BY PAUL J. GESSING
When the 2018 election results were tallied and it was clear that New Mexico had moved into the “progressive blue state” category, it was destined to be a tough couple of years for fiscal conservatives. The 2019 (last year’s) session was indeed the worst we’ve seen. The just-completed 30 day session was not quite as bad, but again needed economic reforms took a back seat to round 2 of the Legislature’s spending binge.
Thanks to the oil boom still going on in the Permian Basin, New Mexico’s general fund has grown to $7.6 billion. That’s up from $6.3 billion when Susana Martinez left office at the start of 2019, a 20% increase in just two years.
Unfortunately, despite big increases in last year’s budget and tax hikes to boot, the 2020 session did not yield any moderation from Gov. Lujan Grisham and the Democrats. Instead, they “doubled down” with even more big-spending plans that are not only unsustainable, but make New Mexico more reliant on oil and gas than ever before.
Reform of New Mexico’s job-killing gross receipts tax (despite the potential for revenue neutrality) fell by the wayside before the session. So did cuts to or elimination of the State’s tax on Social Security benefits. New Mexico is one of 13 states to tax such benefits, thus making the State relatively unfriendly to retirees. Numerous publications rank states on their “retirement-friendliness” and New Mexico consistently ranks poorly for its relatively high taxes on Social Security income.
Unlike retirees and both consumers and small businesses who get hit by New Mexico’s unique and burdensome gross receipts tax wealthy owners of electric vehicles would have received a hefty electric vehicle (EV) tax break thanks to a regressive $2,500 credit contained in HB 217 that was overwhelmingly supported by Democrats in both houses (only to die in the Legislature’s final moments due to a lack of agreement between the two houses). Congressional Research Service data shows that nearly 80 percent of the federal EV tax credits are claimed by people who make over $100,000 per year.
Another harmful policy adopted this year involves a power grab by government employee unions. The original bill (SB 110) was tabled in committee which normally means “killed,” but with the powerful government employee unions pushing sympathetic Democrats, the bill was brought back. It narrowly escaped death again when, after being sent to Senate Finance for a full accounting of its costs and a skeptical examining by Sen. John Arthur Smith, the bill’s language was inserted into a “dummy bill” HB 364 which was subsequently passed.
The legislation is a laundry list of provisions that make it easier to unionize, gives union bosses the personal information of all government employees, and generally helps them flex their muscles in local governments and schools. The process represented the very worst and least transparent aspects of government, but received scant media attention.
One small ray of hope is the bi-partisan agreement reached on a much-needed pension overhaul. New Mexico’s PERA system which includes fire fighters, police, and other non-education-related public employees, is underfunded to the tune of more than $6 billion. Thanks to shared sacrifice and bipartisan leadership (yes, including the Governor) reforms enacted this session will move PERA towards solvency.
These are just a few of the most economically-impactful bills that were passed (or considered) during the 2020 session. The last two years have involved spending WAY too much of the oil surplus and far too little in terms of economic reforms to sustainably diversify the New Mexico economy. We will know what voters think of this spending binge come November.
Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility