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Governor Martinez Draws Line Against Tax-And-Spend Bills

Heath Haussamen
New Mexico In Depth

New Mexico Gov. Susana Martinez stripped all funding for the state Legislature along with state universities and colleges from a proposed budget for the coming fiscal year, using her veto pen Friday to escalate a confrontation with lawmakers over how to shore up shaky state finances.

Martinez also vetoed a $350 million package of tax and fee increases designed by the Democratic-led legislature to stabilize funding for public schools, state courts and many state agencies recently hit with spending cuts to plug a lingering state deficit.
In veto messages, the governor accused the state's unsalaried Legislature of refusing to adequately trim its own staff expenses. She upbraided lawmakers for ignoring her pledge not to raise taxes.
"From the beginning I have said that I will not raise taxes," Martinez wrote. "Yet the Legislature continues to try to force tax increases on New Mexico families."
Line-item vetoes eliminated $745 million for higher education institutions across New Mexico, setting up a budget cliff on June 30 at universities, colleges and specialty schools for the blind and deaf.
In vetoing those funds, Martinez chastised the state Senate for refusing to hold hearings on her nominations for university regents. She said funding and confirmation issues can be addressed when she calls back lawmakers for a special session. A date for the session has not been set.
Democratic leaders of the Legislature accused Martinez of playing extreme political games while putting the state's credit rating at further risk after a downgrade by Moody's Investors Service last year. Many fiscally conservative lawmakers from both parties voted this year for tax increases to avoid further cuts to public schools and critical state services.
Rep. Patricia Lundstrom, D-Gallup, said lawmakers are looking into judicial remedies to restore funding to the Legislature and universities. She said that defunding higher education in particular sends a message of financial uncertainty as the state struggles to improve its economy.
"How does this look to the outside world, where we don't have a higher education system," said Lundstrom, chairwoman of the House Finance and Appropriations Committee. "Give me a break."
House Speaker Brian Egolf of Santa Fe said the governor was seeking to provoke a constitutional crisis. Democratic Senate Majority leader Peter Wirth called the line-item spending vetoes outrageous.
Republican lawmakers, including Republican Senate minority leader Stuart Ingle of Portales, were more muted in their responses.
"I suspect we'll get the problem solved before we get" to the new fiscal year, Ingle said. "We'll have to make some tough decisions."
The chancellor of New Mexico State University in Las Cruces, former New Mexico Gov. Garrey Carruthers, told employees Friday that high education institutions "now appear to be caught up a political strategy."
"Clearly, higher education in the state must be funded," said Carruthers, a Republican, in a memo to staff. "We hope both sides will work expeditiously to resolve their differences."
The vetoed revenue bill from the Legislature would have raised $350 million by increasing taxes on gasoline and diesel, vehicle sales and internet purchases from major online retailers, along with increased permit fees for trucks and reduced tax exemptions on nonprofit hospitals.
Martinez has sought out revenue sources that don't raise taxes, such as redirecting construction dollars toward the state general fund and reducing state contributions to employee pensions. She vetoed a capital spending bill Friday that would have used construction funds to restore more than $40 million taken from school district reserves this year to plug a state deficit.
New Mexico's traditional streams of tax revenue have been eroded by relatively weak energy prices and a stagnant local economy. The state has burned through reserves that stood at $750 million in mid-2015, leaving about $100 million currently.
The governor also vetoed a tax reform bill that would have created a new rainy-day fund to better insulate the state from downturns in tax revenue and economy recession, while phasing out a variety of tax incentives.
Martinez has urging lawmakers to support a more ambitious tax-code overhaul designed to improve the state's business climate by eliminating hundreds of tax breaks, including long-standing exemptions for nonprofit organizations. The reforms, which stalled in the Legislature this year, would lower standard tax rates on sales and services.
Sen. John Arthur Smith, D-Deming, the longstanding chairman of the Senate Finance Committee, said those reforms include contentious measures such as taxing public school supplies that have eroded political support. "I'm not sure it's going to be an easy lift anymore," he said.