March 17, 2017

Governor threatens special session over spending plan

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New Mexico’s 60-day legislative session doesn’t end until noon Saturday, but Gov. Susana Martinez already is preparing to call a special session because of ongoing budget problems, her staff said Friday night.

“A special session could be called as soon as Monday or Tuesday,” said the governor’s spokesman, Chris Sanchez.

Note: This post has been updated throughout to reflect news on likely special session.

Keith Gardner, Martinez’s chief of staff, said a special session is almost a certainty.

“If something doesn’t change dramatically from tonight, yes,” Gardner said at the Capitol on Friday night. “The budget that’s passed and is on the way to the governor’s desk is not balanced.”

Gardner also said other holes remain in the state’s finances, for which he blamed the Democrat-controlled Legislature.

“We’ve got a ’17 cash problem that’s as important as the ’18 budget issues,” he said.

Legislators, including their leading budget hawk, have a different assessment.

“We’ve delivered,” said Sen. John Arthur Smith, D-Deming, chairman of the Senate Finance Committee. “We’ve given her a balanced budget and the revenue to support it.”

Brian Egolf, speaker of the House, said legislators did a thorough job.

“Our budget safeguards the top priorities of hardworking New Mexican families — education, health care, economic development and other vital services,” said Egolf, D-Santa Fe.

Gardner’s critical comments of lawmakers came hours after they had finished work on a tax and spending plan for the fiscal year starting July 1 and had sent it to Martinez, a Republican in her seventh year in office. She has threatened a veto of the budget that could shut down government.

The final step for the $6.1 million budget for 2018 came Friday when the House of Representatives concurred on changes made by the Senate. In order to avoid further cuts to public schools and services, the budget includes spending $128 million more than the state’s current projected revenues. Balancing the budget requires the governor to choose from a smorgasbord of fee and tax increases included in other bills.

Those measures include $350 million from House Bill 202, which would extend the gross receipts tax to out-of-state internet sales, increase taxes on hospitals, gasoline and diesel fuel, as well as vehicle sales. The bill also redirects contributions to the legislative retirement fund and increases permit fees paid by truckers.

Other measures also would help boost the general fund and support schools, including Senate Bill 462, which reallocates $72 million in capital construction projects, with $46 million of that going to school districts to restore cash reserves.

That transfer was part of a solvency package necessary to close a deficit in the 2017 budget, which came after a special session in October that was convened to balance the 2016 budget before books were closed. The fiscal problems have led to a severe depletion of cash reserves, which have now dipped below 2 percent of spending and affect the state’s credit rating.

There are smaller revenue generators as well, including a bill to extend the gross receipts tax to all short-term rental properties in the state and to revert $1 million from the cigarette tax to the general fund.

The overall budget increases spending just $23 million, less than 1 percent of current levels.

Together, lawmakers said they have given the governor enough options so she can sign the budget and operate government without calling them back for a costly special session.

An hour after the House passed the budget, Gardner told reporters the 2018 budget is not balanced without more money, and that is a problem.

“It’s a balanced budget with a wink and a nod,” he said. “Let’s work together. We cannot overspend. The constitution requires a balanced budget.”

He said the governor is exploring the shutdown of nonessential government services to conserve cash until there is a budget.

Egolf said he was bewildered by the governor saying she has had no communication with lawmakers and threatening a shutdown, when he talked with her just two days ago. Senators have said they have included specific spending requested by the executive branch, including efforts to expand economic development and preserve education reforms.

Contact Bruce Krasnow at brucek@sfnewmexican.com.

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