A wide-ranging tax bill that passed the House of Representatives in a unanimous vote ran into obstacles at a Senate hearing Wednesday and isn’t likely to advance in the 2017 Legislature. “Anything still has a chance of moving,” said Sen. Clemente Sanchez, D-Grants, chairman of the Senate Corporations and Transportation Committee, after a four-hour hearing on House Bill 412, sponsored by Rio Rancho Republican Rep. Jason Harper. But during the hearing, lawmakers were more skeptical as they heard concerns from lobbyists for doctors, hospitals, broadcasters, nonprofit organizations, schools, farmers, the dairy industry, hospice nurses and nursing homes about how the tax changes would affect their operations. Related: NM’s revenue still hasn’t recovered to pre-recession levels
Harper was not surprised. “We’ve jokingly called this bill the lobbyist full-employment act.
The New Mexico Legislature came closer Saturday to sending Gov. Susana Martinez a budget for the upcoming fiscal year, as well as a $300 million tax package. The Senate passed House Bill 2, as well as HB 202, which could raise more than $300 million — depending on which new taxes and fees are signed and which are vetoed by Martinez, a Republican who repeatedly has vowed never to raise taxes. Both pieces of legislation will have to return to the House of Representatives for final passage because of amendments made in the session. “This budget and revenue package reflects the desire of the legislature to produce a plan that supports New Mexico families and makes practical long-term spending decisions necessary for the success of our state,” Senate Finance Committee Chairman John Arthur Smith, D-Deming, said in a news release. “By raising new recurring revenue,” Smith said, “we were able to prevent dramatic cuts and strengthen our support for critical state services like public education all while leaving an appropriate level of reserves necessary to reassure bond companies that we have financial stability needed to protect our credit rating.”
Members of the Senate Finance Committee say they have reached an agreement on a package of taxes and fees that would help New Mexico resolve its projected budget deficit and shore up cash reserves to about 3 percent next year. The proposal amends several provisions of House Bill 202, including a tax that was opposed by doctors and hospitals. The Senate measure also would incorporate a gasoline and diesel tax increase that has already passed the Senate as a separate bill. By bringing all the elements together, Sen. John Arthur Smith, D-Deming, the finance chairman, hopes to stabilize the $6.1 billion general fund and guard against further credit downgrades. It also would buffer the state against expected federal cuts in education and health care.
The superintendent of a small school district in Southern New Mexico told state lawmakers in no uncertain terms Tuesday how a 5 percent or 6 percent cut in his operating budget would affect his district. “Our teachers work very hard to put hope in front of those kids,” Ricky Williams, superintendent of Hagerman Municipal Schools, told members of the Senate Finance Committee. “With budget cuts, you take that hope away.” Williams was one of several district leaders and college presidents who put a human face on the realities of education funding cuts during a three-hour hearing at the state Capitol, which attracted about 150 people — many of them educators. Garrey Carruthers, president of New Mexico State University in Las Cruces, told the committee that colleges and universities may have to hike tuition rates by up to 30 percent to offset budget reductions.
A key Senate committee on Tuesday night pushed ahead a proposal to nearly double New Mexico’s tax on cigarettes to raise money for public schools. Though health advocates say it would help curb smoking and some legislators warn of more cuts to education funding if they cannot raise revenue to bolster the state budget, the proposal is unlikely to make it past Gov. Susana Martinez. When asked about the measure on Tuesday morning, a spokesman for the Republican governor reiterated her stand against raising taxes. But the bill’s sponsor, Sen. Howie Morales, D-Silver City, countered that the governor has also pledged that she will not cut classroom spending. “That’s what she would do if she vetoes this bill,” Morales said after the Senate Finance Committee advanced his bill in a bipartisan 9-3 vote.
Senate Minority Leader Stuart Ingle was in office 15 years ago, the only time the Legislature overrode a governor’s veto of the entire state budget. That showdown pitted Republican Gov. Gary Johnson against a Legislature controlled by Democrats. Ingle, R-Portales, said he is confident the impasse this year over spending and tax increases between majority Democrats in the Legislature and Republican Gov. Susana Martinez will not be a repeat of what happened in 2002. He said all parties agree on the priorities. Namely, the state needs to boost revenue to pay for education and day-to-day services included in the proposed $6.1 billion operating budget and stash away more in savings to help its credit rating.
Lawmakers looking for every possible penny of new revenue to balance the state budget moved ahead with an omnibus tax package Wednesday over the objections of hospitals and medical providers that claimed paying more to the state would harm health care in New Mexico. House Bill 202 is part of an effort to bring in revenue from the fastest-growing part of the state’s economy — physicians, hospitals and clinics, most of which now pay little or no gross receipts tax. Rep. Carl Trujillo, D-Santa Fe, said his bill equalizes the tax among the entire health care sector at just over 3 percent — and that amount is paid on just 40 percent of patient revenue. “I don’t know how you can be more fair than everyone in this profession paying the same,” he said. The measure would raise $250 million for the general fund and restore cash reserves to about 4 percent, Trujillo said.
With the state still running a deficit and reserves depleted, Democrats in the New Mexico House of Representatives have identified four tax or fee increases they say would prevent more cuts to education and put the state on better financial footing. The initiatives — taxing all internet sales, raising the permit fee on heavy trucks, closing a loophole that benefits nonprofit hospitals and increasing the tax on vehicle transfers — could raise more than $200 million in ongoing revenue. Some of it would go to avoid cuts in state agencies and some to beef up reserves. The move to bring together the House Democratic caucus came on the same day as state economists restated a revenue forecast from December that shows the economy has stabilized but reserves are far below the desired level of $300 million, or 5 percent of recurring revenue. The reserve account for the $5.6 billion budget at the end of the fiscal year on June 30 is projected at 1.6 percent.
A state Senate committee Monday night approved $1.6 million in funding for the courts, enough to pay for jury trials through June 30, the end of the fiscal year. Still, it was unclear whether the legislation represented a temporary or a permanent step back from the brink of a breakdown for the judicial system. The committee action was another pull in a political tug-of-war between the Democratic-controlled Legislature and Republican Gov. Susana Martinez over funding for the courts. The game is being played out against a backdrop of a state budget crunch across all of government. In recent weeks, Martinez has twice vetoed money to avoid a halt to jury trials and potential dismissal of criminal charges against defendants.
If the state of New Mexico wants to get back on solid financial footing it has to take on some sacred cows, according to Sen. Ron Griggs. Griggs, a Republican who is the former mayor of Alamogordo, calls the omnibus tax bill he is sponsoring the start of that conversation. The bill not only brings back the gross receipts tax on food and medicine — albeit at a lower rate — but it raises the fee to transfer ownership of a motor vehicle and imposes a new fee to transfer or refinance real estate. Senate Bill 343 would also reduce the corporate income tax, eliminate taxes on interest income, which would benefit retirees over 55, and help cities and counties with their budget challenges. Large, complicated tax measures have not always fared well in the Legislature.