The last few years of plummeting state revenues made it clear, once again, New Mexico is over-reliant on tax revenue from the oil and gas industry and the Swiss cheese construction of New Mexico’s tax system can’t support the state’s needs, but a one-day special legislative session critical to the survival of higher education isn’t the time or place for tax reform.
The governor vetoed the nearly $3 billion higher education budget, along with the entire budget for the Legislature, to force lawmakers back to Santa Fe for a special legislative session to redo the state spending plan for the budget year that starts July 1. The Legislature-approved budget package relied on new revenue just to keep spending flat with the current year, but the governor vetoed all the tax options offered.
Since then, she has concluded, somewhat belatedly, that New Mexico needs a tax system fix. However, the governor says her skimpy-on-the-details plan would be revenue-neutral, leaving higher education at risk in a move that will hurt the New Mexico families who rely on affordable higher education and the businesses that need educated employees. The governor says she has a new plan for funding higher education without new taxes. But, like with her tax plan, she has yet to share the details.
The chances New Mexico’s colleges will start the new budget year without any funding are close to zero, but the colleges are already struggling with 8.3 percent cuts since the 2015-2016 fiscal year and, with the potential for additional cuts looming over their budgets for next year, many have announced tuition hikes and program cuts.
New Mexico lawmakers have worked hard to make higher education more accessible for New Mexico families. Tuition at our public colleges and universities is reasonable and most in-state high school graduates qualify for the Lottery Scholarship. Many New Mexicans have a tough time making ends meet and can’t afford a college education. New Mexico’s efforts ensure they are not cut off from the greater employability and higher income that come with higher education credentials.
Ironically, by sacrificing higher education to lower taxes, New Mexico is discouraging the business activity and economic boost it’s courting. Google “what attracts businesses to an area” and article after article will cite national studies showing businesses want an available, skilled workforce more than anything else. In some studies, low taxes are at the bottom of their lists.
This isn’t news to New Mexico policymakers. The Legislative Finance Committee has reported, repeatedly, that the low level of education among our population is a major inhibitor to economic growth. Partly in response to that, the higher education funding formula has been tweaked to reward schools that graduate and certify more students, and the colleges have responded by improving degree-completion rates.
Supporting adequate funding for higher education is not a denial of the role tax reform could play in economic growth – business leaders care about the clarity of taxation even if tax levels are a low priority for some. Conceptually, the governor’s broadly stated goals have merit, particularly her support for broadening the tax base, and potentially lowering the rate, by eliminating a myriad of deductions and credits with questionable benefits. However, she has said she also wants to create new business tax breaks that could cost anywhere between $250 million to $500 million, which would then narrow the base and lead to higher taxes for everyone else. Nevertheless, the Legislature and the administration could, with thoughtful consideration, find common ground and develop a bipartisan plan.
Unfortunately, the governor has yet to reach out to the Legislature’s finance committee chairs to discuss tax reform, an obvious first step and mandatory for winning the bipartisan support necessary to passage. Even if she starts a dialogue, it is unlikely executive and legislative leadership can reach any agreement with the time-constraints of a short-as-possible special legislative session.
Much more achievable is a revisit of the tax options already approved by the Legislature, some of which the governor initially said she could support and has continued to support despite her vetoes. Reconsideration of those options could close tax loopholes, put New Mexico on the path for longer-term tax reform, and salvage our higher education system.
Because of her doggedly determined opposition to tax increases, the governor cut $3 billion from the state’s economy and threatened colleges, agricultural extension offices, the special schools for the blind and deaf, the military institute, and the cancer center, children’s hospitals, and neo-natal intensive care unit. State policymakers must address that threat as quickly as possible.
Tax reform, however, needs more time, and a thoughtful, collaborative approach that recognizes a sound tax system – one that is fair, is easy to understand and administer, is built on a broad base, and generates enough revenue to address New Mexico’s many, deeply rooted needs – is more than low taxes for corporations and tax breaks for businesses. It is the wrong approach to economic development and a great disservice to the people of New Mexico and our future.
Smith, D-Deming, is chairman of the Legislative Finance Committee and Senate Finance Committee. He has represented Senate District 35, which includes parts of Hidalgo, Luna and Sierra counties, since 1989.
Lundstrom, D-Gallup, has served in the New Mexico Legislature representing McKinley and San Juan counties since January 2001. She is chair of the House Appropriations and Finance Committee and a senior member of the Legislative Finance Committee.