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Gov. Martinez signs budget bill, vetoes tax increases

SANTA FE — New Mexico colleges and universities will get their state money next year.

But Gov. Susana Martinez and the Legislature remain deadlocked over how to stabilize state finances in the long run.

That much was clear in a flurry of activity late Friday as Martinez signed legislation that ensures continued state funding for higher education — after a previous veto had put colleges and universities in limbo — while vetoing a variety of tax increases passed by lawmakers.

Martinez, a Republican, praised the spending plan as a “bipartisan agreement.” But she reacted with scorn to the proposed tax hikes endorsed by the Legislature, where Democrats hold majorities in each chamber.

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“The ability of the Legislature to in one breath decry the financial inequities in our state and in the next seek to take more from the pockets of New Mexicans is remarkable,” Martinez said in a veto message to lawmakers.

And in a written statement, she accused the Legislature of trying to “take the easy way out with hundreds of millions in tax increases that would’ve made it more expensive for New Mexicans to live, work and raise a family — while increasing their own budget.”

Democratic legislative leaders, in turn, said the governor’s vetoes will leave the state without the sustained revenue needed to ensure it can continue paying bills and protect its credit rating from further damage.

They expressed serious reservations about the one revenue measure the governor did sign — a complex bond transaction that’s expected to generate some “one-time” money to help shore up reserves.

“The governor’s decision to fund government with one-time borrowed money is fiscally irresponsible,” Senate Majority Leader Peter Wirth, D-Santa Fe, said in a written statement. “By vetoing all the recurring revenue, the governor has created a structural deficit, further threatened our bond rating, and put school classrooms and critical state services at risk in future fiscal years. This is not the way to run government.”

Lawmakers crafted the spending and tax proposals in a special session that began Wednesday. They’re expected to resume the session next Tuesday, when they could try overriding the governor’s vetoes, or just vote to adjourn.

It’s been 15 years since the last successful override approved by both chambers. Just this week, in fact, attempts to override some of the governor’s line-item vetoes — part of the original budget bill adopted this year — failed.

Budget balanced

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Friday’s bill action appears to leave the state’s $6.1 billion budget balanced for the fiscal year starting July 1, but with little margin for error. State reserves were expected to total 1 percent or less of the general fund, lawmakers said, if the governor rejected all tax increases.

The Legislature had voted to increase taxes on gas and vehicle sales and nonprofit hospitals as part of a package of proposals to generate at least $215 million in new annual revenue, or enough to push state reserves closer to 4 percent.

Martinez, however, repeatedly warned lawmakers that she would reject stand-alone tax increases. Instead, she said, she would be willing to raise revenue by closing loopholes in the tax code, if the changes were part of a broader effort to overhaul New Mexico’s system of gross receipts taxes.

But the tax overhaul supported by Martinez failed in a House committee. Opponents said they wanted more time to evaluate the 430-page bill.

Lawmakers instead approved $400,000 to conduct a tax study to help guide their consideration of future proposals to reshape the tax code.

Martinez left that appropriation intact and said she was optimistic, based on talks with legislative leaders, about the possibility of action later this year.

“I’ve been very clear with legislative leaders: The people of New Mexico will be watching to see if this becomes another government study that gets filed away only to collect dust,” Martinez said Friday. “New Mexicans deserve action.”

‘Rainy day’ fund

The governor also signed off on a proposal to create a “rainy day” fund that will set aside money from oil and natural gas taxes in cash-flush years. Backers say the change will help the state, in future years, weather steep revenue downturns.

As for the complex bond transaction, the Martinez administration disputes the argument by lawmakers that it amounts to “borrowing” to pay bills now. The governor instead characterizes it as a way for lawmakers to give up their “pork projects” to help address the budget crisis.

For now, in any case, a state budget is in place.

Marc Saavedra, executive director of the New Mexico Council of University Presidents, said he was thankful that the governor and legislators worked quickly once the special session started.

“This will help ease a lot of anxiety,” he said.

House Speaker Brian Egolf, D-Santa Fe, said he was pleased with approval of the spending plan but dismayed by the rejection of the tax proposals.

“With the governor’s signature on a bipartisan budget that restores funding for higher education and the Legislature,” he said, “we can now move forward with laying down a framework that puts job creation and education at the center of economic development and investment in our kids.”

 

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