Legislature sends new budget package to governor
Plan restores vetoed funding; showdown over tax proposals likely
SANTA FE — State lawmakers moved briskly — and with bipartisan support — late Wednesday to restore $766 million in funding vetoed by Gov. Susana Martinez and to raise revenue to bolster the state’s cash-strapped coffers.
It was a fast start to what’s shaping up to be a short special session aimed at addressing New Mexico’s budget crisis.
But a confrontation over tax legislation is still on tap.
The House and Senate, in any case, each passed legislation Wednesday — the first day of the special session — that would restore funding for New Mexico colleges and universities and for the Legislature itself.
Also heading to the governor’s desk is a proposal that involves borrowing money to help shore up the state’s basic operating fund.
Supporters say the two pieces of legislation should be enough to balance the budget but could leave the state with perilously low cash reserves. Other revenue-raising measures are needed to further bolster reserves, they said.
But “we believe we’re in the black,” said Sen. John Arthur Smith, a Deming Democrat and chairman of the Senate Finance Committee.
Proposals to raise gasoline taxes, impose a gross receipts tax on internet sales and enact other revenue-raising measures were also moving through the Legislature on Wednesday, but without much Republican support. Democrats said they would further shore up state finances and build reserves to protect New Mexico’s credit rating.
But Martinez, a Republican in her second term, has vowed repeatedly to veto stand-alone tax increases. She says the state shouldn’t balance the budget by raising the cost of living for New Mexico families.
It made for a familiar atmosphere at the Roundhouse.
Just as during the 60-day session that ended in March, top-ranking lawmakers and the Governor’s Office have been unable to strike a deal on how to pay for state government operations for the budget year starting July 1 and build adequate reserves.
“I think this budget is a great thing if we have the money to pay for it, and I don’t see that happening in this special session,” said Rep. Jason Harper, R-Rio Rancho, during debate Wednesday on the House f loor.
After both chambers tried to override Martinez’s sweeping budget vetoes on higher education and the legislative branch, the House ultimately voted 46-20 to approve a bill restoring the vetoed funding — with nine Republicans voting with majority Democrats. The proposal later won support 37-4 in the Senate, picking up support from 11 of 15 Republicans and all 26 Democrats.
House members also voted 37-29 to pass a separate bill that would generate an estimated $100 million a year by imposing a tax on both online sales and nonprofit hospital services.
“We hope that (the governor) will sign some of our revenue suggestions, because it’s incredibly important we get our higher education funding back in place,” said Rep. Patricia Lundstrom, D-Gallup, chairwoman of the House Appropriations and Finance Committee.
Borrowing
Meanwhile, the Senate voted 38-3 to endorse a proposal that could raise an additional $100 million in one-time money for the general fund — partly by borrowing the money. It later won approval 64-0 in the House.
The complex bond transaction would essentially take the state’s capacity to borrow money to build big capital projects and convert it into cash to help boost reserves or pay operating expenses.
No one seemed to like the idea. But Republicans and Democrats alike said that the state’s financial crisis demanded action and that the Martinez administration had pushed for the move.
Paying back the money could take 10 to 20 years, senators said.
“It’s bad fiscal policy,” said Sen. John Sapien, D-Corrales. “It’ll end up being a parasite.”
Tax proposals
The Senate also endorsed a package of tax increases on gasoline and vehicle purchases — but it faces almost certain opposition from the governor. Both proposals were part of a $350 million tax package the governor vetoed in April.
Martinez called lawmakers back to Santa Fe for the special session after vetoing all funding for legislative branch agencies and colleges and universities from a $6.1 billion budget bill passed in March.
She has touted an overhaul of the state’s gross receipts tax code — by eliminating exemptions and lowering the base rate — as a way to balance next year’s budget and eliminate “loopholes” in the tax system.
House Speaker Brian Egolf, D-Santa Fe, said earlier this week that the tax overhaul bill will not be voted on during the special session, due to concern over its potential impact and the fact it was still in the works until early this week and has not yet been publicly reviewed in its revised form.
However, the 430-page bill was introduced in the House late Wednesday and was scheduled for debate in a House panel today.
Egolf and other Democrats say they have already shown a willingness to compromise, by including several other provisions backed by Republicans in both their revenue and budget bills.
“We are moving quickly today, but all the things analyzed and considered were vetted in the 60-day session,” Egolf told reporters Wednesday.
Those items included more money for financial aid programs, $400,000 for a tax study and the creation of a “rainy-day” fund that would set aside money for budgetlean years when oil and natural gas prices are low.
If the fund had been in place since the 2006 budget year, it would have meant $627 million set aside in a separate fund over that period, according to a Department of Finance and Administration analysis.
And the tax study could pave the way for lawmakers to come back in September or October for another special session to take action.
‘Budgetary chicken’
The special session’s first day brought scores of protesters, lobbyists and Roundhouse insiders to the Capitol.
At one point Wednesday, university presidents and student leaders testified before a House budget committee about the impact of Martinez’s decision to line-item veto all proposed funding — roughly $744 million — for higher education institutions.
New Mexico State University President Garrey Carruthers, a Republican former governor, said that if the $190 million in vetoed funding for NMSU isn’t restored by July it would “essentially bankrupt” the university.
“We would not be able to operate programs,” Carruthers told members of the House Appropriations and Finance Committee.
Just five weeks remain until the start of the new budget year. Some lawmakers were quite blunt.
“We seem to be caught in this game of budgetary chicken, and you happen to be the pawns in the game,” Rep. Christine Trujillo, D-Albuquerque, told the university presidents.