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Budget, tax package go to governor

Copyright © 2017 Albuquerque Journal

SANTA FE – A $6.1 billion budget plan and a $350 million-plus tax package to help pay for it are headed to Gov. Susana Martinez’s desk, after the Democratic-controlled House gave its final approval to the measures Friday.

But with just hours left until today’s noon adjournment of a 60-day legislative session, the two-term Republican governor was not expected to welcome the bills with open arms.

Her chief of staff accused lawmakers of wasting time on meaningless legislation and allowing lobbyists to block a proposal to overhaul New Mexico’s gross receipts tax system, which many had hoped would be part of a final budget deal.

“The governor will use her veto pen once again to ensure responsibility,” Martinez’s chief of staff, Keith Gardner, told the

Journal . “The tax-and-spend liberals are alive and well at the Roundhouse.”

While Gardner suggested the governor will closely review the proposed budget and tax bills in the coming days, he said it’s likely lawmakers will have to return to Santa Fe for a special legislative session – or face the possibility of a state government shutdown due to low revenue levels.

However, Sen. Joseph Cervantes, D-Las Crues, indicated lawmakers might try to override the governor’s veto, if Martinez does ax the spending bill.

“The state cannot afford to be without a budget,” Cervantes told reporters Friday.

However, it was unclear whether Democrats would be able to successfully override a veto, especially in the House, where the budget and tax bills passed on largely party-line votes.

New Mexico’s budget problems have cast a long shadow over this year’s session, as lawmakers acted in the session’s opening days to approve a solvency package that plugged a budget gap for the current fiscal year, which ends in June.

Putting together a spending blueprint for the coming year has proved trickier, as majority Democrats and the Governor’s Office have continued to disagree over how to properly fund state government.

In addition, Democratic leaders and the governor have clashed this week over the legality of some of Martinez’s vetoes and the pace of Senate confirmation hearings. She vetoed eight bills this week with little explanation, other than to say they weren’t necessary for the health, safety and welfare of New Mexicans.

Lawmakers were expected to work late Friday on a range of other bills, after both the House and Senate were in session until after midnight the night before.

Flat spending

The $6.1 billion budget bill approved Friday, House Bill 2, would keep state spending levels largely flat for the fiscal year that starts in July but would increase spending on K-12 public schools and the state’s cash-strapped judicial system. Universities would be among those facing budget reductions under the plan.

“Our budget safeguards the top priorities of hardworking New Mexico families – education, health care, economic development and other vital services,” said House Speaker Brian Egolf, D-Santa Fe, after Friday’s vote.

But Republican critics of the bill – and the accompanying tax measure – said other potential mechanisms to help prop up state spending were not thoroughly considered by the Democratic majority.

“When we’re looking at how we got into this mess, and how we get out of it, one of the big components is our broken tax system,” said Rep. Jason Harper, R-Rio Rancho. “There is another solution beside stand-alone tax increases.”

Harper is the one of the sponsors of one of the session’s most closely scrutinized bills, a proposal to overhaul the state’s gross receipts tax by eliminating more than 100 tax breaks and lowering the state’s base rate. It passed the House but stalled in a Senate committee due to concerns about its impact.

The Senate late Thursday instead approved a separate tax bill into which some provisions from Harper’s bill had been added. That did not go over well in the House, which then voted without a single “no” vote not to sign off on the Senate’s changes. Lawmakers from both legislative chambers were expected to meet late Friday to try to reach a compromise.

Tax hikes

The budget and tax bills had sat on the House’s agenda for several days without action but were acted on quickly Friday with minimal debate.

The timing of the votes likely means Martinez will not receive the bills until after lawmakers complete the 60-day session.

The tax bill on its way to the governor’s desk, House Bill 202, would raise additional revenue for the state by raising tax rates or eliminating exemptions for commercial trucks, online sales and certain hospitals.

It would also increase New Mexico’s gasoline tax rate by 10 cents a gallon – from 17 cents to 27 cents – and temporarily delay a scheduled cut in the state’s corporate income tax rate.

Without the tax increases, spending levels prescribed in the budget bill would end up being about $164 million more than is expected to be collected in state revenue.

“We’re here because we’re trying to do something responsible,” said Rep. Carl Trujillo, D-Santa Fe, sponsor of the tax measure. “We have a budget to balance.”

But Rep. Yvette Herrell, R-Alamogordo, bemoaned the budget approach, saying, “I believe this is one of the largest tax increases this body has ever considered.”

Although Martinez, the state’s two-term Republican governor, has vowed to veto any tax increases approved by the Legislature, the Martinez administration has indicated the governor is open to closing tax “loopholes.”

Some of the provisions in the tax bill headed to the governor’s desk could meet that definition, but Gardner suggested Friday that most of them are dead on arrival.

“We’ve got a budget from a spending perspective that doesn’t have enough revenue in it,” Gardner said. “Government can’t function with a partial budget.”

New Mexico has had two years of lower-than-expected revenue collections, due largely to plummeting oil and natural gas prices. That’s led to a downgrade in the state’s top bond rating, several rounds of spending cuts and the depletion of cash reserves.

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