SANTA FE – Gov. Susana Martinez’s veto pen struck down the $350 million tax package proposed by the Democratic-controlled Legislature and took the unprecedented action of removing all funding for the state’s colleges and universities.
Those actions set the stage for a special session in the coming weeks.
The two-term Republican governor did sign a separate budget bill approved by lawmakers but used her line-item veto authority to ax $774.8 million from the plan – including the higher education funding as well as all funding for the legislative branch.
Those vetoes were apparently aimed at forcing lawmakers back to the bargaining table for the special session while temporarily balancing the spending bill without tax increases.
Both lawmakers and the governor said they intend to pass a new funding measure for universities and the legislative branch in a special session, but university leaders say the vetoes could make it difficult for them to plan for the coming budget year, which starts in less than three months. And the vetoes drew scathing criticism from top-ranking Democratic lawmakers.
Senate Finance Committee Chairman John Arthur Smith, D-Deming, said Martinez’s action reflected a lack of “fiscal competence.”
“I’ve served under five governors, and all of those previous governors were responsible,” Smith told the Journal. “The bottom line is, I’ve never seen anything like this.”
Another longtime lawmaker, Senate Minority Leader Stuart Ingle, R-Portales, called the governor’s actions a “little bit different,” but expressed confidence that a deal will be struck to ensure adequate funding is provided before July.
“We’ve got to come back up there and get it fixed, and I’m sure we will,” Ingle said Friday.
Martinez, who also vetoed a Democratic-backed tax overhaul measure, signaled Friday that there would be ample time in the special session to come up with a new funding measure for higher education institutions, which have already faced steep spending reductions in recent years.
But the governor also expressed simmering frustration with the Senate for not holding confirmation hearings on several of her regent appointees, including some at the University of New Mexico, as part of the reason for her line-item veto of $744.8 million in proposed funding for colleges and universities.
“The Legislature has disappointed me in the past, but I cannot recall another time where I’ve ever felt that their reckless decision had left New Mexico hanging in the balance,” Martinez said in a statement.
A state budget crisis caused largely by plummeting oil and natural gas prices was a dominant theme in this year’s 60-day legislative session, which ended last month.
Lawmakers began the session by approving a $190 million solvency package aimed at plugging a projected budget deficit for this year by taking money from school district reserve funds and various state government accounts.
Later in the session, in putting together a $6.1 billion spending plan for the coming year, leading Democratic lawmakers relied on tax and fee increases to help fund government operations, saying additional spending cuts would harm the state’s economy – New Mexico already has the nation’s highest jobless rate – and cripple state services.
But Martinez, in her veto message on the $350 million tax package, House Bill 202, said the legislation would have hit low- and middle-income New Mexico families the hardest.
“From the beginning, I have said that I will not raise taxes, yet the Legislature continues to try to force tax increases on New Mexican families and small businesses,” she said.
Since taking office in 2011, Martinez has vowed to oppose any tax increases approved by lawmakers, though her administration has signaled a willingness to close certain tax “loopholes” if doing so levels the state’s tax code.
The vetoed tax legislation included an increase of 10 cents a gallon in the state’s gasoline tax, a higher tax rate for buying new or used vehicles and a requirement that out-of-state online retailers collect gross receipts tax from consumers.
In her veto message Friday, Martinez encouraged lawmakers to work in a bipartisan fashion on tax overhaul legislation during the coming special session.
Such legislation could include both a plan to overhaul the state’s gross receipts tax system by eliminating hundreds of exemptions and lowering the state’s base rate, and a proposal to create a new “rainy-day” fund that would bolster the state’s cash reserves when oil and gas prices drop.
Both proposals were introduced by Republican lawmakers during this year’s legislative session, and there’s no guarantee the Democratic-controlled Legislature would have the appetite to pass them in a special session.
Rep. Jason Harper, R-Rio Rancho, who sponsored the measure to overhaul the gross receipts tax, applauded the governor’s veto of the tax package and expressed optimism that a deal could be in the works.
“We are ready to compromise on ways to generate revenue if it’s part of comprehensive tax reform to get us out of our economic death spiral,” Harper said in an interview. “I’m hopeful we can come together.”
However, some Democratic lawmakers questioned how much leverage Martinez, whose term ends in 2018, would have in a special session.
“We’re going to find out how many (legislators) are still going to be willing to walk in lockstep with her,” Smith said.
The governor’s line-item veto of both funding for higher education institutions and nearly $18.8 million in funding for legislative branch agencies prompted some legislators to question the legality of the action.
Senate Majority Leader Peter Wirth, D-Santa Fe, said Friday that legislative staff would review the constitutionality of the vetoes, which could pave the way for a possible court challenge.
“The question is whether a line-item veto can be used to eliminate state agencies and go one step further and eliminate another branch of government by taking away its funding,” Wirth said Friday. “She clearly can veto the whole budget, but that’s not what she did. These are targeted vetoes.”
“I think it’s the Legislature’s authority to create agencies,” Wirth added. “This action in effect does away with higher education in New Mexico – I think there are a number of legal questions about whether that’s allowable.”
Legislative Council Service Director Raúl Burciaga confirmed Friday that the administrative agency had initiated a legal review of the issue, which he described as largely unprecedented in recent New Mexico history.
The decision to veto legislative branch funding is not expected to have an immediate impact. It was made largely due to frustration with lawmakers’ resistance to reducing legislative spending levels, according to the Governor’s Office.
Meanwhile, a date for the special session has not been announced, but it’s expected to be called before the end of this month.
Martinez has said she’d like for the special session to be a short one – such sessions can cost up to $50,000 a day in taxpayer dollars – but has also indicated she might add other issues to the agenda.
Journal Capitol Bureau reporter Dan McKay contributed to this report.