House panels OK tax hikes; Gov. calls bill ‘political play’
SANTA FE — A high-stakes game of poker over the state budget is unfolding at the Roundhouse.
On party-line votes, Democrats on two different House committees Monday pushed through a $6.1 billion spending plan for the coming budget year, and a $265 million tax package to help fund it.
In response, a spokesman for Gov. Susana Martinez blasted the budget bill as a “political play” and suggested she would veto it if it reached her desk.
“The governor is not going to accept a budget so disconnected from New Mexico values,” Martinez spokesman Michael Lonergan said. “Until then, she’s going to continue meeting with lawmakers on a regular basis to find a solution. We can do better.”
Martinez, a two-term Republican, can veto any bill passed by the Legislature, but lawmakers write the budget. There are less than four weeks remaining in the 60-day session to resolve the budget impasse.
After several rounds of spending cuts, majority House Democrats
say the state needs more revenue — in the form of tax and fee increases — to replenish depleted cash reserves and keep public schools and state programs afloat.
“We’ve been for the last six years heading in the direction of cuts, cuts, cuts, and the people bearing the brunt of that are low-income,” House Speaker Brian Egolf, D-Santa Fe, said at one point during Monday’s meeting of the House Taxation and Revenue Committee. Other Democrats were more blunt. “I hate that we cut the schools, and I won’t do it anymore,” Sen. Mimi Stewart, D-Albuquerque, told a news conference at the Capitol in support of education funding. “It’s no longer fun up here — it’s just a downright fight.”
The budget bill approved 10-6 Monday in the House Appropriations and Finance Committee would keep overall state spending largely flat but would increased spending that flows to school districts statewide by roughly $32 million and provide a 2.5 percent funding increase for the state’s cash-strapped judicial system.
It also would appropriate an additional $17 million for two economic development initiatives — a jobtraining program and a “closing fund” to offset the cost of business expansion and relocation. Last year, funding for the job training program was cut, and earlier this session, the governor used her line-item veto to taking money from the closing fund.
Rep. Patricia Lundstrom, D-Gallup, the committee’s chairwoman, said the infusion would send a signal to business owners concerned about budget cuts.
“We want to continue giving the signal we’re open for business in the state,” Lundstrom told reporters after Monday’s hearing.
However, minority Republicans criticized the Democratic-backed budget plan for cutting roughly $27 million from Public Education Department initiatives, including a teacher stipend program.
“To pull the rug out from under them is inappropriate,” said Rep. Sarah Maestas Barnes, R-Albuquerque.
The spending plan approved Monday hinges on the tax package being enacted.
The tax package, House Bill 202, includes four different provisions: Increasing the tax on vehicle sales, levying a higher fee on commercial trucks, requiring online retailers to collect gross receipts tax and removing some tax breaks for both hospitals and practitioners.
If the package doesn’t pass, spending levels prescribed in the budget bill would end up being about $218 million more than expected in state revenue.
That means that if the governor were to veto the tax package, she’d also likely have to veto the budget bill, because the state Constitution requires a balanced budget.
Although some GOP lawmakers have proposed overhauling the state’s tax code to make it fairer and easier to understand, they balked Monday at the Democratic-backed plan to raise tax rates.
Rep. Jason Harper, R-Rio Rancho, cited statistics during Monday’s meeting of the House Taxation and Revenue Committee that he said showed state government spending outpacing inflation in recent years.
“It could be perceived that we’re using this (budget) crisis to raise taxes,” Harper said.
Health care lobbyists spoke against the plan, claiming it would hurt regional medical centers and independent physicians.
But backers of the proposal said the health care industry has largely been exempt from paying taxes and would still be able to deduct 60 percent of patient care revenues from taxation.
“You cannot have such a large segment of the economy outside the tax base,” Egolf said.
New Mexico lawmakers have been grappling with budget woes for two consecutive years, as state revenue levels have fallen due largely to low oil and natural gas prices.
The state has already had its top bond rating downgraded once, and some legislators have expressed concern about a second downgrade.
If both the budget bill and tax package legislation were approved, the state’s cash reserves would go up to an estimated $149 million — or 2.5percent of state spending.
Both the tax and budget bills could still be changed before being voted on by the full House. A floor vote could take place as soon as Wednesday, with the bills advancing to the Senate if they’re approved.