Deal takes shape on slimmed-down tax package as session enters final hours

SANTA FE — With the end of the 60-day legislative session hours away, members of the House and Senate reached a compromise late Friday on a high-profile tax package — by slimming it down and pushing most changes to next year.

Lawmakers also signed off on bills authorizing New Mexico to fund brackish water projects and making it easier for independent voters to cast ballots in primary elections.

In between that action, a few representatives and senators met behind closed doors all day trying to come to an agreement over the tax package. Amid the deliberations, Gov. Michelle Lujan Grisham came down from her fourth-floor office to talk with legislative leadership.

The key sticking point between the House and Senate was whether a tax hike on oil production should be included in the tax package to offset the budgetary impact of a slew of expanded tax credits and new tax breaks. The surtax would’ve generated about $130 million for fiscal year 2026.

The Senate stood firm after stripping the oil surtax out of the package this week, prompting a showdown with the House, in which three members from each chamber met in an open conference committee Friday morning to try to figure out an agreement.

“I don’t know if we have a path forward,” said Rep. Derrick Lente, D-Sandia Pueblo, during a morning negotiating meeting between appointees from the two chambers.

The initial meeting of the conference committee resulted in stripping a disaster gaming tax exemption for the Ruidoso Downs Racetrack and Casino and reallocating money from a liquor excise tax increase to a tribal treatment fund.

But the biggest issue remained: how to pay for a projected $140 million per year in proposed tax credits and breaks.

Lente made it clear he didn’t want any bills used as “sacrificial lambs” to pay for the tax package.

Unable to reach a deal on the oil tax provision, the committee adjourned and planned to meet again in the late afternoon.

But a legislative staffer, 10 minutes after the scheduled meeting time, announced it was postponed to an unknown time. The committee didn’t meet again until 8:30 p.m., when members announced the compromise, which was then ratified by both the House and Senate.

If approved by the governor, most of the tax changes would not take effect until the 2027 budget year, which starts in July 2026. The liquor tax increase would still take effect in July.

The new pared-package removed about $30 million in previously proposed tax credits and breaks. What remained was a package giving an additional 101,000 New Mexicans personal income tax breaks, as well as tax credits and breaks for foster parents and health care practitioners.

“Yes, we have other ideas that we would like to fund. The beauty about this is we already have a head start to next year,” said Sen. Carrie Hamblen, D-Las Cruces, of the now $113 million tax package stripped of its funding mechanism.

However, Rep. Mark Duncan, R-Kirtland, said he doesn’t like the idea of allocating funding now for next year’s session.

“I still think this is a bad way to do business,” he said. “No one would budget like this in their homes.”

Trying to beat the deadline

With the session set to end Saturday at noon, lawmakers spent most of the day on the House and Senate floors in a final push to pass legislation.

As of late Friday, more than 140 bills had passed both chambers to advance to Lujan Grisham’s desk for final approval, out of the nearly 1,200 filed during this year’s session.

However, the fate of some bills remained uncertain.

That included House Bill 149, which was overhauled on the Senate floor to include language backed by the governor dealing with individuals deemed to pose a threat to themselves or others.

Some senators criticized the legislative maneuver, but backers pushed back against suggestions it represented a back-room deal.

“This is the way the sausage is made,” said Senate Republican floor leader William Sharer of Farmington.

However, it was unclear if the House would sign off on the Senate changes to the legislation after a bill containing similar language stalled earlier in the session in a House committee.

Meanwhile, the possibility of another conference committee was brewing as the House late Friday failed to agree with Senate changes to another bill, House Bill 167, which initially started as a two-page education tests payment bill but had its length more than tripled with new language on teacher preparation programs.

Voting, water bills win approval

Among the bills passed during the final push to adjournment were measures expanding the state’s anti-racketeering laws and establishing a new Medicaid trust fund.

The House also narrowly approved a bill allowing independent voters to participate in primary elections without having to change their party affiliation.

The bill, Senate Bill 16, was approved on a 36-33 vote and could affect more than 330,000 independent voters in New Mexico if signed into law by the governor.

“We were all holding onto our seats, not knowing if it was going to happen,” said Sila Avcil, executive director of the advocacy group New Mexico Open Elections.

The semi-open primary bill marked the only significant elections bill to pass during this year’s 60-day session, and the vote on the bill did not break down along strict political lines.

Rep. John Block, R-Alamogordo, mulled over the possibility of strategic voting as a result of the measure, while Rep. Kathleen Cates, D-Rio Rancho, praised the measure as a way to increase voter turnout rates.

“This is about democracy and strengthening our democratic republic to involve more folks in the electoral process,” said bill sponsor Rep. Cristina Parajón, D-Albuquerque.

On the other side of the Roundhouse, senators debated the proposed Strategic Water Supply Act, which would allow the state to grant awards or enter into contracts for brackish water treatment and reuse projects. The tide turned for the bill that’s failed before and passed 33-6.

The legislation started this year on shakier ground due to its initial inclusion of produced water reuse, but legislators watered it down to give it a better shot at passing the Legislature. A gubernatorial signature is likely, as the bill is a priority of Lujan Grisham.