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House OKs $6.1 billion budget with tax increase

Copyright © 2017 Albuquerque Journal

SANTA FE – The New Mexico House signed off late Wednesday on a $6.1 billion spending bill for the coming year and a $265 million package of tax and fee increases to help pay for it, despite opposition from Gov. Susana Martinez and Republican lawmakers.

Both measures were approved on party-line 37-32 votes after several hours of debate, with majority Democrats in favor and GOP members casting “no” votes.

Majority House Democrats described the budget and tax bills as prudent, and said they would avoid a second downgrade in the state’s bond rating after a steep drop in revenue levels.

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“I think this is the responsible thing to do given the circumstances,” said Rep. Carl Trujillo, D-Santa Fe, the sponsor of the tax measure. “Continuing to make further cuts … I don’t believe is the answer.”

However, House Republicans, who lost their majority in the chamber in last November’s election, blasted the Democrats’ spending and tax plans.

In a news conference held earlier Wednesday at the state Capitol, they pitched their own proposal that includes shifting available infrastructure funds and delaying payments for the state’s film rebate program – there is a $50 million annual cap on film incentive spending – to balance the budget.

“We can have a flat budget without raising taxes,” said Rep. Jason Harper, R-Rio Rancho.

Martinez has also been critical of the House Democrats’ budget plan, with a spokesman earlier this week calling it a “political play” and saying she would not accept it.

The two-term Republican governor has also vowed to veto any tax increases approved by the Legislature, though the Governor’s Office has said she is open to repealing certain tax “loopholes.”

However, some GOP legislators have signaled support for some of the tax provisions in the Democratic tax plan, specifically provisions to require online retailers to collect gross receipts tax and remove some tax deductions for nonprofit hospitals and other health care providers.

In addition to those two provisions, the House-approved tax package, House Bill 202, would also increase the tax on new and used vehicle sales – from 3 percent to 4 percent – and levy a higher fee on commercial trucks.

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Without the tax package, spending levels prescribed in the budget bill would end up being about $218 million more than expected state revenue collections.

New Mexico lawmakers have been grappling with budget woes for two consecutive years, as revenue levels have fallen due largely to low oil and natural gas prices.

Martinez already signed into law a $190 million solvency package earlier this year that reduced funding to school districts statewide and took money from various state government accounts. That package was aimed at plugging a budget gap for the current fiscal year that ends in June and bolstering cash reserves.

Some Democrats have said they won’t sign off on any additional cuts.

“We need to stop the bleeding, and we need to stop the pain,” said Rep. Patricia Roybal Cabellero, D-Albuquerque, during the House floor debate.

While the budget bill passed Wednesday would keep overall spending largely flat, it would increase spending that flows to school districts statewide by roughly $32 million and provide a 2.5 percent funding increase for the state’s cash-strapped judicial system.

It also would appropriate an additional $17 million for two economic development initiatives – a job-training program and a “closing fund” to offset the cost of business expansion and relocation. Last year, funding for the job training program was cut, and earlier this session, the governor used her line-item veto to avoid taking money from the closing fund.

If both the budget bill and tax package legislation are enacted, the state’s cash reserves would go up to an estimated $149 million – or 2.5 percent of state spending.

After winning approval in the House, the measures now advance to the Senate with a little less than four weeks left in the session.

 

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