New Mexico lawmakers will gather in Santa Fe on May 24 for a special session called by Gov. Susana Martinez to address the state’s budget dilemma.
That’s “dilemma” as in the fact that our government-dependent state, still trying to crawl out of the Great Recession and wracked by the plunge in oil prices, has burned through nearly all of its $700 million in reserves and doesn’t have a budget in place for the fiscal year that begins July 1.
The state constitution requires a balanced budget, and the Legislature, with both Houses controlled by Democrats, passed one back in March. But it was based on $350 million in various tax hikes and fee increases that were promptly vetoed by Martinez – as she had promised to do.
After red-lining the tax hikes, she also vetoed the entire appropriation for higher education and the Legislature because there was no money to pay for them, leading some lawmakers to ask the Supreme Court to invalidate the vetoes. The justices opted to stay out of the dispute for now, correctly saying it wasn’t ripe for adjudication. They didn’t comment on the merits.
With the wind out of those political sails, that puts us back to square one. Sort of.
The governor always said the higher ed veto was a temporary measure and that the money would be restored in the special session. There will still need to be some money shifted around and some cuts to get us to balanced and replenish reserves. Meanwhile, while Martinez has always pledged she would not approve new taxes, she has said she is agreeable to increases that occur as part of a broader tax overhaul. That’s a major concession on her part.
Rep. Jason Harper, R-Rio Rancho, has crafted a bill that would overhaul the state’s gross receipts tax code, doing away with a pile of exemptions, deductions and credits. While that’s a tax hike for those who haven’t been paying anything, it would lower the overall rate for New Mexico’s gross receipts tax (GRT) system, which is generally regarded as one of the nation’s worst. Gee, what a surprise. To say it has so many holes that it resembles Swiss cheese is closer to understatement than hyperbole.
The Legislature debated Harper’s bill, which also took on GRT “pyramiding” in business-to-business transactions, during the regular session. There was almost unanimous agreement that major changes in the tax system are needed. But, predictably, a plethora of high-paid lobbyists worked hard and successfully to protect many individual exemptions, trotting out various doomsday scenarios and putting the heat on legislators.
So HB 412 went by the wayside and we ended up with the stalemate in which we now find ourselves.
But in reality, some version of Harper’s legislation might well be the only way forward – unless House Republicans cave in and override the governor’s veto of tax increases.
Political cynicism aside, this is a real chance to make fundamental changes. Lawmaking is about debate and compromise, and Harper is working on changes that will seek to address concerns that have been raised while still meeting the goals of finally having a GRT system that is fair, doesn’t punish New Mexicans, particularly low-income ones, and no longer wreaks economic havoc on small businesses by pushing up costs and making them less able to compete with out-of-state vendors.
Yes, there are those who say we need to study this more. But we have enough studies to keep a fireplace in operation through a cold winter. They have led to nothing, and perhaps that’s the real goal of many who are pushing that option. A delay-and-study would, however, be a bit of an economic boon – for lobbyists.
And yes, there are those who say the economy is improving a bit and that new revenue estimates narrow how much new money we need. Oh, and oil and gas is going to come back “big time.” Or, as they say in New Orleans, “Laissez les bon temps rouler!”
But we’ve seen this movie, and its sequels, before and know that too often they end with an oil price crash and a state budget crisis. Oil and gas is a great industry that contributes much. But oil is a commodity and we don’t control the price. The Saudis and others do.
Fundamental change is tough. We don’t know the details of the new overhaul plan that will be presented, but we do have a blueprint. And it’s a blueprint for a better and more competitive New Mexico.
This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.
