2025 Legislative Update #1
Your update on the most important news from the Legislature.
HALF-A-BILLION-DOLLAR TAX INCREASE CLEARS ITS FIRST COMMITTEE
Yesterday, the House Health and Human Services Committee approved House Bill 11, the proposed Paid Family and Medical Leave Act (PFMLA) on a straight 6-4 partisan vote: When the fund is fully operational in FY 29, the LFC estimates that employees and employers will pay over $500 million in new taxes to support payment of benefits.
Rep. Alan Martinez (R-Sandoval) claimed that this would be the largest tax increase in the history of New Mexico, which earned him a rebuke by Chair Liz Thomson (D-Bernalillo) who considered the assertion to be inflammatory, as well as his persistent questioning about the "fee" actually being a tax. Thankfully, Chair Liz Thompson was later corrected when Rep. Jennifer Jones (R-Dona Ana) provided the accurate definition of a tax – “a compulsory contribution to state revenue, levied by the government on workers' income and business profits, or added to the cost of some goods, services, and transactions.”
Rep. Christine Chandler (D-Los Alamos, Sandoval and Santa Fe) is the Bill’s primary sponsor. She seemed unsure and confused during tough questioning and dodged or simply didn’t have the answers on her own bill.
While it may be up for debate as to whether or not it is the largest tax increase in the state’s history, it’s still one very large and monstrous tax increase, period! According to the fiscal impact report or FIR, for a variety of cultural and economic factors unique to New Mexico, the tax could double in order to support high employee use of paid leave. Among those factors is the provision for "safe" and "exigency" (military related) leave. Most states do not include these factors in their programs.
Along with many businesses and business organizations, including the New Mexico Restaurant Association, the New Mexico Chamber, the Albuquerque & Rio Racho Chambers, your Gallup Chamber testified against the legislation. The following points were conveyed:
- The scope of the bill that allows such a large amount of leave - three months - for such a wide range of reasons, for such a wide range of people, will create incredible instability and administrative challenges in the workplace.
- The bill imposes a new burdensome tax on both employers and employees at a time when the state is flush with cash.
The bill, as written, puts into place a massive new bureaucracy of at least 200 or more employees.
The bill increases the size of Work Force Solutions by a third. The current estimate of workforce and related costs (considerable IT expense) is $49 million per year - costs that must be paid out of the tax revenues put into the fund.
To put the magnitude of this program in perspective. The taxes imposed are more than twice that of the unemployment insurance program. And that's just for openers. According to the FIR it's quite possible that the tax will need to double in order to ensure fund solvency. And these increases need only to be approved by the Secretary of the Workforce Solutions, not the Legislature. As mentioned above, there are several factors that could well lead to New Mexico having high employee participation and, therefore, higher costs than other states, including:
- high numbers of multigenerational households
- New Mexico ranks unfavorably on serious health conditions
- bill includes factors for taking leave not in other state programs
- more people are taking leave - from 2012-2018 increased 2 percent while number of workers decreased 3 percent
The track record on these programs in other states is not pretty. Washington state's tax increased from .4% to .92%. Rhode Island, Massachusetts and California have all had to raise their rates, and these are all much wealthier states with higher tax bases than New Mexico.
Biggest Problem? Filling in for absent employees!
Everyone in business knows what a challenge it is to find qualified employees - we so often find businesses with reduced hours of operation or turning away work because there aren't enough people to provide a service. Even the Workforce Solutions Department itself has a 17% vacancy rate - and this is common in the state government – even they can't find qualified workers despite good salaries and generous benefits.
The fact is, the leave granted under this legislation can be stacked along with other leave benefits. The leave can be taken in as little as eight-hour increments. Since it's hard to find qualified employees for full-time jobs, what are the odds that a qualified employee can be found for a temporary position that will likely result in their termination when the full-time employee returns to work? Slim to none. The burden falls especially hard on small employers, where one worker often represents a huge percentage of that business' output. As was heard in testimony, this could spell the death knell for many small entrepreneurs.
What next?
The bill now moves to the House Commerce and Economic Development Committee. The bill could be set for hearing very soon. We'd appreciate you contacting members of this committee to register your opposition: https://www.nmlegis.gov/Committee/Standing_Committee?CommitteeCode=HCEDC for committee member contact information. We'll keep you posted on the bill's progress and, of course, we'll be there to register the Chamber's strong opposition.
BREAKING NEWS: Senate Conservation Committee Passes Zero Emissions Measure
This afternoon (01/28/2025), the Senate Conservation Committee gave a do pass recommendation to SB 4 on a vote of 5-4 sending the measure along to the Senate Finance Committee for further consideration. Senator Joseph Cervantes (D-Dona Ana) joined the committee's three Republicans in opposition. A multitude of business groups, including the Chamber, stand in opposition. There are many concerns, but at the top of the list is the negative effects the bill would have on the oil and gas industry, which is responsible for much of our states windfalls and budget. SB 4 calls for eliminating all greenhouse gas emissions by 2050 and cutting them by 45% in the next five years.
The bill reaches into every sector of the economy: electric generation, transportation, all forms of waste, manufacturing and extraction of raw materials, agricultural and forest products and, of course, oil and gas. The scale and scope of the bill is ill defined, lacking a realistic plan for implementation. In short, the legislation is too aggressive and ripe with unintended consequences. The bill now moves to the Senate Finance Committee.