May 25, 2017

Legislature pass budget, tax bills, waits on governor’s actions

The seal of the state of New Mexico in the House

Both the House and Senate recessed Thursday afternoon—without officially ending the special session. Now, the governor has three days to take action on four bills aimed at tax changes and reinstating funding to the Legislative branch and institutes of higher education.

By recessing until Tuesday instead of adjourning, the House and Senate could still introduce new legislation to replace anything Gov. Susana Martinez might veto.

Martinez, in an atypical statement, praised the Legislature for some of their work.

“In a bipartisan manner, lawmakers passed my plan to put more funding toward cancer research and student financial aid, while at the same time forfeiting their pork projects and a small portion of their personal legislative retirement accounts to fill the budget hole — something I’ve urged them to do for months,” she said. “We started this budget process at the beginning of the year with the Democrats insisting that nothing short of massive tax increases would solve our budget problems and that has proven not to be the case.”

Senate Majority Leader Peter Wirth, D-Santa Fe, explained the reasoning on recessing instead of adjourning.

“Because of the crisis we’re in, it is critical that these bills be addressed as soon as possible,” Wirth said. “This gives the governor three days to act on the bills, it gives us the opportunity to come back depending on what happens and take a look at that action.”

The Senate passed a House-sponsored tax bill, HB 2, which makes broad changes to how gross receipts taxes are charged, suspends payments to the legislative retirement fund for two years and creates a “rainy day fund.”

Martinez was critical of what she called “tax hikes.”

“Let me be clear: I will veto all tax increases that hit my desk. The legislative leadership knew that from the beginning and chose to pass these tax hikes regardless,” Martinez said.

There was no debate on the bill itself, but legislators did briefly debate two failed amendments.

About an hour before the full Senate passed the bill, it was passed by the Senate Finance Committee with very little debate.

Senate Majority leadership, in a press conference after recessing, said they hoped Martinez would sign all four bills. But they also gave her more “menu items” to choose from if she doesn’t agree with everything.

Senate Majority Whip Michael Padilla, D-Albuquerque, took the opportunity to criticize Martinez for calling legislators back in for a special session and said the Senate had already done its job earlier this year.

“If you feel like you were watching a movie for the second time, you’d be correct,” Padilla said.

After a long debate, the House of Representatives approved a revenue-enhancement bill that will delay planned tax cuts to corporations and manufacturers, raise the state gasoline tax by 5 cents per gallon and charge more for commercial trucker permits.

The bill passed 37-28 along mostly partisan lines, with conservative state Rep. Candie Sweetser, D-Deming, joining all Republicans present in voting no.

Calls for tax overhaul

During debate on the tax package, Republicans repeated a familiar talking point—that they would not pass tax increases without voting on a comprehensive tax reform package favored by the governor.

“It appears we’re doing tax reform,” said state Rep. Jim Dines, R-Albuquerque, referring to the bill before the House. “Yet when we have tax reform that’s comprehensive, we have to have a $400,000 study.”

Earlier in the day, a separate tax overhaul bill favored by Republicans failed in the House Labor and Economic Development Committee on party lines.

A separate revenue bill included $400,000 to study comprehensive tax reform for Fiscal Year 2018. Speaker Brian Egolf, D-Santa Fe, and other Democrats have argued that any big tax overhaul must be thoroughly vetted before legislators approve it.

Anything otherwise is “like holding hands and jumping off a cliff and not knowing where we’re going to land,” said Carl Trujillo, D-Santa Fe, a co-sponsor of the revenue bill.

Trujillo argued that a bill passed by Democrats without Republican support that introduced gross receipts taxes on internet sales and hospitals using county-supported Medicaid funds was a type of tax reform.

At a press conference Thursday afternoon, House Minority Leader Nate Gentry said Republicans define a tax overhaul as something “much more comprehensive than a couple of tax increases.” Any such bill must include eliminating the “vast majority” of exemptions in the state’s gross receipts tax, reducing pyramiding, which increases the effective tax rate because of taxing some items multiple times, and lowering the overall rate, he sai.

Other Republicans criticized Trujillo’s revenue bill by claiming that raising annual fees for trucker permits from $5.50 to $55 would violate the commerce clause of the U.S. Constitution.

“We’re running into trouble because this is going to be found unconstitutional,” lamented state Rep. Larry Larrañaga, R-Albuquerque.

Earlier during the day when the bill was heard in the House Taxation and Revenue Committee, an aide explained to lawmakers that the tax could be interpreted as unconstitutional because it’s a flat tax not apportioned on miles driven by truckers and would go straight to the general fund.

Egolf, during committee, argued that a lawsuit that found a similar tax in New York unconstitutional did so because the state was charging in-state and out-of-state truckers at different rates.

“Here I think we’re OK,” Egolf said. “The permit fee is applied equally to in-state and out-of-state trucks.”

State Rep. Rick Little, R-Chaparral, attacked the merits of the trucker tax increase.

“We’re going to lose jobs going on a 900 percent increase on the registration fee,” he said. “Is there any reason why we hit truckers in this case as hard as we have?”

Trujillo said the average New Mexico trucker pays $172 in fees everywhere, a number much lower than the more than $3,000 in Utah or the more than $800 in Texas.

“We are literally the lowest in the country,” Trujillo said.

Little called this “picking winners and losers.”

“Whether you look at it as, ‘OK, we’re low,’ it’s still going to be a big hit to truckers however you look at it,” he said.

State Rep. James Strickler, R-Farmington, said he couldn’t support the bill because the gas tax increase doesn’t include the pueblo territories.

“Our revenue could be increased by $25 million if we could try to address those issues,” Strickler said. “I will continue to try to push for a process that I think would be more fair to the public.”

Rep. Eliseo Alcon, D-Milan, argued that conservative states surrounding New Mexico raised gas taxes more recently to try to address budget shortfalls.

“They had no problem raising taxes in state of Utah to keep their people working,” he said.

The bill now heads to Martinez’s desk, though her statement shows it will not become law.

Update: Added quotes by Martinez, updated portions of the story related to what she said.