SANTA FE – Senate Finance Committee Chairman John Arthur Smith is trying to find a middle ground in the debate over how to bolster the state’s dwindling unemployment trust fund.
Smith, a Deming Democrat, has introduced legislation in the state’s special legislative session that would raise the rate – or payroll tax – that businesses pay into the fund.
However, the rate hike would be smaller than the one included in a bill Gov. Susana Martinez line-item vetoed in April, citing concerns that the increase would damage the state’s struggling economy. That bill would have raised employer contributions by $128 million for next year.
“I’m saying, here’s a reasonable route,” Smith told the Journal on Wednesday. “It’s one of those things that I’m not sure is popular, but it’s responsible.”
The Governor’s Office signaled Wednesday that Martinez would oppose the plan because of its impact on businesses.
“The governor does not believe politicians should arbitrarily increase tax rates on New Mexico businesses,” Martinez spokesman Scott Darnell said.
Under Smith’s proposal, Senate Bill 29, the rate employers pay into the state fund on behalf of each worker would go up starting in January. The new tax rate could remain in place for two years, though state officials would have the authority to bump it even higher for 2013, depending on economic conditions.
Martinez has proposed her own plan for shoring up the unemployment fund, the balance of which has diminished over the past three years from more than $500 million to slightly less than $140 million as of the start of this month.
Her plan, House Bill 31, would transfer $130 million in state reserves over the next two years to ensure the fund remains solvent and would keep the current employer tax rate in place for 2012 and 2013.
However, a number of budget-minded lawmakers, including Smith, have objected to using state reserves to shore up the unemployment fund.
If the Legislature and Martinez are unable to reach an agreement and approve legislation, the state Supreme Court could resolve the unemployment fund issue.
That’s because six Democratic lawmakers took Martinez to court after her veto, arguing the first-term governor didn’t have the authority to strike out portions of the bill. The court opted in July not to rule on the suit, saying it would wait to see what happened during the current special session.
Several high-profile business groups originally supported the Legislature’s original approach to shore up the fund.
However, Greater Albuquerque Chamber of Commerce President and CEO Terri Cole said her group is now backing Martinez’s plan.
“We have a great deal of respect for Sen. Smith, but we respectfully disagree with him on this one,” Cole said. “It looks like there’s a way to lower costs to business with the governor’s approach, and we’re going to do all we can to make sure the bill lands on her desk.”
— This article appeared on page A6 of the Albuquerque Journal