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.
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 would be willing to sign a food tax into law if it were part of a larger tax reform. The governor told media this after a speech at the Economic Forum of Albuquerque at the Hotel Albuquerque Wednesday. Purchases of food are exempt from the state’s gross receipts tax and have been since 2004. Those who support the exemption say the tax has a larger impact on poor New Mexicans, since food represents a higher percentage of their spending. Martinez did say she would oppose the food tax as a “standalone piece,” according to both the Albuquerque Journal and the Santa Fe New Mexican.
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.
The governor signed the Legislature’s state budget plan Friday morning—but with $800 million worth line-item vetoes, making a future special session a reality. The vast majority of the money vetoed by Gov. Susana Martinez came from vetoing all funding for New Mexico colleges and universities. She cited the Senate’s lack of hearings for nominations of regents for “several higher education institutions,” calling it “a clear violation of its constitutional duty.”
In a separate statement, Martinez said she had to take out the “entire higher education budget” to balance the budget, but said this would be fixed in the special session. Related: Banning guns for domestic abusers vetoed, conversion therapy ban signed among Martinez actions
Senate Majority Leader Peter Wirth denounced the veto of the higher education money. “Governor Martinez has chosen to play extreme political games rather than act responsibly,” Wirth said.
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.
An effort that had broad support to bring in more money to New Mexico government by taxing all internet sales has mushroomed into a measure to raise additional money from hospitals, trucking companies, nonprofit organizations and car buyers. Democrats say the amendments to House Bill 202, originally an effort to raise $30 million by expanding the gross receipts tax to out-of-state internet transactions, are necessary to restore cash reserves and put the state on better financial footing to avoid further cuts to school districts and another credit downgrade. With the changes, the bill is now expected to bring in $265 million in ongoing revenue. Some $1 million a year would come from the legislative retirement fund. A sponsor of the tax bill, Rep. Carl Trujillo D-Santa Fe, said lawmakers have cut spending, both during the 2016 session and again in an October special session.
While state lawmakers are pulling out all the stops to find “now money” to plug an expected deficit in the next fiscal year, Rep. Jason Harper has introduced a bill he hopes can put the state on better financial footing for decades to come. Harper, R-Rio Rancho, admits that House Bill 412, the New Mexico Tax Reform Act, is not a quick fix and will not patch the budget in fiscal year 2018 or even 2019. But by restructuring the state gross receipts tax and simplifying income and other tax policies, New Mexico will position itself for more solid growth in the new economy, he said. “It doesn’t help us fix the current budget problem,” Harper said of his bill, “but this hopefully prevents another budget problem.” The measure comes halfway through the 2017 legislative session, when reserve funds have been depleted by efforts to balance budgets for the last fiscal year and the current year, which ends in June, and many lawmakers are focused on raising enough new money to get through the upcoming year.