The legislative session ended at noon Saturday, with a flurry of activity over the last 24-48 hours to arrive at a final omnibus tax package that could be supported by the House, Senate, and Governor. This was a very difficult session, because of the increasingly anti-business posture of the Legislature, however, the Chamber was able to accomplish many of the key goals of the Chamber’s policy agenda.
From a fiscal standpoint, the Legislature and Governor exceeded the spending targets they set at the start of the session, approving a 14% increase in recurring spending – as opposed to 12% – and arriving at a $9.57 billion budget. Reserves will also dip below their 30% target – to just under 28%. The additional spending occurred in the Senate, during contentious negotiations with the Governor over items like the Opportunity Scholarship program. It would not surprise us if the Governor vetoed several appropriations – large and small – in the budget, in order to bring spending and reserves closer in line with her original goals.
That being said, lawmakers did take a number of fiscally responsible steps this year, which were centerpieces of the Chamber’s fiscal recommendations. They transferred $450 million to the Severance Tax Permanent Fund and passed legislation that will automatically drop future excess oil and gas revenues into the corpus of that fund. Additionally, all of the state’s capital projects in the massive $1.2 billion capital outlay bill will be financed without the use of severance tax bonds; the decision to use mostly general funds, and not take on unnecessary debt, is a smart one that also bolsters the size of the permanent fund. In a disappointing move, the Legislature did not establish a centralized capital projects planning office, due to objections from the Governor.
Closely related, the assembly of the omnibus tax package was quite the saga this year, but the end-product addresses many of the Chamber’s tax policy priorities. We, of course, believe the GRT should have been lowered more steeply and quickly, and our plan for decompressing personal income tax rates was more aggressive than what passed. Anti-pyramiding provisions should have been included, and we’ll need to keep fighting for that. We’re also disappointed that the capital gains deduction was changed at all. But, on the whole, we believe the tax package makes many positive changes that we’ve supported for quite some time.
On the economic development front, no new general mandates on businesses were passed, proposed minimum wage increases were defeated, and three rent control bills were killed. Defeating the paid family/medical leave tax and mandate was an against-all-odds victory that virtually no one in the Roundhouse thought was possible. It was a bruising battle that resulted in the bill being tabled in the House Commerce Committee, and we want to acknowledge the courage and strength of Reps. Marian Matthews and Patty Lundstrom who withstood extraordinary political pressure and intimidation.
LEDA and JTIP – important economic development incentives – were adequately funded; tourism advertising was expanded ($15 million); and over $230 million was allocated for road/highway construction, $55 million for regional airport upgrades, and $124 million for broadband expansion. We are happy to report that legislation expanding available funding for the redevelopment of Metropolitan Redevelopment Areas – like downtown Albuquerque – passed with flying colors, unlocking a new potential revenue stream for big investments in our downtown. Important capital outlay investments were made to improve the Balloon Fiesta Park, the Mesa del Sol sports complex, UNM athletics facilities, Paseo del Norte widening, and the North Domingo Baca Aquatic Center project, among others.
No onerous new regulations or taxes were imposed on oil and gas production, despite many attempts. $50 million in public-private partnership funding for advanced energy projects – including hydrogen energy – was included in the budget.
CNM received substantial funding for its skilled trades facilities and workforce training efforts, an Office of Entrepreneurship was established at the Economic Development Department, $55 million was allocated to research and development at universities for the purpose of commercializing new technology in key industries, the BioScience Authority received $25 million for its work, and $15 million was added to the state’s Venture Capital Fund.
We are very proud of our work this session to address the state’s healthcare workforce challenges. This included pushing very hard for the eventual medical malpractice compromise that will prevent outpatient facilities and independent physicians’ practices from closing – another bruising battle that resulted in cooler heads prevailing and a sustainable solution, with minimal impact on our doctors. The health practitioner loan repayment program was significantly expanded, Medicaid provider reimbursement rates rose across the board to 100-120% of Medicare – key to making New Mexico an affordable place to practice, nursing programs were expanded at CNM and UNM, and the GRT deduction on copays and deductibles was passed. On the negative side of things, when it comes to healthcare, the Legislature still has a penchant for backing mandates on prescription drugs and other topics that will drive up health coverage premiums, and the Governor has been clear in her intention to expand the state government’s role in providing health insurance going forward.
When it comes to education, a proposed constitutional amendment that would have replaced the PED Secretary with a mostly-elected state school board did not ultimately pass, and neither did a proposed moratorium on charter school growth. Principal salaries were raised, high-quality professional development for principals was expanded, and funding was allocated toward principal residency programs during their training period. Legislation was passed to get higher-quality literacy curriculum into the hands of New Mexico students faster, the school year was extended to 1,140 hours for all students, and the State made a major investment in the construction of career/technical facilities and expansion of the CTE educator workforce. 529 savings plans will also now be allowed to be used for purposes other than college, such as to pay for a child’s private K-12 education as well. The Legislature also changed graduation requirements, refused to make financial literacy a required course for New Mexico students, and did not pass legislation that would professionalize our school boards.
And believe it or not, crime was the “forgotten topic” of this year’s legislative session.
Here are many of the things that were NOT passed – and most of the time, not even seriously considered: six bills that aimed to hold more dangerous and violent offenders in jail pre-trial; reforming the “Arnold Tool,” which guides judges’ decisions on pre-trial release; requiring someone who re-offends after being released pre-trial to be held pre-trial; grand jury flexibility for prosecutors; protection of child victims from pre-trial interviews; penalties for drug trafficking with firearms; increased penalties for fentanyl trafficking; DWI – sentencing overhaul and expansion of statutes to other substances; a real “3 strikes” law for violent offenders; penalty enhancement for felons in possession of a firearm; specific funding for a Crime Gun Intelligence Center or crime-fighting data platforms; establishment of an independent office to monitor child welfare decisions by CYFD (killed due to Governor’s veto threat); and more.
So what was accomplished on the crime front?
- The budget includes $10 million for felony warrant roundups (the request was $20 million).
- A prohibition and penalties were passed for purchasing a gun and knowingly providing it to somebody who can’t legally possess it or who uses it to commit a crime.
- Nearly $100 million was included for the recruitment and retention of law enforcement officers.
- A requirement was imposed on metal dealers to collect information on those selling second hand catalytic converters.
- Legislation passed allowing retail thieves to be charged based on the aggregate value of the things they steal, across crime scenes, which should result in more felony charges and sentences for these offenders.
- And various public safety facility projects and equipment requests (substations, police vehicles, radio comms, helicopters) received partial capital outlay funding.
Significant funding was allocated for affordable housing projects ($40 million +), behavioral health provider rate increases and programs ($164 million), and continued construction of the Gateway Center for the homeless in Albuquerque ($10 million).