Governor signs state budget, tax bills with minimal vetoes

Mar. 6—Gov. Michelle Lujan Grisham's deadline Wednesday to take action on legislation passed during the 30-day session proved anticlimactic — a far cry from the drama that erupted last year after she gutted a tax package and angered lawmakers on both sides of the aisle.

The governor signed the budget, capital outlay and tax omnibus bills — three of the most significant and costly bills passed by the Legislature every year — and kept them largely intact, though there were a few notable changes.

One was in the budget, where Lujan Grisham line-item vetoed an amendment added by the House to prohibit the Public Education Department from using appropriated funds to implement a rule establishing a minimum requirement of 180 instructional days per school year.

That veto wasn't necessarily a surprise. At the end of the session, Lujan Grisham said despite the Legislature's opposition she was moving forward with a plan to require 180 school days per year, which would force rural districts that have four-day weeks now to switch to five days.

"I think 180 days should occur, and I'm proceeding with that rule," she said at the time.

In a statement Wednesday, Lujan Grisham thanked New Mexicans for their input during the budget process and state lawmakers for sending a "carefully considered bill" to her desk. The $10.21 billion budget increases spending over the current fiscal year by 6.8% and maintains reserves at 32.5%.

"The budget I signed today represents a strong investment in New Mexico's future with funding to improve literacy, help keep New Mexicans safe, expand affordable housing, raise teacher pay, assist tribal governments and much more," she said.

As for the tax bill, Lujan Grisham thanked lawmakers "for addressing the sustainability concerns I raised last year in my message line-item vetoing much of last year's omnibus tax package."

Senate Majority Leader Peter Wirth, D-Santa Fe, said in a statement last year's bill contained a wide range of "smart cuts and tax changes," but Lujan Grisham had concerns over the billion-dollar fiscal impact that led to the vetoes.

"This year's bill was more limited in scope, focusing primarily on lowering income taxes for working New Mexicans and incentivizing our transition to a clean energy future," Wirth said.

"In building this year's bill, the House and Senate worked together with the executive throughout the process. That collaboration avoided a last-minute conference committee and resulted in only one line-item veto," he added. "This is a big tax policy win for New Mexicans."

The tax bill includes various credits designed to incentivize New Mexicans to transition to a clean energy future, including for manufacturing and buying electric or plug-in electric hybrid vehicles.

"New Mexico's leadership in advanced-energy manufacturing is creating jobs, diversifying our economy, and providing the world with clean energy that is essential to combating climate change," Environment Secretary James Kenney said in a statement.

Kenney said an advanced energy tax credit in the tax package "will continue to attract investments from around the globe that we need in our state to meet our ambitious climate goals."

The bill also adjusts the state's personal income tax brackets, decreasing taxes for all taxpayers, though lower- and middle-income earners will see the biggest reduction.

A married couple filing jointly with $50,000 in income, for example, could save $303 per year, according to the Governor's Office.

Camilla Feibelman, director of the Rio Grande chapter of the Sierra Club, called the bill "a climate and families tax package."

"New Mexicans can save money on clean cars, rooftop solar and efficient home heat pumps," she said in a statement. "Adding a credit for used electric vehicles and compensating households that purchased solar after the credit ran out in previous years make a real difference for lower- and middle-income people."

The governor did remove certain stipulations throughout the budget giving state agencies more flexibility in how to spend an appropriation, saying in her message they "impermissibly intrude into the executive managerial function.

"These restrictions on agency functions exceed the Legislature's proper, constitutionally defined role, unduly constraining the Executive's ability to effectively administer programs to meet the State's needs, in violation of the distribution of powers established" under the state constitution, she continued.

In the tax bill, the governor axed an exemption that "would have effectively forced taxpayers to pay 'stripper well' operators' costs to comply with the state's methane waste and ozone precursor rules," according to the Western Environmental Law Center.

"Although I appreciate the intent behind this measure ... the exemption should be limited to small and independent operators," the governor wrote.

As written, she added, the measure was "problematic because large companies can hold wells in multiple subsidiaries, which are themselves considered the 'operators of a well' under current law. This would disproportionately benefit larger companies, substantially decrease state revenues, and work counter to my Administration's climate change goals."

Lujan Grisham encouraged the sponsors of that provision to work with her administration to draft legislation for next year's 60-day session that addresses those issues.

In the capital outlay bill, the governor vetoed $557,000 in general fund projects, which represents about 0.04% of the total amount of capital outlay in the legislation. She wrote in her executive message the bill included "several projects that lack proper planning or are not ready to proceed."

The governor also got rid of capital appropriations under $10,000.

"As I mentioned last year ... the capital outlay process mainly exists to fund intelligent investments into critical infrastructure, and relatively small projects should not be addressed by capital outlay funds," she wrote.

Lujan Grisham noted the capital outlay bill funds more than $1.5 billion in projects, including $483 million for state agencies and $523 million for local governments. The state capital projects range from a new literacy center to acequia improvements statewide. And, she said, the bill includes $570 million in severance tax bonds, mostly for statewide road improvements.

The governor's deadline to act on legislation was noon. Based on information from the Secretary of State's Office, as of 5 p.m. Wednesday Lujan Grisham had signed all but three of the 72 bills lawmakers passed during the session. Bills the governor neither signs nor vetoes are "pocket vetoed" and don't become law.

Among the bills the governor waited until the last day to sign was Senate Bill 246, which reauthorizes funding for some 250 capital outlay projects that have been delayed in recent years.

Capital outlay funds projects around the state — roads, bridges, broadband, hospitals and the like — usually on a one-off basis that requires tight coordination with local entities like cities and counties. But in the last few years, many projects have taken longer to get completed and the money allocated for them — about $5 billion — has gone unspent.

Of the three bills that had not yet appeared online on the Secretary of State's website as approved, only one had a veto message: Senate Bill 217, which would have sent $82 million a year to the state's Severance Tax Permanent Fund from 2024 to 2034.

The fund, created in 1973, serves as a vehicle to invest severance taxes not used to bond capital projects every year. The governor issued a veto message saying she is "not convinced this legislation is necessary at this time."

Follow Daniel J. Chacón on Twitter @danieljchacon.