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Senate OKs hiking tax on gas, car sales

SANTA FE – With 16 days left in this year’s legislative session, a budget showdown between Gov. Susana Martinez and the Democratic-controlled Legislature appears headed for crunch time.

Despite the governor’s looming veto threat, the Senate on Thursday approved a measure that would raise taxes on New Mexico gasoline, diesel and vehicle sales, and use the estimated $183 million in additional revenue to bolster cash reserves and repair roads statewide.

Senators voted 29-13 to approve the measure, with three Republicans joining majority Democrats in casting “yes” votes.

The state’s gas tax rate – currently 17 cents per gallon – has not been increased since 1993, and the bill approved Thursday would increase the rate by 10 cents per gallon, starting in July.

Senate Majority Leader Peter Wirth, D-Santa Fe, cautioned that the state’s bond rating could be downgraded – for a second time – if revenue-generating measures are not approved and more spending cuts are needed.

“Lots of different eyes are on the state of New Mexico,” Wirth said. “We simply cannot continue to do this by plugging the dam with non-recurring revenue.”

However, a Martinez spokesman confirmed later in the day that the two-term Republican governor will veto the bill if it reaches her desk.

“The governor firmly believes that it’s up to government to tighten its belt – not our families and businesses,” Martinez spokesman Michael Lonergan said. “The administration will continue to negotiate with legislative leaders on comprehensive tax reform that closes loopholes, broadens the base and reduces rates.”

The gasoline tax bill approved Thursday is one of several proposed tax hikes that have advanced in the Legislature. There are also bills to overhaul New Mexico’s tax structure, though those measures are not intended to generate additional revenue.

After several rounds of spending reductions, top Democratic lawmakers are resisting additional cuts, saying they would be harmful to schools and state agencies that are already running on threadbare budgets.

Senate Finance Committee Chairman John Arthur Smith, D-Deming, cautioned that additional spending cuts of 5 percent or more would have to be levied on public schools, universities and health care programs if revenue-generating measures are not enacted during this year’s 60-day session.

“The fiscally responsible thing to do is to save our bond rating,” said Sen. George Munoz, D-Gallup.

But some Republican senators argued during Thursday’s floor debate that not all cost-saving measures have been considered.

“Raising taxes right now is going to make it harder and harder for us to open the door and create new jobs,” said Sen. Mark Moores, R-Albuquerque.

Half of the additional revenue generated by the gasoline and diesel tax increases would be earmarked to bolster cash reserves, and the other half would go toward state and local government road funds.

Among other components, the bill – a combination of Senate Bills 95 and 131 – would also increase the excise tax rate on sales of new and used vehicles from 3 percent to 4 percent. For someone purchasing a $30,000 car, that would mean an extra $300 in taxes.

A House-approved tax bill contains the same provision, which would still leave New Mexico’s vehicle excise tax rate lower than those of neighboring states.

New Mexico lawmakers have been grappling with budget problems for two years, due primarily to falling oil and natural gas prices and their ripple effect on the state’s economy.

As a result of lower-than-expected revenue collections, the state’s cash reserves have been largely depleted, and Martinez signed into law earlier this year a $190 million solvency package aimed at plugging a budget gap for the current fiscal year that ends in June.

The solvency package reduced funding to school districts statewide and took money from various state government accounts.

After Thursday’s vote in the Senate, the director of one of the state’s large teacher unions called the passage of revenue-generating bills critical.

“Our legislators can either support measures to raise the revenue needed to prevent further cuts to public education or accept responsibility when our teachers and students are left without the tools they need to succeed because of devastating cuts that will be necessary to balance the budget,” National Education Association of New Mexico Executive Director Charles Bowyer said.

The bill now heads to the House, which has already passed its own $265 million package of tax and fee increases. The House-approved bill has not yet reached the Senate floor.

A $6.1 billion state spending bill for the coming budget year has also been approved by the House and is pending in the Senate. In its current form, the spending plan hinges on additional revenue being generated via tax increase legislation.

The three Republican senators who voted in favor of the gasoline, diesel and vehicle tax increase bill were Gay Kernan of Hobbs, Jim White of Albuquerque and Steven Neville of Aztec.