A $5.9 billion state budget proposal that New Mexico House members could see as early as next week will include a 1 percent salary increase for state employees, a top-ranking House finance committee member confirmed Wednesday.
Rep. Luciano “Lucky” Varela, D-Santa Fe, the deputy chairman of the House Appropriations and Finance Committee, said the budget measure being crafted by the panel will call for across-the-board pay raises to be given for the first time since 2008.
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“We’re going to leave them in there,” Varela said. “If the governor wants to take them out, she can take the credit for that.”
Gov. Susana Martinez has opposed granting broad salary hikes for the coming budget year, claiming the timing is not right. Martinez supports merit-based pay increases for some teachers, however.
A 1 percent pay raise for all state workers and teachers – as proposed by the Legislature – would cost an estimated $32.2 million during the coming fiscal year. It would mean an additional $400 per year in pay for an employee making $40,000 annually, at least before taxes.
The state is expected to have $283 million in “new” revenue available in the coming budget year, though that number could change when updated revenue estimates are released next week. New revenue is money in excess of this year’s spending levels.
While standing against salary increases, Martinez has proposed increased spending on public education, Medicaid and other areas. The governor is also backing tax breaks aimed at making New Mexico more economically competitive with neighboring states.
A Martinez spokesman said Wednesday the Republican governor believes House Democrats share her concerns regarding the state economy, but did not say whether she would veto salary increases if they are included in the state budget.
“The governor is focused first and foremost on ensuring the adequate funding of education reform and public safety, and investing in economic development initiatives that level the playing field and make New Mexico more competitive,” Martinez spokesman Greg Blair said.
With more than half of the 60-day legislative session still left to play out, Varela and other Democratic budget makers have offered no guarantees regarding Martinez’s tax break proposals.
Senate Finance Committee Chairman John Arthur Smith, D-Deming, said tax incentives approved in the last several years have ended up costing the state more than expected in foregone revenue.
Those include a tax break approved last year in hopes of bolstering the state’s sagging construction and manufacturing sectors, along with a separate tax incentive for businesses that provide high-wage jobs.
“We’re sort of in a position where we’re afraid to move ahead because we don’t know type of landing we’re going to have,” Smith said.
As presented last month, Martinez’s budget plan would leave nearly $50 million available for the cost of the tax cuts. The governor’s tax proposals include lowering the state’s corporate income tax rate from 7.4 percent to 4.9 percent and changing business tax calculations so they are based entirely on in-state sales.
Overall state spending is expected to go up in the coming fiscal year, which starts in July. This year’s state budget is roughly $5.6 billion.
However, concern over possible federal budget cuts and the prospect of the state having to pay more into two public retirement systems have tempered optimism over the state’s financial health.
Next week’s new revenue figures from legislative and executive branch economists, will be scrutinized by House members before a vote on this year’s budget bill is taken.
The budget bill typically originates in the House, then moves on the Senate. Once approved by both chambers, it then advances to the governor’s desk for final approval.