September 30, 2016

Committee passes bills to help bridge budget deficit

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Andy Lyman

Andy Lyman

Sen. John Arthur Smith

The Senate Finance Committee went to work Friday to bridge the gap on the large budget deficits in both the current fiscal year and the recently completed fiscal year.

Andy Lyman

Andy Lyman

Sen. John Arthur Smith

The proposals to close the deficits came from expanding medical marijuana, taxing some internet sales and accelerating the phasing out of the hold-harmless provision for local governments.

“If it looks like chaos, that’s what it is,” Senate Finance Committee chair John Arthur Smith, D-Deming, joked at the start of the productive meeting.

Another meeting for the bills was scheduled for later Friday evening, with Senate Majority Leader Michael Sanchez saying the full Senate would hear the bills later that night.

The committee passed seven bills in all, sending all seven to the Senate floor. Some bills breezed through unanimously while others caused debate between members of the committee.

Taking funds from the tobacco settlement fund to help pay down the deficit was one that received no debate and passed unanimously. This has been one of the most-mentioned proposals since it became clear a special session would be necessary to fix the budget.

Corporate income tax cuts

Taxation and Revenue Department Secretary Demesia Padilla spoke more than most members of the committee on debate on a bill that would freeze a corporate income tax cut.

The tax cut passed in the dying moments of the 2013 legislative session.

“We are starting to get companies that are looking at the fact that we’re moving in this direction,” Padilla said. She said if this passed, it would send a signal to businesses that New Mexico’s attempts to make the state more business friendly are “not something they can rely on.”

Sen. Steven Neville, R-Aztec, agreed with Padilla, and said the $13 million the proposal is projected to raise would be offset if the state attracted “another Facebook,” referring to the recently-announced data center by the social media giant that will be built in Los Lunas.

“The reason we had these initiatives was because oil and gas allowed us to do this,” Smith said. He said they were not repealing the taxes, but only “trying to slow it down.”

That bill passed 6-4 on a party-line vote.

Omnibus tax bill

The committee also passed a omnibus bill that included a number of large tax provisions. One portion would close loopholes in the high-wage tax credit that Padilla said cost the state millions each year.

The bill also would create a $24 million cap on how much the state could spend on the credit, which Padilla opposed.

The bill also seeks accelerate the “hold harmless” phase out for municipalities and counties. The hold harmless payments go to the local governments to offset lost gross receipts taxes paid for food and medical expenses. These expenses are exempt from the state’s gross receipts tax.

Currently, the state pays 86 percent of the lost revenue, with that rate dropping annually. With this bill, it would go down to 76 percent on Jan. 1, 2017 through the end of June 2018. The original version calls for the rate of reimbursement to drop to 82 percent on July 1.

A representative for municipalities said this would cause an undue burden on the local governments.

The bill would also seek to collect gross receipts taxes for online purchases from large online retailers. The proposal would collect the revenue from any entity that makes $100,000 or more on online purchases. Currently, the state only collects taxes if the company has a physical location in the state. So retailers like Amazon or eBay would be exempt from the tax.

The large piece of legislation passed on a 9-1 vote.

Capital outlay voiding

Legislators also passed a bill that would void a large number of capital outlay projects that were funded but did not actually go through with construction. Then, those funds were moved to the state’s general fund to shore up the deficit.

The bill would also reduce the tribal and colonias earmarks of some severance tax bonding capacity from 5.5 percent to 4.5 percent, something that lobbyists for several tribes and pueblos opposed or expressed their concerns.

Sen. Carroll Leavell, R-Jal, said one of the projects in Lea County—for the design and construction of a terminal at an airport—should not be on the list of targeted projects because it was currently under construction. He introduced an amendment to remove it.

Smith said this would “open the floodgates” and others would seek to remove their projects.

Smith said that if the project was already being constructed, then protections in the bill should make sure the money is not taken away.

Medical marijuana plant limit lifted

A bill that would stop the Department of Health from instituting limits on how many plants medical marijuana producers could grow also cleared the committee.

Sponsor Jerry Ortiz y Pino, D-Albuquerque, said that it would not only raise revenue by increasing sales of medical marijuana, which are taxed, it would also help solve the current problem with not enough medical marijuana for the tens of thousands of participants in the program.

The proposal would allow an unlimited amount of plants, but it would require $200 per plant (a math error led to initial language calling for $2,000 per plant, but Ortiz y Pino amended his bill).

Currently, DOH regulations only allow producers to grow up to 450 plants (for a $90,000 fee). These include all plants being grown at any one time, from seedlings to fully mature plants.

That bill passed on an 8-2 vote.

On the House side, earlier in the day, Rep. Bill McCamley introduced a bill to legalize, regulate and tax recreational marijuana. It’s unlikely that bill will be heard during the current special session.

 

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