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SANTA FE The Legislature adjourned a politically difficult special session on Thursday after putting the finishing touches on more than $230 million in tax increases to balance the state budget next year.
The final measure to win approval was a 75-cents-a-pack increase in the cigarette tax. It will generate $33 million next year.
“We did what we had to do. We got the job done,” said Senate Majority Leader Michael Sanchez, a Belen Democrat. “I think we helped keep government running and people employed.”
Without the tax increases, he and other Democrats said, New Mexico would need to slash spending and potentially lay off hundreds of workers in state agencies and public schools.
Republicans argued that the tax increases will hurt New Mexicans and the economy, and might not solve the state’s financial problems.
“I’ve got to tell you that I think this is one of the darkest weeks that I can remember in 10 years of being a state senator,” Sen. Kent Cravens, R-Albuquerque, told his colleagues.
Democratic Gov. Bill Richardson has 20 days to decide whether to sign or veto the tax and budget bills approved by the Legislature.
“I am pleased that the budget package includes a balanced approach to closing the deficit that relies on a combination of targeted spending cuts with revenue increases that don’t hurt our ability to create jobs,”
Richardson said in a statement.
The governor didn’t say whether he will sign the tax increases, but he has few options unless he wants to call lawmakers back for another special session or face the unpleasant consequences of cutting government programs and spending.
A budget bill passed by the Legislature gives the governor the authority to unilaterally make cuts if the state faces a projected deficit next year.
The special session lasted four days, costing taxpayers an estimated $50,000 a day. Lawmakers were confronted with voting for tax increases in a year when all 70 House seats are up for election. Senate terms run through 2012.
“Nobody is happy, but our actions take us down the road with a balanced budget,” said House Speaker Ben Lujan, D-Santa Fe.
Before the Senate adjourned, Cravens warned his colleagues that the state’s financial problems may continue. He contended that the proposed budget is based on revenue growth unlikely to happen with the state’s weak economy.
“We produced a budget based on numbers that don’t really exist, a 6 percent revenue growth,” Cravens said. “We’re spending money that will never appear. We’re spending money we don’t have and we won’t have. And now we’re dragging out this really desperate Hail Mary pass with this cigarette tax to try and fill some of the gap.”
The proposed cigarette tax increase is to remain in place four years, boosting the state’s rate from 91 cents to $1.66 a pack.
A third of the money from the tax will be dedicated next year to early childhood programs, including pre-kindergarten and child care assistance. Supporters said the one-year earmark was needed because those programs had been squeezed by recent budget cuts.
The Senate voted 25-15 in favor of the cigarette tax measure, and the House accepted the Senate-approved version of the bill. The House previously had voted to set aside part of the cigarette tax revenues to public schools.
Also approved during the session were:
• A $5.6 billion budget to finance public schools and government services in the fiscal year that starts in July.
• The largest tax increase package in more than two decades. Proposals to raise more than $230 million included an eighth-cent increase in the gross receipts tax on goods and services, and higher income taxes for about a fourth of New Mexican tax filers. A tax on food, averaging about 2 percent statewide, will be reinstated starting in July.
• Measures financing $250 million in capital improvements. Bonds for about $175 million in projects will require voter approval in the November general election.