Advance work necessary to balance state’s budget

When you’re $700 million in the red, something’s got to give. Will it be pay cuts or fewer jobs for public employees? Less money for education, possibly meaning fewer teachers and larger class sizes? What about sidelining road improvements and senior centers? Or slashing social programs? How about cuts to economic development and business recruitment? Or will it be the dreaded T word? Higher taxes? The state is facing projected budget shortfalls for the current and just-completed budget years that together could exceed $700 million. A special session may be needed to sort it out, but it would help if lawmakers and the governor could agree on a plan first.

New Mexico’s economy is heavily dependent on revenues from extractive industries like oil and gas, and from federal government installations like national labs and military bases. The budget scenario has worsened over the past two years as gas and oil revenues have sunk and federal spending has shrunk.

Senate Majority Leader Michael Sanchez, D-Belen, last week hinted at invoking the T word. “We can’t just cut ourselves out of the problem,” he said.

He didn‘t offer specifics at how to balance the budget, but some Democrats have already vowed not to cut public employees’ pay, or take from public schools or higher education. Public and higher education alone take up to about 57 percent of the budget, so that doesn’t leave many other places to go for savings.

So far, Gov. Susana Martinez — now in her second term and who has vowed “no new taxes” since she first campaigned for the office — has told her agencies to come up with at least 5 percent cuts to their budgets. She wants the legislative and judicial branches to do the same.

Expect pushback across the board, including from a court system that has been begging for increased funding and says it’s barely keeping up with burgeoning caseloads. New Mexico is ranked second in the nation for violent crime, so there is no shortage of offenders to clog the system. But what about tax increases? In 2013, a last-minute compromise between lawmakers and the governor allowed a much-needed lowering of the corporate tax rate — gradually reducing the topend rate from 7.6 percent to 5.9 percent over five years — with the goal of making the state more competitive with its neighbors in attracting business and industry.

According to the Tax Foundation, New Mexico’s corporate income tax rate is 6.6 percent. That is lower than it had been, but it’s still higher than neighboring states: 4.63 percent in Colorado, 5 percent in Utah, 5.5 percent in Arizona and 6 percent in Oklahoma. Texas has no state or corporate income tax and business is booming there, as it is in our other neighbors.

When it comes to the best states for business, Forbes ranked New Mexico 47th worst in 2015. Our neighbors fared much, much better: Utah No. 1, Colorado No. 5, Texas No. 6, Oklahoma No. 16 and Arizona No. 23.

So increasing the cost of doing business in New Mexico is unlikely to help conditions here.

And attempting to raise taxes only on the fictional New Mexico rich masses seems like a nonstarter — there are only 2 million people in the state, and many are on Medicaid and/or food stamps.

There has been talk in some corners about reinstituting the food tax and raising the gasoline tax. Repealing the food tax was one of the state’s worst policy decisions and the tax’s impact on lower-income people can be ameliorated through income-tax credits. Any gasoline tax increase should include designating the revenue specifically to road projects.

While a special session is likely necessary to deal with the shortage, Martinez is correct in calling for advance negotiations that would lead to a very short session, essentially to pass a budget bill she knows she will sign. Attempting to hatch a plan on the fly seems pointless because $700 million is a really big hole to plug.