An effort to eliminate hundreds of tax breaks for dozens of businesses and service providers while lowering the overall tax rate on sales is moving forward in the Legislature and may become part of a solution to fix New Mexico’s budget deficit for years to come. The measure, sponsored by Rep. Jason Harper, R-Rio Rancho, passed the House of Representatives late Wednesday with no dissenting votes. The initiative had been broadly scaled back from what Harper first proposed with the introduction of House Bill 412, which now has a prime focus on reforming the state’s cumbersome gross receipts tax law. Initial measures to extend that tax to food, as well as changes to income tax rates and how property is valued, were removed from the bill in what House Speaker Brian Egolf called “the largest substitution in the history of the House floor.” Harper accepted the amendments from Rep. Carl Trujillo, D- Santa Fe, as the only realistic way his reforms would move forward.
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.
State lawmakers say revenues are no longer deteriorating but remain flat, and they are moving forward on a 2018 budget with proposals to infuse new revenue — including tax increases — to balance spending and replenish reserves. A new consensus revenue estimate for fiscal year 2018 was expected to be released Wednesday but was pulled back for more study. Still, lawmakers said they do not expect a significant change from December, when economists were forecasting a $125 million deficit for the 2018 fiscal year, which begins July 1. “I don’t believe there’s going to be a material change,” Sen. John Arthur Smith, D-Deming, told the Senate Finance Committee. A forecast presented halfway through last year’s legislative session showed state revenues cratering from the collapse of crude oil prices.
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.
While lawmakers say measures to patch an unconstitutional budget hole are the 2017 Legislature’s first priority, disagreements over a solvency package Tuesday kept most of the plan from moving forward to the governor. Four bills together would roll back some capital construction projects, sweep money from cash balances, including dollars earmarked for education reforms and economic development, and tap into reserve funds squirreled away by school districts and charter schools. “No one’s happy about having to cut the public schools in the middle of the year,” said Sen. Mimi Stewart, D-Albuquerque. The exact amount of money that lawmakers scrape together will depend on the final version, but the legislation would beef up state government’s $6 billion general operating fund by adding some $260 million. If signed by Gov. Susana Martinez, as expected, the solvency plan would close a $70 million deficit for the fiscal year that ends June 30.
As New Mexico lawmakers prepare to convene for the 2017 legislative session — Gov. Susana Martinez’s final 60-day session — probably the most common words spoken at the Roundhouse by legislators, staff, lobbyists, reporters and other Capitol regulars are some version of “Here we go again.” Another session. Another budget crisis. More partisan head-knocking. More harsh rhetoric.
The Senate Finance Committee went to work Friday to bridge the gap on the large budget deficits in both the current fiscal year and the recently completed fiscal year. The proposals to close the deficits came from expanding medical marijuana, taxing some internet sales and accelerating the phasing out of the hold-harmless provision for local governments. “If it looks like chaos, that’s what it is,” Senate Finance Committee chair John Arthur Smith, D-Deming, joked at the start of the productive meeting. Another meeting for the bills was scheduled for later Friday evening, with Senate Majority Leader Michael Sanchez saying the full Senate would hear the bills later that night. The committee passed seven bills in all, sending all seven to the Senate floor.
There’s still no word on if or when Gov. Susana Martinez will call a special session to address the state’s money shortfall, but one nonprofit group wants lawmakers to consider a tax increase on alcohol sales as a way to increase state revenues. Peter DeBenedittis, director of the group Alcohol Taxes Save Lives & Money said he’s been speaking with lawmakers as he tries to increase taxes on alcohol sales in order to supplement public substance abuse treatment programs. While DeBenedittis said he has been working with lawmakers for a while, he wants to gain support from the general public now. “Were just trying to start the conversation publicly,” DeBenedittis said of the campaign. Key players in the legislature said in recent weeks there is a need to shore up the state budget before the next regular session in January. DeBenedittis said the state can save serious money by holding those who abuse alcohol accountable for treatment costs.
SANTA FE — A district court judge ruled Friday there was probable cause to move forward with a criminal case against a former state senator on all but one count in a public corruption case. District Court Judge Brett Loveless made the ruling after the fourth and final day of the preliminary hearings in the criminal case against former State Senator Phil Griego. He said that he will issue an order for a trial early next week. This is a breaking news story. More information may be added.
Prosecutors with the New Mexico Attorney General’s office, a group of legislators, legislative support staff and one journalist are set to testify in the case against former New Mexico State Senator Phil Griego next week. According to a document filed by an attorney for the Legislative Council Service (LCS) earlier this week, 14 legislators and administrative staff who were called to testify are represented by Thomas Hnasko, counsel for LCS. Hnasko told NM Political Report that’s hard to say who if anyone he represents will decline to answer questions based on a speech and debate clause from state law that protects legislators from consequences on actions they make as legislators. He added that he doesn’t foresee many problems with lawmakers answering questions in court. “All legislators want to be as open as possible,” Hnasko said.