State finds a temporary budget deal, but uncertainty and division remain

A statue outside the Roundhouse in Santa Fe.

Heath Haussamen /

A statue outside the Roundhouse in Santa Fe.

Policymakers avoided resolving a standoff over budget cuts and tax hikes this week by covering New Mexico’s fiscal woes with a Band-Aid. But there’s no certainty that they’ve fixed the budget for the fiscal year that begins July 1, and they’ve done little to address the state’s deeper economic woes.

That’s because lawmakers and the governor balanced the budget for the fiscal year that begins July 1 with the help of a complex bill that would use the state’s bonding ability to borrow as much as $100 million. That money would have to be paid back over the next decade or two, so it’s essentially borrowing from the future.

Gov. Susana Martinez signed legislation on Friday to restore the higher education and legislative funding she vetoed in March. The state’s public colleges and universities, which had faced immediate consequences from the uncertainty created by Martinez’s vetoes, will get their funding.

But Martinez once again vetoed legislation to raise taxes to help fund the budget. So the plan that’s in place leaves the state with no money in reserves — at best. Oil and gas prices fluctuate. That and other factors mean the money that comes into state government is uncertain and projections could change.


If they change for the worse, lawmakers may have to meet again to find new ways to balance the budget. The state’s policymakers have made significant cuts to government in recent years, swept money out of many funds, and now are borrowing from the future. Whether they can continue avoiding the tax hike/budget cut stalemate isn’t clear.

Democrats were unhappy with Martinez’s tax-hike vetoes and warned Friday that there may be more work to do later this year.

“The governor’s decision to fund government with one-time borrowed money is fiscally irresponsible,” said Senate Majority Leader Peter Wirth, D-Santa Fe. “By vetoing all the recurring revenue, the governor has created a structural deficit, further threatened our bond rating, and put school classrooms and critical state services at risk in future fiscal years.”

“This is not the way to run government,” Wirth said, even as many Democrats went along with the plan to borrow money.

Democrats may be trying to wait out Martinez’s time in office. She will be replaced by a new governor in January 2019. After Martinez vetoed the tax hikes on Friday, House Speaker Brian Egolf, D-Santa Fe, said he was “dismayed” that “commonsense legislation to create sustained revenue and provide over $100 million in new money for Medicaid, as well as efforts to level the playing field for small businesses and hospitals, will have to wait another year to become law.”

One policy change most agree needs to happen is reform of the state’s swiss cheese gross receipts tax, which has hundreds of exemptions that shift greater burden onto those who aren’t exempt. Martinez said she was disappointed lawmakers didn’t approve a reform bill during the special session.

“I’m disappointed lawmakers once again tried to take the easy way out with hundreds of millions in tax increases that would’ve made it more expensive for New Mexicans to live, work and raise a family – while increasing their own budget,” Martinez said. “… The right thing to have done is pass true comprehensive tax reform that allows families to keep more of what they earn.”

While such reform might boost the state’s long-term economic outlook by helping business and people, how it would help address the short-term budget woes isn’t clear. It’s a complex bill Martinez wanted passed quickly, with little time for fiscal analysis and public scrutiny. In addition to having ideological disagreements with parts of the legislation, some Democrats expressed concern about transparency and time for deliberation. Ultimately, Democrats on the House committee that heard the bill voted to table it.

Martinez said Friday she spoke with Egolf about GRT reform. Hinting at the possibility of another special session in the coming months, she said Egolf “was open to acting on comprehensive tax reform this year.”

“Moving forward, I’ll keep fighting to fix our broken tax code to help New Mexicans keep more of what they earn, allow more businesses to grow and create jobs, and make New Mexico even more competitive,” Martinez said.

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