Senate passes $5.276 billion spending plan

New Mexico would tax food for the first time in years, add $1 to the state cigarette tax and net taxes from out-of-state owners of business partnerships on income earned here.

Meanwhile, state agencies would get fewer dollars and several hundred jobs would disappear from state government.

That mixture of spending cuts and tax hikes was part of a $5.276 billion state budget proposal that the Senate passed  25 to 17 early Sunday morning to help close a projected shortfall of several hundred million dollars next year.

The lawmakers passing the proposed spending plan was bi-partisan, with nearly half the Republican caucus joining nearly 20 Democrats to support the budget proposal.

The passage of the state budget came after a marathon floor session in which lawmakers deliberated for more than six hours on one spending bill and three tax measures that together made up a state budget package.

Overall, the Senate plan trims spending by roughly $120 million and raises revenue by about $180 million.

“There was no delight in putting together this budget,” said Sen. John Arthur Smith, D-Deming. “The pain is spread throughout the state of New Mexico.”

Not many lawmakers were happy with the budget package, although a majority voted for it.

“I don’t think this budget will work,” Sen. Cynthia Nava, D-Las Cruces, said, predicting that the spending plan would lead to layoffs and cuts to important programs.

Sen. Vernon Asbill, R-Carlsbad, agreed, but for different reasons. He opposed the state budget, he said, because lawmakers didn’t tackle the bloated state government before trying to raise taxes.

More than a few lawmakers, however, acknowledged that there were no good scenarios available to them as they tackled the worst budget situation to hit New Mexico in decades.

“The Senate Finance Committee is doing a damn good job,” said Sen. Clint Harden, R-Clovis. “We got a mess laid in our laps.”

The Senate proposal is the latest plan produced by the Legislature as state lawmakers try to close the state’s biggest budget shortfall in decades.

The Senate’s plan differs from a competing state budget proposal passed by the House earlier this month. The Senate proposal recommends spending $120 million less than the House plan — $5.3 billion to $5.426 billion. It also raises nearly half the revenue as proposed in the House bill, generating $180 million through tax increases vs. $340 million in the House bill.

The House and Senate must agree on a spending plan and send it to Gov. Bill Richardson for his signature. But lawmakers are running out of time, with only five days to go in the legislative session to produce a state budget.

While the Senate proposal differed in many ways from the House budget, the most vigorous debate Saturday night revolved around the tax measures that help pay for some of the proposed spending in the Senate state budget.

The biggest levy would tax many foods for the first time in years, including tortillas and white bread, yogurt, spaghetti, hot dogs and white rice.

The proposal, SB 10, which passed 23 to 19, would extend the state’s gross receipts tax to many foods as defined under the Women Infants Children program.

Lawmakers who preferred taxing wealthier individuals and out-of-state corporations through what is called combined reporting vigorously opposed the food tax, saying it would disproportionately affect the poor, several said.

“Let the poor be damned,” said Sen. Gerald Ortiz y Pino, D-Albuquerque.

Added Sen. Eric Griego, D-Albuquerque: “I wonder what else we will find to kick the working families.”

But supporters said it was needed to balance the Senate’s budget proposal

“It actually prevents us from making additional cuts to education … to our seniors. And hopefully it will have a health benefit, in preventing obesity,” said the sponsor, Sen. Bernadette Sanchez, D-Albuquerque.

Sen. Dede Feldman, D-Albuquerque, touted that possible future health benefit as the reason she supported the food tax.

“This will be a boon to New Mexico’s health,” Feldman told her colleagues. “This is what you mother told you to eat. It is a tax on salt, sugar white flour and processed foods.”

Other tax measures to pass would raise the state excise tax on cigarettes by $1 per pack  and non-resident owners of so-called ‘pass through entities’ — for example, business partnerships — would pay withholding taxes on net income earned in New Mexico, according to the legislative analysis.

On the spending side, the Senate proposal recommends more cuts than the House.

It trims 1,000 positions across state government, about 250 more than proposed in the House bill.

Public education, meanwhile, would get $53 million less than in the House proposal. Public education is the state’s biggest ticket item.

Both the Senate and House proposals, however, call for directing more dollars to public education than this year.

The House is proposing $2.319 billion compared to the Senate’s $2.268 billion. This year the state will spend just over $2.1 billion for public education because the Legislature trimmed education spending during an October special session dedicated to addressing the state’s sorry financial state.

Meanwhile, spending on higher education in the Senate proposal comes in $6 million lower than in the House bill. Both proposals dramatically cut spending on higher education from this year’s levels of $816 million.

Other agencies in the Senate proposal facing reductions from this year’s spending levels include the state Department of Health, at $10 million, and the state’s Children Youth and Families Department (CYFD). CYFD would see a decrease of $3 million.

New Mexico courts would experience a $2.6 million reduction.

Some agencies, however, would see funding increases under the Senate proposal. The Corrections department would get $2.5 million more. The state’s share of Medicaid – the government’s low-income health insurance program – would jump from $578 million to nearly $601 million, the handouts show.