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Deal-making takes center stage as session end nears

From left, Rep. Jim Trujillo, D-Santa Fe, and Rep. Javier Martinez, D-Albuquerque, listen Friday as Sen. Clemente Sanchez, D-Grants, presents to the Senate Finance Committee an amended bill to change some tax rates. (Eddie Moore/Albuquerque Journal)

Copyright © 2019 Albuquerque Journal

SANTA FE – As New Mexico lawmakers neared the finish line of a 60-day session, the House and Senate sent a $7 billion spending plan to Gov. Michelle Lujan Grisham’s desk after reaching a deal but were still at odds over how far a proposed package of tax changes should go.

The two bills have been among the most highly scrutinized measures during this year’s session, as some lawmakers have questioned the need for tax increases at a time the state has an unprecedented $1.2 billion budget surplus – mostly from an oil drilling boom in southeastern New Mexico.

“It’s very difficult to raise revenues when you already have revenues,” Sen. John Arthur Smith, D-Deming, told the Journal.

The $7 billion spending bill, which is arguably the most important piece of legislation in this year’s session, won final approval after the House and Senate both signed off late Friday on a compromise version.

Lujan Grisham will have until April 5 to act on the budget bill, which would raise state spending by roughly $705 million – or 11.1 percent – over current spending levels.

Both the House and Senate had previously passed similar versions of the budget, dollar-wise, but the chambers disagreed over some budgetary language.

In a conference committee created to hash out a deal, the appointed lawmakers agreed that teachers and school administrators would get 6 percent pay raises next year – not pay raises that average 6 percent.

In addition, they agreed to add an extra $1.1 million for the University of New Mexico Athletics Department that could be used to bring back four eliminated sports teams – men’s soccer, women’s beach volleyball and men’s and women’s skiing.

But unlike the House-approved version of the bill, UNM would not lose its entire allocation of state dollars if it did not reinstate the four teams.

While the two chambers found common ground on the budget bill, they were still at loggerheads over a broad tax package passed by the House earlier this month.

The Senate voted 32-8 on Friday afternoon to approve a downsized version of the package, House Bill 6.

Specifically, the Senate stripped out of the tax legislation provisions to create new personal income tax brackets for higher-earning New Mexicans and to increase vehicle registration fees.

In addition, some revenue generated by a higher tax rate on motor vehicle purchases would be diverted to pay for road repairs and the state’s cigar tax rate would be decreased – though taxes on cigarettes would go up and a new tax would be levied on vaping products.

The Senate left in provisions allowing the state and local governments to start levying a tax on online sales – a 2018 U.S. Supreme Court ruling allowed states to do so – and requiring nonprofit hospitals to pay the same gross receipts tax rate that other hospitals do.

Those changes mean the tax bill would generate roughly $45 million a year for general state operations – down from more than $300 million annually in the original bill. But economists cautioned that projection could be altered after further study.

“This bill is more of tax reform than it is a tax increase,” Sen. Clemente Sanchez, D-Grants, said during the Senate floor debate.

He also said the bill would expand a tax break for working families and create a new tax deduction for some New Mexicans who were negatively affected by a 2017 federal tax law.

However, the Senate’s vote sent the bill back to the House, which voted not to accept the changes. Supporters of the original bill in that chamber argue the state needs a more stable – and larger – revenue base to help pay for a proposed spending increase on New Mexico teacher salaries and other education initiatives.

The dueling votes set the stage for a last-minute conference committee, in which appointed representatives from both chambers will try to reach a compromise.

If no deal is reached on the legislation before noon today, it will die.

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