Ending a political standoff with state lawmakers, Gov. Susana Martinez signed legislation Friday restoring funding for New Mexico’s higher education system and, keeping her guarantee, also vetoed a series of tax increases Democrats argued are needed to shore up the state’s finances.
Lawmakers passed the measures during a special session over the previous two days. Martinez called the session partly to address her decision to cut all money for the state’s colleges and universities, as well as the entire legislative branch of government, from the $6.1 billion budget for the fiscal year that begins in July.
Though the special session yielded a deal that ensures funding for higher education and the Legislature, Democrats argued that vetoing tax increases and rejecting proposals to end some tax exemptions will leave the state with little money in reserves and potentially lead to yet another downgrade of New Mexico’s credit rating.
Martinez argued that raising taxes — the tax on gasoline, for example — would have been a burden on New Mexicans.
“I’m disappointed lawmakers once again tried to take the easy way out with hundreds of millions in tax increases that would’ve made it more expensive for New Mexicans to live, work and raise a family,” the governor said in a statement Friday.
But Senate Majority Leader Peter Wirth accused the governor of placing New Mexico on shaky financial ground.
“By vetoing all the recurring revenue, the governor has created a structural deficit, further threatened our bond rating and put school classrooms and critical state services at risk in future fiscal years,” Wirth, a Santa Fe Democrat, said in a statement. “This is not the way to run government.”
By acting Friday on all four bills passed by the Legislature this week, Martinez seemed to bring an end to the special session.
Lawmakers convened Wednesday and recessed Thursday, giving Martinez until Monday to sign or veto the bills. Legislators did not vote to adjourn the session, so they will still return to the Capitol on Tuesday.
Democrats have not ruled out trying to override the governor’s vetoes.
But after a similar vote failed earlier this week without much support from Republicans, Democrats may decide to adjourn the session and let the state begin the new budget year hoping a recent uptick in tax collections, as well as oil and gas prices, will be enough to keep New Mexico’s finances in the black.
“I think we may have the bare minimum we need for reserves,” state House Speaker Brian Egolf said Friday.
The governor signed House Bill 1, which includes a total of $2.9 billion in state and federal funds for New Mexico’s higher education system.
Martinez had said that even though she vetoed the money from the budget lawmakers passed during the regular legislative session in March, she did not intend to close down the state’s universities and colleges. Instead, the move appeared to be an effort to force Democratic legislators back to the negotiating table on other issues, such as taxes.
Democrats accused Martinez of using college students as political pawns. And despite her assurances that the funding would be restored, the vetoes rattled New Mexico universities, which also operate hospitals and the state’s agricultural extension service.
Martinez touted the special session’s budget fix as providing additional money for cancer research and student aid, though it also amounts to a 1 percent cut in higher education spending from last year. Administrators nonetheless said restoring university funding brings certainty to the state’s colleges.
“For students and faculty, this makes it really clear for them we have a budget and they can plan to attend New Mexico schools,” said Marc Saavedra, executive director of the Council of University Presidents.
The governor used her line-item veto power to scotch about $120,000 for the Legislative Finance Committee, the agency tasked with analyzing and studying state policies.
The governor approved part of House Bill 2 to create a “rainy day fund” to capture windfalls of tax revenue from oil and gas booms. The bill also would divert payments into the Legislature’s retirement account for two years. But she vetoed sections of the bill that would have taxed sales by major internet retailers, a measure that had bipartisan support, and ended a tax exemption for nonprofit hospitals.
She also vetoed a bill that would have delayed the implementation of corporate tax cuts and raised taxes on car sales and gasoline — from 17 cents to 22 cents per gallon. New Mexico’s gas tax still ranks on the low end when compared to other states, and backers argued the money is needed to pay for a network of roads in need of repair. But Martinez described the bill as hypocritical and potentially stifling for businesses.
Instead, to put the state’s finances in the black, Martinez signed Senate Bill 1, which uses an accounting maneuver to take money from bonds and put the cash into the state’s general fund. Top legislators argued the move would balance New Mexico’s budget, though lawmakers also strongly criticized the concept as effectively using borrowed money that comes with millions of dollars in interest to pay for the day-to-day operations of state government.
The bill also would sweep about $19 million from a list of state accounts — from the Board of Nursing fund to the Capitol Building Repair Fund.
But the governor line-item vetoed several of those proposed fund transfers, arguing that some of the money legislators had sought to sweep up does not really exist.
Before the line-item vetoes, the bills were expected to restore New Mexico’s general fund reserves to half of one percent of what is known as recurring spending, according to an analysis by the Legislative Finance Committee.
That is below what many state leaders have said is needed and far below recent levels. The state had 11.6 percent of its general fund in reserves as recently as 2015, for example.
The state would have had about 3.8 percent in reserves had Martinez signed a series of tax increases.
Martinez has said she will not accept tax increases without comprehensive tax reform. Lawmakers rejected a 430-page proposal for tax reform this week, however, arguing the short special session was no time to address the sweeping issue. Instead, they approved and Martinez signed $400,000 for a study of the issue.
Contact Andrew Oxford at 505-986-3093 or email@example.com. Follow him on Twitter @andrewboxford.