom said. "But we've got to get together and talk about this stuff."

Earlier in the day, the state Senate voted 39-2 to approve the bill's core spending increase of just over $700 million — an 11 percent bump. Spending on public education would increase to $3.2 billion as the state grapples with a court order to improve schooling for poor, minority students.

Separately, the Senate approved a capital spending package of $933 million for state and local infrastructure projects, from roads to rooftop solar and high-speed internet.

Typically the state issues bonds to borrow money for such infrastructure improvements. This year, lawmakers are proposing to spend $858 million on capital projects directly from the state general fund, amid a windfall in state income linked to record-breaking oil and natural gas production.

Democratic Gov. Michelle Lujan Grisham and legislators in the Democratic House majority are seeking to make good on campaign promises to boost spending on a troubled public education system and invigorate the state's economy with stimulus spending on construction projects and reforms to spur growth in the clean energy sector, film and moribund economic sectors.

Senate Finance Committee Chairman John Arthur Smith, D-Deming, said state government finances are tethered closer than ever to the oil and natural gas production, estimating the industry accounts for 45 percent of general fund income. He urged the industry on with a cheerful chant of "drill baby, drill."

At the same time, Democratic lawmakers are rushing to trim the state's reliance on a boom-and-bust oil sector by creating a new state office to promote outdoor recreation and tourism and by approving major new incentives for solar and wind energy. State economists warn that surpluses would quickly become a deficit if energy markets falter — threatening state commitments to greater spending on schools and teachers.

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A Democrat-backed proposal to lock in more-stable sources of state income is in limbo. It would impose new taxes on internet sales and e-cigarettes and raise rates on personal income and auto sales.

Lujan Grisham has sought a slightly larger, $800 million general fund spending increase and has the power to line-item veto individual spending provisions or the entire budget — though major disagreements are unlikely.

Estimated state income is outpacing spending obligations by about $1.4 billion for the fiscal year that ends in June, and another $1.1 billion for the year starting in July.

The House is seeking across-the-board 6 percent average raises for school staff, while the Senate wants average raises of 6 percent with relative winners and losers.

"Those are two very different things," said Democratic Sen. Bill Soules of Las Cruces.

The House and Senate have both endorsed 4 percent pay increases for state workers.

Transportation projects within the general fund spending bill account for $250 million in expenses designed to boost economic growth, along with $89 million for maintenance projects and $50 million in local government road funds.

Copyright 2019 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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