Budget cuts, tax hikes on horizon

By Steve Terrell and Kate Nash: The Santa Fe New Mexican

There’s a mountain of need in New Mexico. The problem is, there’s only a molehill of money to meet those needs.

The state faces a projected budget deficit of $600 million or more next year. This is what the Legislature is up against when New Mexico’s citizen lawmakers convene Tuesday in Santa Fe for a 30-day session.

For the second year in a row, the Legislature must grapple with a widening budget crisis caused by decreasing tax revenues. It seems like a different epoch when, back in 2008, the state was dealing with a budget surplus by sending $25 or $50 tax rebate checks to New Mexicans.

Now there are more budget cuts in store and tax hikes for New Mexicans — if only temporarily — on the horizon. Some senators are calling for repeal of Gov. Bill Richardson’s 2003 income-tax cuts — tax cuts that became major campaign bragging points when Richardson ran for re-election and for president. Among other proposals on the table, House Speaker Ben Lujan, D-Nambe, is talking about boosting the gross-receipts tax rate.

Thousands of state employees, already taking a series of furloughs to save payroll expenses, could see further pay cuts.

For Richardson, this will be his last regular session. He’s legally prohibited from seeking a third consecutive term. Richardson’s “legacy” is very much on his mind and he’s vowed to load the Legislature with proposals such as legalizing domestic partnerships, helping the renewable energy industry, ethics reform and further toughening the laws against drunken driving and domestic violence.

Budget blues

It’s clear that dealing with the budget won’t be easy. Spending must be slashed by millions of dollars, on top of spending cuts made last year.

A governor’s task force has pitched concrete ideas aimed at slimming down and reorganizing state government, such as combining the Higher Education and Public Education departments and blending the Homeland Security Department with the Department of Public Safety.

The group also called for creating a large Department of Commerce, which would merge the Economic Development, Workforce Solutions, Tourism and Regulation and Licensing departments, Workers’ Compensation Administration and the border and Spaceport authorities.

It also recommends eliminating 19 boards and commissions, including the Fair and Equal Pay for All New Mexicans Initiative, the Intertribal Ceremonial Board, the Nutrition and Dietetic Board, the Water Cabinet, the Green Jobs Council and the Interior Design Board.

State agencies have already been forced to take steps to cut costs.

The Department of Health, for example, has cut budgets for providers who perform services including therapy. It also decided that family members who care for others at home will receive less help. The department also has set more strict criteria under which extra services for people with high risk medical or behavioral problems can be approved.

At the Human Services Department, a toll free number for Electronic Benefit Transfer customers was eliminated, saving the department between $25,000 and $28,000 a year.

The moves come as the state deals with budget numbers that have fluctuated wildly in past years.

One key part of the budget — oil and gas revenues — has been a particularly fickle friend.

In late 2007, consensus estimates pegged the cost of natural gas at $6.57 per thousand cubic feet for the 2010 fiscal year. By December of 2008, the estimate was at $6.35, declining to $4.30 in December of 2009.

Those same fiscal year 2010 estimates for oil went from $75 a barrel in 2007 to $59 in 2008 and then in December of 2009 rebounded to $70.

Those changes in price meant a big difference suddenly in what the state thought it could afford and what it really had the cash for.

At almost the same time, New Mexico’s state and local tax revenue declined by 40 percent between the third quarters of 2008 and 2009 — or from $1.18 billion in 2008 to $710 million in 2009, according to an analysis by the Wall Street Journal.

Taxes

The unsteady nature of the budget has meant calls for the state to diversify its revenue, but one key idea — raising taxes — will see mixed opinions this session.

Richardson said in an interview last week that he could get behind imposing gross receipts taxes on junk food, candy and soda pop. He said he might support an increase on the tax on tobacco. Rep. Brian Egolf, D-Santa Fe, has pre-filed a bill to raise cigarette taxes by about $1 dollar a pack. Egolf also has a bill that would increase the cost of alcohol by an estimated dime-a-drink.

But the governor says he thinks any other tax hike should be temporary — three years maximum.

There have been several proposals to raise taxes.

Speaker Lujan’s suggestion would raise the state’s base gross-receipts tax rate by one-half percentage point — adding another half-cent tax on every dollar spent on most business transactions. He also would enact a 1 percent surtax on joint personal income tax filers who earn more than $150,000 per year. The sales tax hike would bring in a projected $240 million next year, while the surcharge would raise about $56.3 million.

But Republicans and conservative Democrats in the Legislature, including Senate Finance Committee Chairman John Arthur Smith, D-Deming, are opposed to raising taxes.

A proposal by the Albuquerque Chamber of Commerce to bring back the gross-receipts tax on groceries — which was removed in 2004 — seems to have gained no traction among lawmakers.

Other issues

In a 30-day session only financial bills — budget, taxes, etc. — can be considered unless the governor puts other specific issues on the agenda.

Richardson has indicated he will have several such items on his call. The most controversial is bound to be domestic partnerships.

Asked last week what he’d like to see passed that he hasn’t been able to in previous years, the first thing Richardson said was “domestic partnerships.” This would allow unmarried couples — including same sex couples — the right to enter into a contract that would give them many of the same rights as marriage.

Last year the vote failed in the Senate when 10 Democrats joined all Republicans in voting against it. Some of the Democrats admitted it was the fact the bill was actively opposed by New Mexico’s Catholic bishops as the reason they voted no.

Late last year the bishops asked Richardson to not put domestic partnerships on his call. Richardson said he indeed intends to push for the bill anyway, though he concedes it will be difficult to pass.