If it had passed in its original form, the tax overhaul supported by the governor and legislative Republicans during the recent special session would have hurt the state. That’s the news from the finalized fiscal impact analysis done by staffers with the Legislative Finance Committee, first flagged by the Albuquerque Journal. According to the analysis, a technical error on the part of the bill’s drafters threw off revenue estimates by more than $100 million. The error had to do with the repeal of a nonprofit receipts exemption that applies to nonprofit organizations, including hospitals. The bill itself was finalized shortly before the special session began and was introduced hours after the special session came to order.
For most of this year, the budget was the hottest topic for legislators and the governor. Both branches battled, then came to an agreement no one seems enthusiastic about. The deal suggested by Gov. Susana Martinez essentially amounted to using bonding money normally reserved for state infrastructure to balance the budget. State lawmakers request the bonding money for state infrastructure projects. Issuing bonds works like a home mortgage: the state borrows money backed by oil and gas revenue and pays it back with interest over the years. Senate Finance Committee Chairman John Arthur Smith, D-Deming, said the funding method “sets a poor precedent” while Senate Minority Leader Stuart Ingle, R-Portales, said he didn’t “like to do this either.”
And yet, the plan passed with a unanimous vote in the House of Representatives and just two dissenting votes in the Senate.
Without much drama or even an attempt to override Gov. Susana Martinez’s vetoes of tax increases, legislators ended a special session where a budget deal became law. The legislators in both chambers came to order around 1 p.m. on Tuesday after recessing ahead of the holiday weekend. The legislators recessed last Thursday rather than adjourn after passing bills related to the budget and taxes. Staying in session while recessed meant Martinez had to make a decision on legislation to three days instead of 20 days. Martinez ultimately signed legislation on Friday reinstating funding for higher education and the state Legislature, both of which she vetoed entirely after the regular Legislative session earlier this year.
A complex tax overhaul bill failed to clear its committee, and that’s going to further complicate the special session in which legislators are supposed to address the budget in New Mexico. Rep. Jason Harper, R-Rio Rancho, presented his 430-page tax overhaul bill Thursday morning. It took him nearly an hour to describe the bill to the House Labor and Economic Development Department. “That in very high-level, broad terms is what is in this bill,” Harper said when he finished describing the bill and how it differed from a similar bill legislators already passed in March. After public comment and questions from the panel, the committee voted 6-5, on party lines, to table the bill.
Questions on what can be accomplished during a special session linger even as legislators head to Santa Fe today. The main priority for legislators is a budget. Legislators must pass a new budget after Gov. Susana Martinez vetoed the entire budgets of higher education and the Legislature. If a new budget isn’t passed before the start of the next fiscal year, which begins on July 1, New Mexico community colleges and universities will have no money. But Martinez also wants legislators to address a massive tax overhaul and confirm two University of New Mexico regents.
Gov. Susana Martinez met with legislative leaders Friday morning to discuss a budget fix ahead of the upcoming special session scheduled to start next Wednesday. Martinez’s spokesman, in a statement, called the meeting “productive” and said the governor is confident her office would come to an agreement on funding the coming fiscal year, “including funding for higher education.”
“The Governor reiterated that she will not support standalone tax increases, but is hopeful that we will be able to find a bipartisan path forward on tax reform,” spokesman Michael Lonergan said. The statement potentially leaves room for tax increases as a part of a comprehensive tax overhaul similar to what state Rep. Jason Harper, R-Rio Rancho, spearheaded during the recent general legislative session. Martinez last week told the Santa Fe New Mexican that she would support reinstating the food tax as part of such a reform—a marked contrast from even just two months ago when she vowed to “definitely veto every tax increase on my desk.”
State House Speaker Brian Egolf, D-Santa Fe, however, told NM Political Report that “there is still tremendous uncertainty about what sort of tax reform proposal is going to be offered during the [special] session.”
Egolf described the meeting with Martinez as “a first crack” at agreeing to a budget solution. “It wasn’t really a horse trading kind of thing,” Egolf said.
State House Republicans unveiled a spending plan for the upcoming special legislative session that would transfer $12.5 million from the state Legislative Retirement Fund to the general fund to solve the New Mexico’s budget shortfall. Martinez announced the special session will begin Wednesday, May 24. GOP House leaders announced the plan publicly in a press release Tuesday, touting it as a solution to fix the state’s budget issues without raising taxes. “This plan covers New Mexico’s budget needs for the upcoming fiscal year and increases funding for cancer care as well as support for students working to obtain a college degree,” state Rep. Larry Larrañaga, R-Albuquerque, said in a statement. “I urge my colleagues in the Legislature to adopt these proposals so we can resolve this budget impasse fairly and for the benefit of all New Mexicans.”
But the ranking lawmaker in the House Appropriations and Finance Committee questioned whether the Legislature could legally transfer money already invested the retirement fund.
Attorneys for the Legislative Council Service urged the state Supreme Court to reject Gov. Susana Martinez’s large line-item vetoes in the state budgets in a Wednesday court filing. In the latest legal argument from LCS involving its lawsuit against Martinez, a response to arguments submitted last week from her legal camp, attorneys Jane Yohalem and Michael Browde argued that Martinez’s vetoes last month violate the state constitution. Specifically, the argued that a provision that bars the governor from re-writing the annual bill the Legislature passes to fund state government. Martinez vetoed the entire budgets for the state Legislature and the state Higher Education Department. The large vetoes, the attorneys added, violate the separation of powers between the Legislature and governor established in the state constitution.
Gov. Susana Martinez officially called the state Legislature into a special session beginning at noon on May 24 to draw up a spending spending plan for the coming fiscal year, among other issues. The special legislative session is set to occur roughly one week after the state Supreme Court hears oral arguments in a case from the state Legislature challenging several of Martinez’s line-item vetoes on the budget passed earlier this year during the general session. Martinez’s actions included vetoes of the entire budgets for higher education and the state Legislature. Note: This is a breaking news story and more information may be added. In the proclamation, Martinez says there is “an essential and immediate need to enact a more responsible budget for the New Mexico higher education institutions and the legislative agencies that are provided for in state statute to assist New Mexico’s voluntary legislature for Fiscal Year 2018.”
Gov. Susana Martinez still hasn’t set a date for a special session, but just put another big item on the plate for the Legislature. Martinez said Thursday in addition to fixing the state budget, she wants legislators to act on tax reform. Currently, the budget has no money for higher education or the Legislature for the fiscal year beginning July 1 due to the governor’s line-item vetoes. According to the Albuquerque Journal, Martinez described an overhaul of the state’s tax code as “both a short-term and a long-term solution.”
Martinez announced the effort at the annual New Mexico Tax Research Institute Policy Conference in Albuquerque. Martinez has called for a quick special session in the past, saying she hopes legislators can come together in agreement before legislators convene.