Gov. Susana Martinez is sticking with her plan to veto a bill raising employer taxes and isn't reconsidering, despite business groups urging her to sign the legislation to shore up the unemployment compensation program, a spokesman for the governor said Thursday.

However, the question of how to fix the ailing unemployment program could be back before the Legislature later this year in a special session if the state's economy doesn't improve, according to Martinez spokesman Scott Darnell.

The Legislature passed a bill that will raise taxes on businesses by $128 million next year — a 56 percent increase — and reduce benefits to prevent the unemployment trust fund from running out of money. If nothing is done, the fund is projected to become insolvent in March 2012, and the state might need to borrow from the federal government to pay jobless benefits.

"This bill just isn't the prudent response right now," said Darnell.

Before making a decision on what should be done to the unemployment program, the administration wants to see if the economy rebounds and unemployment falls in the next several months.

A special session of the Legislature is planned this fall to deal with redistricting, and the unemployment issue could be added to the agenda if necessary, Darnell said.

"The contribution increase portion of the proposed legislation would not take effect until next January, so addressing this issue during the redistricting special session in the fall has no impact on revenue to the fund and allows policymakers to have a much clearer picture of the solvency of the fund to ensure the situation is responsibly solved," he said in a statement.

High unemployment is depleting the fund that pays weekly benefits to workers who have lost their jobs.

New Mexico had a balance of $137 million in its unemployment fund earlier this month and paid an average of $870,000 a day in benefits in February, according to the Department of Workforce Solutions.

When the Legislature adjourned last weekend, Martinez announced she would veto the unemployment legislation because of the proposed tax increase. She had pledged during her campaign last year to oppose tax increases.

However, the Greater Albuquerque Chamber of Commerce and the Association of Commerce and Industry are urging the governor to reverse course and sign the legislation. They say businesses likely will be hit with an even larger tax increase if the fund becomes insolvent.

"We think it's a risky gamble in this fragile economy to veto a bill like this," said Terri Cole, president and CEO of the Greater Albuquerque Chamber of Commerce. "We urge her to sign it and not to take a gamble on this one."

Average tax payments by a business for each of its employees will increase to about $370 a year starting in January under the legislation. That's a jump of $155, or about 72 percent. Rates vary for businesses depending on their history of unemployment claims.

"It will take courage on all our parts to protect the solvency of our fund. It took courage for the Legislature to pass this legislation and courage for the business community to lobby for the removal of benefits and the temporary increase. We now hope that Gov. Martinez show the same courage and sign this important piece of legislation," Beverlee McClure, the association's president and CEO, and Jeff Parker, regional director of Manpower Professional, an employment services company, said in a statement.

State law automatically sets employer contributions at rates adequate to ensure there's enough money in the fund to cover claims. However, the Legislature circumvented that system by reducing employer taxes several years ago when the unemployment fund was flush. Lawmakers also increased jobless benefits. The Legislature last year raised unemployment taxes by about $20 million to replenish the fund and locked in those rates through this year.

If the fund faces insolvency in 2012, it's projected that taxes will jump to the highest rate and average payments by businesses will go to $512 for each employee in 2013 — a 139 percent increase.

"The very people pushing the governor to sign this bill are the same people who pushed to dramatically increase unemployment benefits and artificially lock the contribution rate, which created the current situation," said Darnell.



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