May 19, 2017

Guv, legislators take ‘first crack’ at agreement ahead of special session

Gov. Susana Martinez

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. “It was more the governor saying what she would like to have—that was mostly talking about Harper’s tax bill—then the rest of us telling the governor what we thought we should do.”

Egolf said the House would pass “modest tax reform” measures like adding a gross receipt tax to internet sales and some additional GRT to hospitals, which are taxed at a lower rate than the rest of GRT, which he said would add money to the general fund and Medicaid.

Egolf also indicated he would be open to more significant tax reform efforts at a later date.

In a statement, Senate Majority Leader Peter Wirth, D-Santa Fe, said he was “encouraged that the Legislature and Governor Martinez are close to an agreement to reinstate the budget the Legislature worked hard to pass in the regular session.”

Wirth said that Democrats were waiting on details of the tax reform proposal and that the costs of the proposal during the regular session was concerning to both Democratic and Republican senators.

“From day one, our goal has been to pass a responsible budget that funds classrooms, higher education, and critical state services while leaving our state on solid financial footing,” Wirth said. “That continues to be our priority as we approach the Special Session.”

Meanwhile, Egolf said Martinez told legislators she would restore her line-item veto cuts of higher education funding.

As for a wider tax overhaul, Egolf said Republicans still haven’t submitted a draft bill for the special session.

“It seems very inappropriate to look at a bill for the first time Monday or Tuesday that changes every part of tax code and try to vote on it Wednesday or Thursday,” Egolf said. “We don’t know the consequences.”

Harper introduced broad tax reform legislation aimed at eliminating exemptions and deductions in the state tax code while lowering the overall state gross receipts tax rate during this year’s regular legislative session. This came after he chaired an interim committee that examined tax reform for much of 2016.

Egolf said he was open to examining the issue over the summer, “and then I’d be happy if we could come back in have a bipartisan bill in a special session in the fall.”

He also predicted that next week’s special session wouldn’t last longer than a few days.

“If we’re not done by the end of the day Thursday, it’s because there’s some disagreement,” Egolf said. “An appropriations bill and modest tax measures could be done in 24 hours.

Legislative leaders will likely meet with Martinez and her staffers about the special session again on Monday, Egolf added.

Update: Added a quote by Peter Wirth.