March 2, 2017

Senate panel advances House tax bill over health providers’ objections

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.

The bill has passed the House and moved from the Senate Corporations Committee on Wednesday without a formal recommendation. It now goes to the Senate Finance Committee.

A dozen representatives of the hospital industry said the measure is not closing loopholes but bringing higher costs at a time of great uncertainty. Many hospitals will have to cut services or reduce staff, and some might even be forced to close, said Dan Weeks, a lobbyist with the New Mexico Hospital Association.

J.D. Bullington, a lobbyist for two hospital companies, said the increase would come during a time of uncertainty at the federal level over the Affordable Care Act and potential Medicaid cuts in the coming years.

“This can become a very serious situation,” he said.

The CEO of Christus St. Vincent Regional Medical Center said in an interview that the bill would cost the nonprofit provider $13 million to $16 million. “There are a lot of things we won’t be able to do” if the bill becomes law, Patrick Carrier said.

The Senate Corporations Committee’s decision to move the bill to the Senate Finance Committee without a formal recommendation is a sign that the legislative session is entering its final weeks and the Democratic majority wants to get the measure to Gov. Susana Martinez to finalize a fiscal year 2018 budget.

As it now stands, the 2018 budget bill is not balanced without an additional $128 million, and even that much revenue would leave cash reserves at zero.

The health care section is the most controversial part of HB 202. Other provisions were greeted with more support, including taxing internet sales, increasing permit fees for heavy trucks and diverting $900,000 a year the legislative retirement fund to the general fund.

The bill also would raise $50 million by increasing the fee to transfer a motor vehicle to 4 percent of the sale price from 3 percent.

“This isn’t easy for me. I didn’t pick this up and say, ‘this is what I want to do this legislative session,’ ” he told senators. The bill passed the House with no Republican votes.

Sen. William Sharer, R-Farmington, said he understands that lawmakers have to do something to raise revenue, but he was not satisfied with the effect the bill would have on hospitals. He joined the other Republicans in opposing the bill.

Democrats who control the House and Senate say they do not know where Gov. Martinez stands on any of the tax bills. Republican House members have said the governor wants to close tax loopholes and make taxes fairer. They have their own package, which raises $240 million, some of it from one-time sources.

But Democrats, taking no chances, plan to vote on several bills in the next few days in case HB 202 is vetoed.

One of those, approved Wednesday by the Senate Corporations Committee, has the support of the hospital association and the New Mexico Medical Society. Senate Bill 433, sponsored by Sen. Carlos Cisneros, D- Questa, is a lighter version of the health care provision in HB 202, imposing a 1 percent gross receipts tax and creating a Medicaid Trust Fund.

The money from the tax would expire in a few years and be earmarked to restore the Medicaid reimbursement cuts imposed by the governor and lawmakers last year. Hospitals would essentially pay the tax and get the money back by receiving higher payments when treating Medicaid patients.

Weeks said the bill would raise about $52 million, and all of the money would go to the Medicaid program rather than the general fund.

Sen. James White, R-Albuquerque, is also moving a stand-alone internet tax measure that has broad support among lawmakers and business groups and seems to have enough votes to override any veto by Gov. Martinez.

Finally, the full Senate on Thursday will debate what would be the first gas tax increase in 23 years. The bill would boost the gasoline tax to 27 cents from 17 cents and the diesel tax to 26 cents from 21. The bill also increases the motor vehicle transfer fee to 4 percent from 3 percent.

Some of the revenue would go to road funds for the state, cities and counties, and a new trust fund would be created just for road and bridge maintenance.

Many local government officials, mayors and county commissioners are calling lawmakers in support of the measure, which passed two Senate committees so far with just one no vote.

Lawmakers still face objections that there have not been enough spending cuts.

Speaking against HB 202, Terri Cole, president of the Greater Albuquerque Chamber of Commerce and a close ally of the governor, said members of her organization agree that gross receipts taxes should apply to all online sales. But that needs to come with a more determined effort to streamline and reorganize government operations, she said.

Sen. Michael Padilla, D-Albuquerque, challenged Cole on what she would propose to cut further, considering that public education and higher education take almost 60 percent of the state general fund.

Cole said there are still some capital outlay projects that can be delayed, additional dollars can come out of lawmakers’ retirement, and she wants the Legislature to move forward on a proposal from Martinez to make state employees pay a larger share of their own monthly retirement, which would essentially reduce their take-home pay by about 3 percent.

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