The New Mexican business community would do well to pay attention to the upcoming legislative session.
For a 60-day period beginning Jan. 17, state lawmakers will attempt to steer their constituents toward prosperity while grappling with a $300 million deficit for the coming fiscal year and another $69 million projected budget deficit still to be dealt with in the current fiscal year. As such, there are no sacred cows: Budget cuts and tax increases are being proposed across the board, with additional recommendations likely to crop up as the session progresses.
Regardless of what the Legislature decides, its actions will affect industries across the state. With that in mind, we’ve compiled a quick guide to what we know so far about the legislation that could impact your business and what to watch for as the session unfolds.
Minimum wage increase
What it is: The state’s minimum wage is currently $7.50 an hour, with higher wages in cities such as Santa Fe and Albuquerque. Two new proposals have already been filed: A bill sponsored by Sen. William Soules, D-Las Cruces, would raise the state’s minimum to $8.45 an hour, while Rep. Patricia Roybal Caballero, D-Albuquerque, is proposing $15 an hour, which would be the highest state minimum wage in the nation. Both bills still allow local entities to institute minimums beyond that of the state. Currently, Albuquerque’s minimum wage is $8.80 for employees without benefits and Bernalillo County’s is $8.70.
What to watch: Between the Democratically controlled Roundhouse and minimum wage increases passing in Arizona and Colorado to raise the wage incrementally to $12 by 2020, some kind of modest increase seems likely, though Roybal Caballero said she hopes lawmakers have the “foresight and the courage” to adopt something closer to a living wage. Business organizations such as the New Mexico Association of Commerce and Industry and the Albuquerque Hispano Chamber of Commerce will likely push back against all increases, claiming they will force businesses to cut jobs, and may focus their efforts on disallowing different minimum wages in different localities. Terri Cole, president of the Greater Albuquerque Chamber of Commerce, said her organization would be “fully engaged” in the minimum wage debate and “definitely” oppose any increases in the $12 to $15 range because such hikes could have a negative impact on the state’s small businesses.
Other Employment Issues
What it is: The big one is an as-yet-unfiled measure aimed at addressing the “regulatory patchwork” created by city- and county-specific employment law, including the minimum wage issue mentioned above, as well as paid leave and scheduling mandates. Employment law uniformity is a top priority for both ACI and the legislative Jobs Council in the upcoming session. Jason Espinoza, ACI’s president, said consistency is “crucial to businesses,” and is key to creating a more business-friendly and prosperous economic environment.
What to watch: Any effort aimed at reviving the state’s lackluster economy is likely to have legs in a session so focused on fiscal solvency, particularly measures that don’t require appropriations. Espinoza said he’s confident that employment law uniformity is one of the best ways to “help small businesses, which are so important to our state, especially at a time when our economy isn’t where we want it to be.” Watch for critics to argue that the emphasis on homogeneity is meant to stymie workers’ rights campaigns that would have more chance of succeeding locally than statewide. Other workplace issues likely to crop up: workers compensation reform and the employment drug-testing complications likely to arise from the potential legalization of marijuana, particularly in light of the state’s reliance on federal contracts. The Hispano Chamber of Commerce said it will be focusing on a bill aimed at connecting state contracts with historically underutilized businesses.
What it is: An ambitious package of bills being crafted by Rep. Jason Harper, R-Rio Rancho, and Rep. Bill McCamley, D-Mesilla Park, among other lawmakers, aimed in part at lowering the state’s 5.125 percent gross receipts tax rate to 2.25 percent, creating a flat corporate income tax and broadening the tax base. In addition to closing dozens of tax loopholes and deductions, the package would encourage online retailers to collect gross receipts tax from their New Mexico-based customers and reinstitute the state’s food tax. In its current form, the package is meant to be revenue-neutral, redistributing the tax burden as opposed to adding revenue, but that could easily change as lawmakers look for ways to address the budget deficit.
What to watch: Tax reform is inherently controversial, but expect the issue to get especially heated when the food tax comes up for discussion. The tax has attracted criticism from some of the most powerful entities in the state, including Gov. Susana Martinez, as well as the Archbishop of Santa Fe, who argued that a tax affecting New Mexico’s poorest residents has no place in a state with the second-highest child hunger rate in the nation. But New Mexico Tax Research Institute’s Richard Anklam, who provided input on the legislation, said it’s unwise to allow a single element to overshadow the rest of the package, which in his opinion represents “true reform.” “There are a bunch of moving parts, including mechanisms that are meant to help poorer households,” he said. Anklam added that the fiscal crisis may be so bad that lawmakers are forced to build bipartisan bridges to solve the problems, which could in turn mean accord on the tax reform package.
LEDA and JTIP
What it is: Economic developers say Local Economic Development Act funding – incentive money like the $10 million to Facebook for the Los Lunas data center – and the Job Training Incentive Program – reimbursement for training in newly created jobs – are two of the most powerful tools they have to convince businesses to choose New Mexico for expansions and relocations. But politicians are looking for every dollar they can find to sweep back into the general fund or eliminate from the budget, and LEDA’s remaining $35 million and JTIP’s recurring $5 million allotment are looking awfully tempting.
What to watch: Mark Lautman, lead consultant for the Jobs Council, said his sense is that lawmakers generally support maintaining the programs in some form, but the political pressure around the budget situation is such that the council won’t endorse a memorial to keep them intact. “They seem to agree that everything is on the table for cuts, though there is also widespread consensus that LEDA and JTIP should be preserved,” said Lautman. Whether that consensus will remain when lawmakers are choosing between preserving corporate incentives and, say, early education programs remains to be seen. Both incentives have been popular among politicians in recent years, particularly LEDA, which was allotted $50 million in 2015, up from $15 million the year prior. A corollary issue: Two bills have already been filed that would allow local and regional governments to fund broadband infrastructure, such as conduit and trenches, and not be in violation of the state constitution’s anti-donation clause. Businesses often cite the lack of broadband access as a major impediment to expanding in rural communities.
Correction: An earlier version of this article incorrectly stated the tax reform package being crafted by Rep. Harper, among other lawmakers, would lower the state’s gross receipt tax rate to between 4 and 5 percent. Though the bills have yet to be filed, Rep. Harper said that number reflects the total new rate for the average business once county and municipal taxes are taken into account, while the new state gross receipts tax rate would be about 2.25 percent. The article also stated the issues addressed by two broadband bills which would be “moot” if the state’s LEDA fund was reduced or eliminated. In fact, the bills do not address how broadband projects would be funded, but instead clarify the language of the Local Economic Development Act itself to permit public entities to engage in such projects. The Journal regrets the errors.