Governor threatens special session on budget

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By The Staff

SANTA FE (AP) — Gov. Bill Richardson said Tuesday he will call a special session of the Legislature next week if lawmakers fail to agree on a state budget before adjourning on Thursday but there's still time to reach a compromise on spending and tax increases.

The Democratic governor said lawmakers should consider a small increase in New Mexico's gross receipts tax — perhaps one-eighth or one-quarter of a cent — along with a tax on junk food and cigarettes to help raise revenues to balance the budget.

"Nobody is happy with every revenue increase, but we have an opportunity to forge a compromise," said Richardson.

Senate Majority Leader Michael Sanchez, D-Belen, said he could support the tax proposals outlined by the governor.

"To me, that sounds reasonable to get us out of here," Sanchez said in an interview.

Richardson has met with legislators about the budget, and legislative leaders are working privately to try to resolve differences between tax increases and spending cuts approved separately by the House and Senate.

Sen. John Arthur Smith, a Deming Democrat, said the Senate and House remained far apart.

"They're waiting for us to blink first, and we're waiting for them to blink first," Smith said. He is chairman of the Senate committee that handles tax and budget legislation.

The House approved a budget package that relies on $300 million in new revenues from tax measures, including a half-cent increase in the gross receipts tax that would generate $238 million and a 1.5 percent surtax on upper-income taxpayers.

Richardson said the surtax was unacceptable to him.

The Senate approved bills to generate more than $180 million in revenue for the budget, including a proposal to reinstate the gross receipts tax on certain food products. Richardson said the $138 million proposal was too broad and suggested narrowing it to junk foods rather than taxing foods commonly used many New Mexico homes, such as white flour tortillas and dried red chili.

The Senate also approved a $1-a-pack increase in the tax on cigarettes to provide $33 million. Richardson said there may be enough support in the Legislature to raise the cigarette tax, but he suggested the tax should apply to tribal retailers, who currently sell tax-free cigarettes.

The governor said lawmakers need to take a balanced approach with perhaps $200 million in tax increases to go along with targeted spending cuts to balance the budget.

Public schools are a critical issue for reaching a compromise on the state budget because they account for more than two-fifths of state spending. Richardson said he wanted to avoid spending cuts that squeeze public school classroom instruction and health care services for the needy.

Rep. Henry Kiki Saavedra, an Albuquerque Democrat and chairman of the House budget committee, said, "We're hoping we can get something. It's frustrating."