Lawmakers restore vetoed funds
Improved revenue picture, unspent cash from projects help balance budget, but governor may not agree
The New Mexico Legislature on Wednesday used the upturn in the state economy and unspent cash from construction projects to restore budgets for higher education and other programs that were vetoed by Gov. Susana Martinez.
The appropriations bill that passed both the Democrat-controlled House of Representatives and the Senate during the first day of a special session restores all $745 million vetoed by the governor for higher education and another $19 million for legislative operations, including the special session.
But whether Martinez, a Republican, will agree to the plan remains a question. Sen. John Arthur Smith, D-Deming, said Martinez called the special session without negotiating an agreement with legislators on how the state’s financial problems would be resolved.
The House voted 46-20 vote to approve the supplemental appropriations bill. All 38 Democrats were joined by eight Republicans, including Minority Leader Nate Gentry of Albuquerque, in approving the measure. In the Senate, the budget bill passed with a strong bipartisan vote, 37-4.
If Martinez chooses to sign the bill, the state will move forward with a balanced budget for the fiscal year that begins July 1 and not raise taxes or fees. The governor said the $6.1 billion budget presented to her during the regular legislative session was not balanced, and she vetoed tax and fee increases that would have put it in the black.
Legislators of both parties say Martinez’s camp endorsed some of the revenue measures, but she vetoed all of them. Martinez then took the opportu-
nity to criticize lawmakers for sending her an unbalanced budget that relied on new taxes.
What’s different today is that the state has had three strong months of improved growth in tax collections and revenues. An economist who works for the Legislature estimated gains of $100 million to $120 million in ongoing revenue. That bounce has given lawmakers new hope for their old budget.
“There’s some strength in recurring revenue,” David Abbey, director of the Legislative Finance Committee, told House members.
Martinez has been under pressure from people outside the Legislature for her vetoes, especially campus leaders. She eliminated state money for universities, community colleges and related research and economic development programs.
Among those who walked the hallways of the Capitol on Wednesday were college and university presidents from all corners of the state. They told a House panel the vetoes have damaged enrollment, faculty recruiting and accreditation reviews.
Former New Mexico Gov. Garrey Carruthers, now chancellor of New Mexico State University, told lawmakers that students are apprehensive about their academic programs and that bond rating companies have halted review of his school’s credit offerings because there is no budget in place for next year. Prized faculty members also are being poached by other states, said Carruthers, a Republican, who was governor from 1987-91.
“The veto has created issues,” Carruthers told House members. “My view is that the circumstances [in which] we find ourselves in the state of New Mexico are not good for the image of New Mexico.”
Rep. Rod Montoya, the Republican whip from Farmington, confirmed there was no agreement with the governor on what spending levels she would accept. “I was hoping at this point we’d have some agreement in place with the fourth floor,” he said of the Capitol location where her office is located. “I’m concerned about signing on to a budget that would be out of balance.” He voted against the budget bill.
But Democrats who chair both budget committees are confident there is enough money to support the spending plan, especially with a bill sponsored by Sen. Carlos Cisneros, D-Questa, that transfers $100 million from public works projects to the general fund.
Though the Senate voted 38-3 to take money from bonds sold to finance brick-andmortar projects and use the cash to shore up the state’s general fund, members from both parties lambasted the idea of using borrowed money to pay for the government’s day-today expenses.
“We’re not solving a recurring revenue problem,” said Sen. Jacob Candelaria, D-Albuquerque.
But Smith countered that the move would balance the budget.
“This bill, all it does, is put it into the black,” Smith said. Martinez’s staff was still skeptical. “It depends how you define balanced,” said Keith Gardner, the governor’s chief of staff, when asked if he thought the Legislature had passed a balanced budget. “Are we talking about zero reserves?”
Even if the governor vetoes all the new revenue measures, the budget would have a reserve cushion of $27 million, or half of 1 percent, according to Rep. Patricia Lundstrom, D-Gallup, who chairs the House Appropriations Committee.
“While we won’t be flush, we won’t be spending in deficit,” Lundstrom said.
Like all budget documents, the general fund in New Mexico is a moving target. The budget pays for everything from public education to courts and prisons. But exactly how much money is available is volatile, especially with the state being so dependent on gross receipts taxes, derived from consumer spending, and revenue from the oil and gas industry.
Many Republicans were hesitant to commit to a spending plan that might still be out of balance without new revenue.
“It’s really thin without the tax increases on internet sales and hospital taxes,” said Rep. Paul Bandy, R-Aztec. “I don’t have a problem with that, but I’m not sure where the governor is at.”
The appropriations measure also includes the following items that were not part of the regular session:
$400,000 to study the state gross receipts tax law and recommend improvements;
$1 million for oncology research at The University of New Mexico;
$1 million to boost student financial aid at universities;
$5 million for UNM Carrie Tingley Hospital;
$1.2 million for magistrate courts;
$208,000 to pay for the special session, though that much might not be necessary, depending on how long it lasts; and
authority for the Public Education Department to increase the per-pupil unit value for 2018.
Lawmakers also were considering other revenue measures that, if approved, would boost cash reserves and help New Mexico’s bond rating, which Moody’s Investors Services lowered last year after the state burned through $700 million in cash to pay for operations.
“We’re trying to build reserves. If you want to talk about something that’s really going to be costly, it’s if our bond rating drops even more,” Smith said.
The bill would raise the gas tax by 5 cents per gallon, to 22 cents from 17 cents. Half of that extra nickel would go to pay for road maintenance. The other half would go to a reserve fund until that fund reaches 5 percent of the state’s general fund spending. Martinez vetoed a 10-cents-a-gallon gas tax approved in the regular session, and she has criticized legislators for proposing such an increase.
The bill also would raise the tax on vehicle sales to 4 percent from 3 percent, another measure Martinez has vetoed previously.
Other measures were moving that would extend the gross receipts tax to all internet sales and nonprofit hospitals, also measures she vetoed.
Jeff Dye, executive director of the New Mexico Hospital Association, has worked with lawmakers and his members on the bill that would tax hospitals. “I think it’s a winwin for the hospitals and the state,” he said. “We’ll promote it.”
The measure would raise $115 million annually with $26 million of that going to support the Medicaid insurance program.
Staff reporter Steve Terrell contributed to this report.