One New Mexico industry received more than $130 million in tax breaks last year.

Supporters say the breaks are necessary to do business.

Critics call them "giveaways."

The state's oil-and-gas industry benefited from a host of tax exemptions, deductions, credits and rate differentials strewn through the tax code. And that has film-industry advocates wondering why Gov. Susana Martinez has singled them out.

Martinez wants to lower from 25 percent to 15 percent the refundable tax credit the state gives to production companies that meet certain requirements. If state lawmakers go along, the Martinez administration estimates the proposal would net $25 million in savings at a time when policy makers are trying to close a projected shortfall between $200 million and $450 million.

"There are choices we have to make in New Mexico," the governor said Friday. "Do we subsidize Hollywood or do we start cutting in the classroom? I prefer to not be subsidizing Hollywood and make sure that we fund adequately our classrooms."

But Rep. Luciano "Lucky" Varela, D-Santa Fe, the chairman of the powerful Legislative Finance Committee, says the governor and state lawmakers should look beyond the film industry to other proposals for savings.

"If the governor is looking at the film production tax credit, maybe we can look at other sources," Varela said.

By the numbers

New Mexico loses $1.3 billion in revenue each year through the more than 300 credits, exemptions and deductions written into the state's tax code.

And more than $134 million of that total last year went to the oil and gas industry through various breaks, according to a Taxation and Revenue Department document.

Over the same period, $65.9 million went to film and TV production companies through the film production tax-credit program.

Rep. Brian Egolf, D-Santa Fe, and new chairman of the House Energy and Natural Resources Committee, thinks it's about time to look through some of the breaks the oil and gas industry gets for possible revenue.

"I will have a bill introduced next week where I am going to look at the some of the tax giveaways that go to oil, gas and coal," Egolf said.

Martinez and others won't look kindly on the legislation.

The state's newly elected governor repeatedly has said she is against tax increases, or so-called revenue enhancements, to help close the state's budget gap.

In other words, closing or reducing any exemptions, deductions or credits beyond the film production tax credit are off the table.

But Sen. Michael Sanchez, D-Belen, sees a bit of inconsistency in the governor's position that he says opens the door wide to a broad tax discussion. While she has called for a reduction in how much New Mexico gives to film production companies, she wants to eliminate a state tax to benefit a railroad company.

On Tuesday, Martinez said during her State of the State speech that she wants to eliminate the locomotive fuel tax to help close a deal in which Union Pacific Railroad would move its hub from El Paso to Santa Teresa, N.M.

"Isn't that a subsidy? Isn't the railroad one of the most subsidized industries in the country?" Sanchez said.

Martinez dismissed the analogy Friday.

"One is affecting the tax," the governor said of the locomotive fuel tax proposal. "The other one is a subsidy," she said of the film production tax credit.

Jobs, jobs, jobs

Some state lawmakers worry that closing tax breaks could lead to increased costs of doing business in New Mexico and could lead to job losses in the oil and gas industry.

The industry looms large in New Mexico as an economic engine and proven job creator.

According to the New Mexico Oil and Gas Association, the industry is New Mexico's largest civilian employer, with 23,000 industry-related jobs. The industry also has done its part to keep the state financially afloat, contributing $1.3 billion to the state's main checking account, or general fund, through direct taxes, royalties, and lease bonuses, it says.

"Oil and gas is a definite cash register," said Sen. Minority Leader Stuart Ingle, R-Portales.

But film-industry advocates say the tax credit Martinez hopes to reduce also has created jobs.

Under the state's film production tax credit program, the state reimburses a portion of the money — 25 percent of expenses that qualify — that production companies already have spent here in New Mexico. So a refund of $65.9 million, or 25 percent of qualified expenses, to film and TV production companies last year means that those firms spent at least $263 million in New Mexico.

Those advocates worry that the increased costs of filming in New Mexico could cause productions to not locate here, meaning a loss of jobs.

Whose ox is getting gored?

The contrast between the oil and gas and film industries illustrates a truism about state budgeting in tough economic times. There are always winners and losers, and the film industry looks like it has lost its most-favored status.

Gov. Bill Richardson touted the film production tax credit as one of the signature programs of his eight-year tenure as the state's chief executive and fought any attempts to reduce or dismantle it.

It may have had no bearing on his protection of the program, but TV and movie production companies were among his biggest campaign contributors, according to the National Institute on Money in Politics. TV and film production companies gave $477,000 in campaign contributions to New Mexico's ex-governor, putting film/entertainment among the top 15 donor categories for Richardson. Oil and gas was a big contributor, too, giving Richardson $685,000, according to the Institute.

In contrast, the oil and gas industry contributed $807,000 of the $6.9 million in campaign contributions Martinez collected when she ran for governor last year, institute data show. Among industries, oil and gas was her biggest contributor.

Martinez's office said Friday the contributions have no bearing on her decision to not target tax exemptions, deductions and credits for industries beyond film production.

Often, elected office-holders deny any connection between money they receive and policy decisions they make. At best the nexus is often unclear, with many campaign contributors saying they give in hopes of getting access, and nothing more.

Finding the bang for the buck

House Minority Leader Thomas Taylor, R-Farmington, said the biggest problem in deciding who deserves tax breaks is the difficulty in determining the bang for the buck the state gets.

"Obviously, there is a much increased activity in the film production in New Mexico," Taylor said. "An argument can be made, if you didn't have the subsidy they wouldn't make the film, so as a result you wouldn't get anything. If it's 25 percent, you're getting 75 percent of something you wouldn't have gotten otherwise."

The big question before state officials is trying to figure out if a tax break is worth it. And that's something Martinez and the Legislature will have to work out over the next seven weeks.

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