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Senate panel OKs budget based on higher taxes

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By Barry Massey

 SANTA FE — A state budget proposal by a Senate committee calls for $150 million in new revenues from tax measures and requiring public employees to pay more for their pensions.

The pension change assumed in the budget will save the state $44 million next year, but will lower take-home pay of state workers and educators by a similar amount.

The Finance Committee approved the budget on Thursday and sent it to the Senate for consideration.

The committee proposed spending about $5.5 billion in the next fiscal year, which starts in July. That includes about $200 million in federal aid that’s replacing state money for Medicaid, public schools and higher education.

The budget represents a 3.5 percent reduction from what the state plans to spend this year on education and governmental programs, including health care provided through Medicaid for the needy and uninsured children.

A House-passed budget would cut spending

1.5 percent next year and it relied on about $300 million in tax increases.

The Senate committee assumes about $150 million in new revenue will be generated from taxes and it trimmed about $150 million in spending from the House-passed budget. The savings include 1 percent across the board cuts in programs and agencies. Public schools would get less money for rising insurance costs.

“We’re trying to spread the pain as broad as we can with everyone,” said Sen. John Arthur Smith, a Deming Democrat and Finance Committee chairman.

Gov. Bill Richardson said the committee budget made “unacceptable cuts to critical services, such as education that will inevitably hit the classroom and hurt teachers and kids.”

Separate legislation must be passed to raise taxes and to implement the proposed pension change. The budget merely factors in extra revenues from taxes as well as savings from reducing the amount that government employers contribute into pension funds by 1.6 percent.

Employees — from school teachers to state agency workers — will make up the $44 million for pension programs by contributing an extra 1.6 percent of their salaries.

A similar shift in pension contributions was enacted last year and required workers to pay an extra 1.5 percent.

Public employee unions oppose the pension proposal.

“We’re very disappointed that the Senate Finance Committee is balancing the budget on the backs of educational and state employees when they aren’t asking anyone else to share in the sacrifice,” said Carter Bundy of the American Federation of State, County and Municipal Employees.

State workers will have been hit with the equivalent of 5 percent pay cuts, he said, if the latest pension change is combined with last year’s increased pension contributions and unpaid furloughs being implemented in the current fiscal year.

On taxes, the committee’s budget assumes about $138 million from narrowing a tax exemption for food. A bill pending in the Senate would reinstate the gross receipts tax on certain items except for food staples such as meat and vegetables. Currently, there is no tax on products such as candy, soft drinks, cookies and potato chips.

Opponents of the food tax proposal contend it will hurt low-income families.

Because of the way the legislation defines food, it will impose the sales tax on a number of products used by many families, including white flour tortillas, white bread, spaghetti and other pastas, cooking oil, canned soup, butter, yogurt and nuts.

“Families that are already struggling to put food on the table in this economy will find their dollars stretched even thinner every time they go to the grocery store,” said Allen Sanchez, director of the New Mexico Conference of Catholic Bishops.

The budget also factors in nearly $16 million in new revenues from a House-passed bill that seeks to improve tax compliance by out-of-state residents. The measure expands income withholding requirements on partnerships, certain smaller corporations and other “pass through entities.”

The budget bill is HB2. The food staples tax bill is SB10. The tax withholding bill is HB120.