- Associated Press - Monday, February 20, 2017

SANTA FE, N.M. (AP) - The Democratic majority in the New Mexico House of Representative pushed forward Monday with a budget plan that would hold state government spending steady in the coming fiscal year, as the state wrestles with stunted revenues linked to a downturn in the oil sector and a sluggish economy.

The $6.1 billion spending bill would maintain current overall funding levels for public schools, boost resources for the judiciary and restore money for business incentives linked to expansions and job training.

That plan hinges on companion legislation that would raise $218 million in new revenues from a long list of taxes and fees. New revenues would come in large part from a tax-deduction overhaul for the health sector designed to raise more than $100 million and steeper charges for cross-state trucking permits. Smaller provisions include taxing online sales by out-of-state retailers and no longer exempting nonprofit groups from taxes on sales.

Both the spending and revenue bills received committee endorsements Monday, with Democratic support and unified Republican opposition.

Legislative analysts say the state requires $125 million in new revenues in order avoid new budget cuts, with additional money needed to restore depleted reserves and protect the state’s credit rating.

Democratic House Speaker Brian Egolf emphasized the need to collect more taxes from a health care sector that is growing faster than other areas of the economy but contributes relatively little to the state general fund.

“This is a step toward correcting that disparity,” he said. “We have to do things on the revenue side, by closing loopholes, by making the tax system more fair.”

House Finance and Appropriations Committee Chairwoman Patricia Lundstrom said lawmakers cannot sustain critical government services without increased revenues.

A spokesman for the Republican Gov. Susana Martinez called the Democrat-sponsored spending plan “a political play” that makes harmful cuts to school programs and leaves prison funding at “dangerously low levels.”

“The governor is not going to accept a budget so disconnected from New Mexico values,” said spokesman Michael Lonergan in an email. “She’s going to continue meeting with lawmakers on a regular basis to find a solution.”

The proposed state spending plan would increase classroom spending on K-12 education through a per-student funding formula by $32 million. Overall spending on public education would remain unchanged from the current year because of reductions to grant programs operated by the Public Education Department, including merit pay and stipends for educators. Funding for early childhood reading programs would flow to all schools, rather than through grants awarded competitively to certain districts.

The Corrections Department budget would increase by 2 percent to $299 million.

Republicans, including Rep. Jason Harper, R-Rio Rancho, said the combined taxes and fees go too far and that greater government austerity was needed. “I think there is a way to keep our budget flat and increase funding to K-12 funding without raising taxes,” Harper said.

Rep. Carl Trujillo, D-Santa Fe, stressed that increasing revenues from the health sector would help the state attract more federal matching funds to Medicaid health care for low-income and disabled residents. The state spends more than $900 million a year on Medicaid, and it received about $5 in federal matching funds for every dollar spent by the state.

Spending on the judiciary in the budget plan would increase 2.5 percent, or $6.7 million.

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