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Sunday, August 02, 2009
$300M Shortfall Concerns Lawmakers
By Dan Boyd
Journal Capitol Bureau
SANTA FE — It's one suggestion to address New Mexico's ongoing cash shortage, but one state lawmakers are trying to avoid at almost all costs.
Despite a revenue shortfall that some legislators fear could be larger than $300 million when new estimates are released in several weeks, the prospect of raising taxes during an ongoing economic recession remains largely off the table.
"I just don't hear a steady drumbeat on that," said Sen. John Arthur Smith, D-Deming, chairman of the Senate Finance Committee.
State government spending has grown by about 40 percent during the past six years. Smith and other lawmakers might focus on alternatives to new revenues to pay for the state's nearly $5.5 billion annual budget, such as shifting money from stalled infrastructure projects, shortening the government's workweek or furloughing state employees, should a special legislative session be called this fall by Gov. Bill Richardson to address budget problems.
The reasons for the reluctance to consider tax hikes might be obvious: They're always unpopular politically, especially in a state with low income levels. New Mexicans face rising unemployment and a stagnant housing market to boot.
"It's a politically risky proposition to raise taxes in difficult economic times," said longtime New Mexico politics researcher Brian Sanderoff.
If taxes were to be raised, Democrats, who control the executive branch and both houses of the Legislature, could face the lion's share of the blame, Sanderoff said.
However, while reluctant, some lawmakers are starting to say taxes might have to be considered.
"We don't have too many places to go," said Sen. Carlos Cisneros, D-Questa, the vice chairman of the Senate Finance Committee. "We may not have a choice but to go in and look at some revenue generating options, though that's a real long shot."
Driven by similar budget challenges, 16 states have increased taxes by more than 1 percent this year, according to the National Conference of State Legislatures, while just a few states cut taxes.
For example:
• New Jersey, Hawaii and Wisconsin raised taxes on high-income earners.
• California and Massachusetts bumped up their sales tax rates.
• Kentucky increased its tobacco tax and added a tax on package alcohol sales.
In New Mexico, several tax increase proposals brought before lawmakers during this spring's regular session, including a tobacco tax increase and a lodger's tax, were soundly rejected.
A proposed three-quarters of a cent increase in the state's gross receipts tax that would have generated about $400 million annually for a new public school funding formula — but wouldn't have helped balance the budget — also stalled during this year's regular session, though groups that advocate for children have continued to sound the call for more funding for early-childhood education.
Other revenue-raising suggestions, such as repealing upper-bracket income tax cuts enacted during Richardson's first term or changing corporate income tax reporting requirements, appear likely to face similar fates given the current political climate.
Business groups have argued against such taxes, saying they would make it harder to attract new businesses to New Mexico.
Instead of taxes, lawmakers used a combination of spending cuts and account juggling to plug a $450 million budget gap in January.
Economic problems have persisted, however, leading to the likely need for additional steps to balance the state budget.
Concern among budget watchers has recently focused more on sagging personal and corporate income tax revenues, and less on oil and natural gas prices — the state receives royalties from oil and gas extraction — that prompted belt-tightening earlier this year.
New Mexico gets nearly two-thirds of its general fund revenue from gross receipts — or sales — and income taxes.
Lawmakers are hoping slow-arriving federal stimulus money will provide a jolt to the state's economy, but admit feeling concerned.
"When you're already $300 million down and it's not even halfway through the year, that's not a good sign," said Sen. Sue Wilson Beffort, R-Sandia Park, who also sits on the Senate Finance Committee.
Richardson's office has said it's "premature" to discuss potential budget-balancing options until the new revenue estimates are released.
Those figures will be released Aug. 14 during a meeting of the Legislative Finance Committee to be held in Angel Fire.
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