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SANTA FE – With a state budget crunch looming and a special legislative session possibly on tap, Gov. Susana Martinez is sticking to the “no tax increase” pledge she’s held since campaigning for office in 2010.
The two-term GOP governor, who plans to meet with legislative leaders this week to discuss the budget situation, has been urged by some lawmakers to reconsider her position given projected budget shortfalls for both the current and just-completed budget years that could together exceed $600 million.
But Martinez spokesman Chris Sanchez indicated in a Monday statement that’s not happening.
“The governor does not believe raising taxes on families and businesses is the right way to respond to this oil and gas price crash,” he said.
While there’s no budget-balancing plan in place yet, the governor’s tax stance could mean steep additional spending cuts, as lawmakers have already spent much of the state’s cash reserves to plug much of the shortfall in the fiscal year that just ended.
Senate Finance Committee Chairman John Arthur Smith, D-Deming, one of the Legislature’s top financial gurus, said Monday the governor’s hard-line tax stance doesn’t leave much “wiggle room” for budget negotiations. Already, majority Senate Democrats have said they will oppose any proposed spending cuts to public schools or universities, which make up about 57 percent of the state spending.
“No one likes to eat their words, but sometimes you have to make adjustments,” Smith told the Journal, referring to the governor’s tax stance.
The governor has rejected attempts from the Legislature to make her administration take action in the case of a revenue shortfall. Specifically, Martinez used her line-item veto authority earlier this year to axe a provision that called for automatic spending cuts of up to $62 million if tax collections came in lower than projected.
No easy fix
Legislators from both political parties have urged Martinez to call a special session soon to address the state’s budget woes, which are largely due to falling oil and natural gas prices that have meant lower-than-expected tax collections in several sectors.
The state is facing a $150 million-plus deficit for the budget year that ended June 30, along with a potential shortfall in the new budget year of up to $500 million, according to revenue-tracking figures recently announced by Smith.
Martinez said last week a special session to address the budget crunch could be a short one, though she did not say exactly when she might call lawmakers back to Santa Fe. A special session would likely cost $50,000 per day, based on previous such sessions.
One option for dealing with the budget crunch could be for lawmakers to tap a $224 million tobacco fund in special session – the fund was created after a 1999 legal settlement with big tobacco companies – to close the books on the just-finished budget year, then hold off on addressing this year’s revenue shortfall until January, when a 60-day legislative session begins.
Smith said Monday the strategy might be politically expedient, though he cautioned it would not be “responsible.”
He also said he recently discussed the state’s budget situation with the top-ranking Senate Republican, Senate Minority Leader Stuart Ingle, R-Portales, but has not had recent conversations on the issue with the governor.
While some Republican legislators have said they would not rule out tax increase proposals, other GOP lawmakers say such an approach shouldn’t be seen as an easy fix.
“The reality is, Who do you tax?” said Sen. Steven Neville, R-Aztec, in a recent interview. “New Mexico doesn’t have a lot of rich people.”
Among the tax measures proposed by Democratic lawmakers during this year’s regular legislative session were a gasoline tax hike and delaying a pending decrease in the state’s corporate income tax rate.
Call for transparency
Meanwhile, an open government group is urging lawmakers and the executive branch to hold open-door budget talks – both leading up to and during a possible special session.
The New Mexico Foundation for Open Government objected earlier this year when a House budget-writing committee held talks on a state spending plan behind locked doors, though the panel vetted the spending plan the following day in an open committee hearing.
Capitol insiders say such closed-door hearings for budget-crafting talks have taken place for years in both the House and Senate, but FOG officials say that’s a not valid reason for continuing the practice.
“FOG is sympathetic to the cost of a special session, but these critical budgetary decisions cannot be made behind closed doors,” said Greg Williams, the president of the organization’s board. “The impact of the budget decision will be felt all over the state, and the public can’t be shut out of the process.”
“New Mexicans need to be able to participate, and not just read about the result in the newspaper,” he added.
However, Senate financial guru Smith said holding open budget talks might prove difficult in a year in which all 112 legislative seats – 70 in the House and 42 in the Senate – are up for election.
“Trying to get a compromise is not an easy challenge,” Smith said.