The 60-day legislative session ended Saturday with a down-to-the-wire agreement on a sweeping tax bill that will raise rates on e-cigarettes and new vehicles while nearly doubling an income tax credit for some families. The scaled-back version of House Bill 6 approved by the Senate in the last 20 minutes before the final bang of the gavel was a fitting end to a session dominated for better or worse by the state’s financial outlook. Driving the session was a whopping budget surplus and the substantial increases in funding for education that it has financed. An oil boom generated the windfall, but there was fear among several lawmakers about what might befall New Mexico if fickle energy markets take a turn. For Republicans and even some skeptical lawmakers on the other side of the aisle, the tax bill represented a sort of “only in Santa Fe” paradox, with newly elected Gov. Michelle Lujan Grisham looking to raise revenues at the same time that the state had a surplus of $1 billion this year.
The New Mexico House of Representatives approved a sweeping tax-reform bill late Friday night that would generate at least $320 million more each year for the state’s general fund. Republican lawmakers critical of the move called it one of the biggest tax increases in New Mexico history. The bill, approved on a vote of 40-25 after nearly three hours of debate, also would bring in $37 million per year in additional funding for state and local roadways. Not surprisingly, the vote fell mostly along party lines, with two conservative Democrats joining Republicans to oppose the bill — which, some lawmakers said, will financially hurt the average New Mexican. Among other measures, House Bill 6 would implement a tax on all online sales, increase the tax on cigarette sales by 10 cents per cigarette, repeal a state law that allows New Mexicans to deduct half of their capital gains income on their personal income tax forms and increase the motor vehicle excise tax to 4.2 percent from 3 percent.
After a midterm election in which Democrats wrested back control of the Governor’s Office and expanded their majority in the state House of Representatives, Kelly Fajardo feels almost invisible at the Roundhouse this year. Fajardo, you see, is a Republican representative in a Democrat-dominated House, where members of the GOP are now outnumbered by the largest margin in two decades. “It just feels like we don’t matter,” said Fajardo, R-Los Lunas. “Our job is to create good policy, and when you’re going, ‘I don’t need you. I don’t need to listen to you,’ that creates a problem,” she said.
Top lawmakers on Monday rolled out a proposed $7 billion state budget that would include a whopping $600 million for public works projects around New Mexico as the government’s coffers swell with a windfall of revenue from an oil and gas boom. The Legislative Finance Committee’s proposed budget would mark almost an 11 percent increase in spending by the state. That is less than what Gov. Michelle Lujan Grisham has proposed in her own version of the state budget, which would raise spending by about 13 percent. But as lawmakers prepared to convene Tuesday for a 60-day legislative session, leaders indicated they are not far off from an agreement with the new governor when it comes to some spending on the issue that is sure to dominate the agenda: education. Faced not only with a judge’s order to come up with ways of improving education for many of the state’s most vulnerable students but also with a bright financial outlook in the short-term, legislators echoed Lujan Grisham’s own call to greatly increase funding for New Mexico schools.
Gov. Susana Martinez will have to decide whether to sign a bill designed to prevent the state government, as well as local governments in Northern New Mexico, from losing tax revenue if a nonprofit university takes over management of Los Alamos National Laboratory later this year. That possibility is real, as two Texas universities have submitted bids for the contract. “We stand to lose about $30 million in gross receipts revenue to the state should a nonprofit contractor receive the [operations contract] at the national laboratory in Los Alamos,” Rep. Stephanie Garcia Richard, D-Los Alamos, told the House of Representatives late Tuesday night before it voted 48-19 in favor of the measure, Senate Bill 17. Garcia Richard’s number is consistent with a fiscal impact report by the Legislative Finance Committee, which estimates the state’s gross receipts tax losses at $25 million to $30 million if a nonprofit is chosen to run the lab. Both the University of Texas System Board of Regents and Texas A&M submitted formal bids on the lab management contract in December.
The state House of Representatives on Saturday approved a bill seeking to create bigger prizes in the state lottery, but not before heavily amending the measure to protect the lottery scholarship fund for college students. House Bill 147, sponsored by Rep. Jim Smith, R-Sandia Park, cleared the House on a vote of 37-30. It eliminates a requirement that the lottery turn over 30 percent of its gross revenue for scholarships. The lottery staff and lobbyists for lottery vendors said scrapping the funding requirement actually would one day lead to significantly more money for scholarships. Democrats and Republicans alike were skeptical of that claim.
New Mexico legislators are seeking to overhaul a key part of the state’s tax code in next year’s legislative session, but doing so will be difficult.
That’s according to members of the New Mexico Legislature’s interim Revenue Stabilization and Tax Policy Committee after they heard a presentation from state experts on tax reform efforts and an update on an independent study on tax reform in the state. Legislators have been looking at reforming the state’s Gross Receipts Tax, a key source of revenue. Earlier this year, the state hired Ernst & Young, in partnership with Georgia State University, to take a look at how changing the state’s GRT might affect revenue. Legislative Finance Committee analyst Jon Clark said analysts will examine a tax reform effort sponsored during this year’s special legislative session by Rep. Jason Harper, R-Rio Rancho. Harper took a crack at tax reform when he introduced House Bill 8, a massive 400-page bill which would have lowered the gross receipts tax while eliminating most deductions.
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.
The House of Representatives passed three pieces of budget legislation Wednesday afternoon and evening with little debate. The first restored funding to higher education and the state Legislature. Earlier this year, Gov. Susana Martinez vetoed the entire budgets for both during the regular session, citing her opposition to tax increases. Two Republicans—state Reps. Jason Harper of Rio Rancho and Rod Montoya of Farmington—voiced concerns for the spending bill.