SANTA FE – Forging ahead despite warnings from Gov. Susana Martinez, a key Senate committee signed off Tuesday on a bill that would raise taxes on gas and vehicle sales and use the revenue to bolster the state’s cash reserves and pay for road repairs.
The Senate Finance Committee voted 11-1 in favor of the legislation, which combines two different gas tax bills and would generate an estimated $189.2 million in the coming year.
Martinez, the state’s two-term Republican governor, has vowed to veto any tax increases approved by the Legislature, but leading lawmakers say they’re wary of enacting additional spending cuts after two years of belt-tightening.
“We’re in one heck of a mess here,” said Senate Finance Committee Chairman John Arthur Smith, D-Deming, during Tuesday’s hearing. “We’re on the verge of losing a lot more jobs if we don’t step up to the plate.”
The tax package approved Tuesday now heads to the Senate floor with less than three weeks left in this year’s 60-day session. More tax bills could also be advanced, including a proposed $1.50-per-pack increase in the state’s cigarette tax.
Senate Finance Committee Vice Chairman Carlos Cisneros, D-Questa, said the tax bills should move in tandem with a $6.1 billion state spending bill for next year, because the spending plan will hinge on additional revenue being generated via tax legislation.
The budget bill was passed last week by the House but has not been voted on in the Senate.
The House also passed its own $265 million package of tax and fee increases, but it’s unclear whether the Senate will take up that bill or advance its own tax plan.
If Martinez were to veto whatever tax increase bill lands on her desk, lawmakers probably will be forced to come up with a new budget plan with deep spending cuts or other fixes.
The governor has described tax increases as the “easy way out” of an ongoing budget crunch caused largely by falling oil and gas prices that has already led to a downgrade in the state’s top bond rating.
In a statement last week, a Martinez spokesman described the House-approved budget and tax plans as a “political play” and suggested they would be vetoed.
“The governor is not going to accept a budget so disconnected from New Mexico values,” Martinez spokesman Michael Lonergan said.
However, some Democratic lawmakers say easy budget fixes – like shifting money from various government accounts – have already been done.
“We can’t sweep or swap any more funds without doing more damage than good,” Cisneros said Tuesday.
The tax plan approved Tuesday is sponsored by three Democratic lawmakers – Sen. Clemente Sanchez of Grants, Rep. Roberto “Bobby” Gonzales of Taos, and Smith.
The state’s gas tax rate – currently set at 17 cents per gallon – has not been increased since 1993, and the bill approved Tuesday would increase the rate by 10 cents per gallon, starting in July.
Half of the additional revenue generated would be earmarked to bolster cash reserves, and the other half would go toward state and local government road funds.
The measure also includes several other provisions:
• It would increase the excise tax rate on sales of new and used vehicles from 3 percent to 4 percent. The House-approved tax bill contains the same provision, which would still leave New Mexico’s tax rate lower than those of neighboring states.
• It would temporarily divert some revenue from fees for commercial petroleum imports and trucking. The diversion would end when state reserves bounce back to at least 5 percent of spending.
Environment Secretary Butch Tongate objected to the latter provision during Tuesday’s hearing, saying shifting money away from the agency could hurt its ability to clean up leaks from underground storage tanks.
But only one lawmaker – Sen. Carroll Leavell, R-Jal – voted against the plan, and four Republican senators voted in favor of it.
New Mexico lawmakers have been grappling with budget woes for two consecutive years, and cash reserves have been largely depleted by less-than-expected revenue collections.
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.
“I think the general public would support a revenue package over more cuts,” Sen. Howie Morales, D-Silver City, told the Journal .
The state is on track to end the current budget year in June with about $90.7 million in reserves – or 1.5 percent of state spending.