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Different approaches to state budget

SANTA FE – Gov. Susana Martinez has repeatedly accused the Legislature of failing to pass a balanced budget.

Just last week, her proclamation calling lawmakers back to Santa Fe for a special session slams lawmakers for adjourning earlier this year after approving an “unbalanced budget.”

But is that correct?

Not entirely, according to some of the budget leaders on both sides of the aisle and documents produced by the nonpartisan Legislative Finance Committee.

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The governor’s contention rests on setting aside a key component of the budget package lawmakers approved – about $350 million in new revenue that could have been raised through a series of tax increases and closed tax loopholes, all of which she vetoed.

Rep. Patricia Lundstrom, a Gallup Democrat and chairwoman of the House Appropriations and Finance Committee, said the governor’s contention is incorrect.

“The reality is that the budget was in balance,” Lundstrom said Monday, “and it also provided a fairly decent reserve had she approve the revenue package that went along with it.”

Martinez, for her part, maintains that lawmakers knew she wouldn’t support tax increases, and so the budget they sent her is unbalanced without them.

That was her argument last week – in the special session proclamation and an earlier public statement.

And Martinez didn’t back down from it on Monday.

“They can’t possibly call it a balanced budget when they tied it to a $350 million tax increase that would have made New Mexicans pay more for gas,” Martinez spokesman Michael Lonergan said in a written statement.

“Lawmakers knew the governor would veto any tax increase, yet they refused to negotiate. Instead, they stuck to their ‘my way or the highway’ attitude and tried to jam through one of the largest tax increases in state history.”

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Revenue dispute

An affidavit by A.J. Forte, a deputy Cabinet secretary for the Department of Finance and Administration, explains the administration’s argument.

In a two-page sworn statement – submitted as part of litigation over the budget – Forte said staff economists for both the Legislature and the administration had estimated that about $5.9 billion in revenue would be available in the fiscal year that starts July 1, if no changes were made.

But the proposed spending approved by the Legislature would have reached about $6.1 billion, he said. That would have left the state “short of a balanced budget,” Forte said.

In the special session proclamation last week. Martinez said the Legislature had adjourned after “passing an unbalanced budget” for the fiscal year that starts in July.

Earlier in the week, Martinez issued a written statement saying her administration had been negotiating “with legislative leaders to fix the unbalanced budget passed by lawmakers during the recently concluded session.”

Forte and Martinez’s characterization of the budget, however, appears to leave out the Legislature’s approval of House Bill 202, which included roughly $350 million in additional revenue to be raised by increasing tax rates and closing tax loopholes. That would have been more than enough to balance the budget, based on revenue projections, lawmakers say.

The package of proposed tax hikes would have imposed gross receipts taxes on retail sales over the Internet, increased taxes on gasoline and vehicle sales, overhauled the tax system for hospitals and raised a permit fee on interstate truckers.

Lawmakers said that even if the governor didn’t support all of the taxes, she could have used her line-item veto authority to craft a budget more to her liking.

Martinez vetoed the entire tax package. Her administration said that some of the tax increases were legally questionable and that others would have raised the cost of living on New Mexico families.

“After the soda tax was emphatically rejected in liberal Santa Fe, it’s even more clear today that New Mexicans do not want higher taxes,” Lonergan, the governor’s spokesman, said Monday.

Martinez has suggested she would support new revenue in limited circumstances, if it’s accompanied by broader efforts to restructure New Mexico’s tax code to produce a more level playing field and business-friendly environment.

‘She unbalanced it’

Some of the budget leaders in the House and Senate disagree with the “unbalanced budget” characterization.

“If everything were to have gotten signed, there wasn’t an unbalanced budget,” said Rep. Larry Larrañaga, an Albuquerque Republican and former chairman of the House Appropriations and Finance Committee.

He’s on the governor’s side, however, on the tax issue. He voted against the spending plan and tax package approved the Legislature.

“I wouldn’t say it was unbalanced,” said Sen. Steven Neville of Aztec, the ranking Republican on the Senate Finance Committee. But “it wasn’t balanced in the way most conservative Republicans would have preferred.”

The bills won bipartisan support in the Senate but passed on a party-line vote in the House.

Democratic Sen. John Arthur Smith of Deming – chairman of the Senate Finance Committee and the Legislative Finance Committee – said it was the governor’s own veto of the taxes in House Bill 202 that created the threat of an overspent budget.

“She unbalanced it,” he said.

A financial summary produced by LFC staff – who work for the Legislature as a whole, not one particular party – described the budget package as balanced, before the governor’s vetoes.

The budget sent to Martinez would have balanced revenue and appropriations at roughly $6.1 billion over the next year, with some extra revenue going into reserves, according to a general-fund financial summary.

‘We’ll find a way’

It isn’t clear how the budget impasse will be resolved.

Martinez used her line-item veto authority to remove funding in the budget for higher education and the Legislature itself to balance the budget without the tax increases.

She has called a special legislative session for May 24 with the hope of reaching agreement with lawmakers on how to fund those institutions.

Legislative leaders, in turn, have sued the governor, asking the Supreme Court to restore the funding and overturn the governor’s vetoes.

“We’ll find a way through this,” said Larrañaga, the Albuquerque Republican. “There’s path forward if people start talking a little bit.”

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