A Democratic state senator on Wednesday introduced the latest competing proposal to fix New Mexico's unemployment benefits fund.

The bill's sponsor, Sen. John Arthur Smith, D-Deming, called what he filed Wednesday a compromise that strikes a balance between competing measures.

Smith's bill would increase what businesses pay into the state's unemployment fund but it would be less of a hike than called for in legislation the Legislature passed earlier this year. Gov. Susana Martinez partially vetoed that bill, saying she disliked a provision in that legislation that raised taxes on businesses during a time of an economic downturn, when they could least afford it.

"I'm just trying to find a middle ground," Smith said Wednesday. "I don't know how much traction it will get."

The Governor's Office didn't sound enthusiastic about Smith's bill.

"The Governor does not believe politicians should arbitrarily increase tax rates on New Mexico businesses," Martinez's spokesman Scott Darnell said in an email. "The Governor is hopeful that a bi-partisan compromise can be reached that keeps taxes low on businesses during this recovery to help put more New Mexicans back to work and then bases contribution rates on economic conditions, such as the amount being paid out in benefits, the balance of the fund, and the unemployment rate."

Smith's bill is the latest proposal in a six-month battle between Martinez and the Legislature to find a workable agreement to prop up the state's unemployment benefits fund, which is projected to go insolvent in 2013 without an injection of cash.

After Martinez used her line-item veto authority this spring to kill the provision raising what businesses pay into the unemployment fund, several state lawmakers sued the governor in court, saying her action was unconstitutional. But the state's Supreme Court took no action on the constitutional challenge and said the governor and the Legislature could still strike a deal on how to prop up the fund during the current special session. If no deal is reached on the unemployment fix during the session, lawmakers likely would ask the court to rule on the constitutionality of Martinez's action.

As of Wednesday, a deal appeared nowhere in sight.

Martinez is backing legislation that would withdraw $130 million from the state's savings account over two years to put into the fund. But that has run into resistance from some powerful lawmakers who complain that taking money from the state's savings account is too risky during a bad economy.

Rep. Mimi Stewart, D-Albuquerque, meanwhile, has filed a bill that largely mirrors the legislation state lawmakers passed earlier this year before it was caught up in the legal challenge. The bill raises what businesses pay into the fund to a higher level than Smith's proposal.

Several state lawmakers have said the court's decision to put the issue back before the Legislature during the special session adds pressure on the governor and legislators to reach a deal. While Stewart said that was true, she added that it also creates incentive to do nothing.

"We can let the Supreme Court take care of this," she said.

Contact Trip Jennings at 986-3050 or at tjennings@sfnewmexican.com.