Governor beats deadline by signing $10.8 billion budget bill, but vetoes tax package

SANTA FE — Gov. Michelle Lujan Grisham signed off Friday on a $10.8 billion spending plan for the coming budget year, but used her veto pen to strike down a tax package approved by lawmakers on the second-to-last day of this year’s 60-day session.

In her veto message, the governor criticized lawmakers for “last-minute deal-making” on the tax package, which passed after House and Senate members reached a compromise that delayed the effective date of most of its changes until next year.

“That is not prudence — it is paralysis,” Lujan Grisham wrote.

“Even more troubling is the fact that what ultimately emerged lack both strategic coherence and fiscal responsibility,” the governor added. “There was no plan and no preparation for how to pay for the tax relief in this bill.”

Among other provisions, the tax package would have given a personal income tax break to an estimated 101,000 working New Mexicans and would have provided a tax credit or deduction for foster parents and health care practitioners. The vetoed bill, House Bill 14, also called for a 20% hike in New Mexico’s liquor excise tax rate.

Lujan Grisham said she supported some of those ideas, but encouraged lawmakers to “do better” during next year’s 30-day legislative session.

Rep. Derrick Lente, D-Sandia Pueblo, the chair of the House Taxation and Revenue Committee, said Friday he was disappointed by the governor’s veto.

“I think a lot of the measures in this tax omnibus package were going to support New Mexicans during this time of financial uncertainty,” Lente said in an interview. “We’ve missed a large opportunity here by not putting this into law.”

He also said the provisions included in the tax package had been thoroughly vetted before being added to the bill, but acknowledged the Senate’s decision to remove a proposed oil surtax complicated negotiations about the tax package’s budgetary impact during the session’s final days.

The tax package veto came on the final day for the governor to act on legislation passed during the legislative session, which ended March 22.

Partial vetoes of budget, capital outlay bills

Several bills were signed into law Friday by Lujan Grisham, including the budget bill and a $1.2 billion package of public works projects around New Mexico.

But Lujan Grisham used her line-item veto authority to ax some spending initiatives and language from those bills.

Specifically, the governor struck down a $1 million appropriation for start-up costs associated with a new Office of the Child Advocate, which lawmakers approved this year to investigate complaints involving the state’s troubled Children, Youth and Families Department. Lujan Grisham signed the bill last month after previously opposing it.

Rep. Nathan Small, D-Las Cruces, criticized the veto, saying, “The vetoing of funding for that office is very concerning.”

The governor also vetoed a budget earmark stipulating that up to $80 million of a $110 million appropriation for statewide affordable housing projects be split between Albuquerque and Bernalillo County.

Other vetoes included funding for the Legislature to consider audit and evaluation requirements for a new behavioral health law, and reporting requirements tied to CYFD funding.

Small, the chair of the House Appropriations and Finance Committee, said the vetoes would not deter lawmakers’ efforts to ensure state funds are spent appropriately.

“Our commitment to New Mexicans to have adequate oversight is absolutely going to continue,” he said.

In all, Lujan Grisham’s line-item vetoes of the budget bill amounted to about $19 million, according to the Governor’s Office. But more than half of that amount was tied to bills that failed to pass, meaning the funding could not have been put to use even if left intact.

Meanwhile, Lujan Grisham also vetoed language stipulating that pay raises for New Mexico public school personnel average 4%. As a result, all school employees will get 4% raises, starting this summer.

State employees will also get 4% salary increases under the budget plan.

Lujan Grisham said some of the vetoed budget language exceeded the Legislature’s authority, and would have unduly constrained the “executive’s ability to effectively administer programs to meet the state’s needs.”

In all, the signed budget bill will boost recurring state spending for the fiscal year that starts in July by $618 million — or about 6% — over current levels amid an ongoing New Mexico revenue surge. That revenue boom is due largely to an oil production boom in southeast New Mexico’s Permian Basin.

Sen. George Muñoz, D-Gallup, the chair of the Senate Finance Committee, said the Legislature’s creation of new trust funds for behavioral health and Medicaid spending, along with other decisions, have put the state on a firm financial footing.

“We’ve set ourselves up to be recession-proof,” Muñoz told the Journal.

Public works package gets green light

In addition, the governor vetoed all capital outlay projects with appropriations of less than $10,000, saying such small projects should not be funded with state dollars.

Her vetoed projects in the bill amounted to nearly $1.3 million — or only slightly more than 0.1% of the bill’s total funding.

Lawmakers used the state’s budget surplus to pay for most of the projects in the capital outlay bill, House Bill 450, though some projects will be paid for by bonds backed by future severance tax revenue.

The annual public works package sparked political controversy during the final week of the session, as Republicans objected to a $10 million earmark inserted by the Governor’s Office for a new reproductive health clinic in northern New Mexico.

Few details have been announced about the projects, which come two years after a similar appropriation for a new abortion clinic in Doña Ana County.