SANTA FE, N.M. (AP) — The governor of New Mexico scaled back a tax relief package on Friday based on concerns it could undermine future spending on public education, heath care and law enforcement while signing into law $500 individual tax rebates and the largest proposed spending plan in state history.
Vetoed items within the tax relief package included reduced tax rates on personal income, sales and business transactions as well as proposed credits toward the purchase of electric vehicles and related charging equipment.
Surging oil prices and output in southeastern New Mexico have produced a financial windfall for government. In a state with high rates of poverty and low workforce participation, officials estimate a $3.6 billion annual surplus over current spending obligations for the coming fiscal year.
Gov. Michelle Lujan Grisham expressed “grave concerns about the sustainability” of tax changes proposed by the Democratic-led Legislature.
The Democratic governor endorsed one-time rebates, refundable credits of up to $600 per child, a tax break for health care providers and new incentives for the film industry estimated at $90 million a year, but vetoed an array of tax cuts and credits to safeguard state finances.
“Tax cuts will impact our ability to fund important services and programs that our citizens depend on, such as education, health care, public safety, and infrastructure,” the governor warned in a written message to legislators about her line-item changes to the tax bill sponsored by Democratic Rep. Derrick Lente, of Sandia Pueblo.
The state would forgo about $247 million annually by 2027 under the tax bill after the governor’s changes. Without changes, tax relief would have soon exceeded $1 billion annually.
At the same time, Lujan Grisham signed into law with few exceptions a $9.6 billion annual spending plan from the Legislature that shores up rural health care networks while underwriting tuition-free college, no-pay day care and new business incentives. The plan represented a roughly 14% spending increase for the fiscal year that runs from July 2023 through June 2024.
The approved budget includes 5% average salary increases for state employees and public education workers. Lawmakers also approved $1 billion in direct spending on infrastructure projects, vetoing just a handful of construction items.
The governor highlighted new state spending initiatives aimed at providing healthy, no-pay meals to all students of public schools after federal funding was scaled back, as well as an expansion of public funding for professional and vocational training.
She also noted a $146 million permanent annual allocation toward tuition-free college, and an $80 million reserve to support newly constructed hospitals in rural areas.
Environmental advocacy groups including the Sierra Club criticized the governor’s veto of tax credits designed to rein in climate change and reduce fossil fuel consumption. Lujan Grisham vetoed consumer tax credits toward the purchase of heat pumps that can lower home energy consumption and rejected a credit of up to $4,000 toward the purchase of an electric vehicle. She also struck down incentives for large-scale geothermal production of electricity.
“Climate tax credits would have amounted to a drop in the bucket of New Mexico’s budget,” the Sierra Club Rio Grande Chapter said in a statement.
Other vetoes on Friday included a bill to create a civil rights division at the attorney general’s office in efforts to safeguard the rights of children in state custody amid allegations of inadequate care and protection. The governor rejected a proposal to reduce and modify high school graduation requirements, saying it would have weakened education standards.
A bill to increase salaries for state justices and judges, by pegging them to pay to rates for federal judges, was vetoed. The governor said judges got a 17% pay raise last year and that she would rather consider the addition of more judges to alleviate backlogged cases that delay justice.
In all, 34 bills were vetoed explicitly or by ignoring them as a signing deadline passed on Friday.
Other bills signed on Friday seek to bolster the state’s health care workforce and make medical care more accessible, including changes to medical malpractice regulations aimed at easing financial pressures on independent clinics.
Individual tax rebates of $500 are scheduled for delivery in June. Rebates of $1,000 will go to married couples, single heads of family households, as well as widows and widowers.
