The bill that bleeds red ink now, and will forever!

We’ve said it all along! The proposed leave programs in House Bill 11 show a lot of red ink. Finally, we have a Fiscal Impact Report (FIR) from the Legislative Finance Committee.  We had already done our analysis and it was clear from what we could see that the bill and its committee substitute were financially insolvent.  The FIR proves we were correct. HB 11, which seeks to provide a two-part leave program. Part one is called Family Wellness leave, which is funded by new payroll taxes on employees and employers (Paid Family & Medical Leave).  This part of the bill allows up to six weeks of paid leave (on top of the already mandated 6 weeks of sick leave) for a whole host of prescribed reasons. The second part is called Welcome Child, which provides up to 12 weeks of unpaid leave and $9,000 per child in a "rebate." Where does the $9,000 come from? Well…presumably out of thin air!! There is no funding mechanism in the bill. We have to assume that the costs will be taken from the state's general fund starting in 2028. Based on the average number of births in New Mexico each year, the cost to the general fund is $193 million, which is NOT included in this year's budget. In other words, it's a deficit (in the red) from the get-go unless the state begins to empty its pockets. But wait the red ink gets deeper… the amount of the rebate increases each year as it is adjusted upward for the cost of living (based on the C.P.I. which rose 3% last year). That’s a sea of red on which the state cannot afford to sail, and yet, that’s only half the story.

 Here's the other half.  Family Wellness program financed with new taxes. Two of three scenarios are shown in the FIR and both have us seeing more red. In the "medium" scenario, by 2029 (the first year after full implementation of the program) the deficit starts at $42.4 million, growing to $227 million by 2031 . Under the "high scenario," the deficit in 2029 is $350 million, growing to $870 million in 2031. Only under the "low" scenario does the fund remain in the black. The scenarios are based on different assumptions about how many people will participate - high, medium and low amounts. According to the FIR, "If enacted, New Mexico would be the lowest-income state to implement a PFML program. The lower payroll base could result in the payroll contribution being insufficient to cover the needs of the fund."  The bills sponsors aren’t worried about that, because in the bill they have given the authority to the Workforce Solutions Cabinet Secretary to raise the rates, cut benefits, or do both.  Basically, you would pay more and get less…sounds like your typical government run program.

Remember this will be the largest tax increase in history on New Mexicans. Your additional tax burden will look like this:

Beginning on Jan. 1, 2027, for employers and July 1, 2027, for employees. The tax is .2% of employee wages (taken from their NET pay), split 55% paid by the employee and 45% by employers into a fund. However, the secretary of Workforce Solutions must have an actuarial study done and adjust rates to ensure fund solvency. If the high scenario plays out, the tax would go from .2% to .8%, quadrupling the tax rate. If the medium scenario plays out, the rate would go to .5%, two and a half times the original rate. Even under the low scenario, the rate goes to .3%. The bill does limit tax increases to .1% per year, putting the deficit squarely on the backs of all taxpayers. In other words, the Legislature would have to bail the fund out, much like was necessary with unemployment insurance during COVID. 

HB 11 starts out on shaky ground financially and will most likely never find a solid financial foundation.  It also imposes huge hidden costs as small businesses who will struggle to find part-time employees to fill in for absences (virtually impossible in many situations) or simply do without, working remaining employees overtime or cutting back services. New Mexicans count on every dime they make, given the whopping increases in the price of everything, making ends meet is more difficult than ever before. This is a program many employees don't want to pay for and may never use.

The bill remains on the “Speakers Table” waiting to be heard on the House floor.  We will continue advocate on behalf of your business and employees.

$10.8 BILLION Budget is moved to the Senate

After three hours of debate and an alternative budget presented by House Republicans, the House sent the 262-page House Bill 2 to the Senate on a vote of 50-18. The Senate Finance Committee (SFC) will address issues important to the Senate, amend HB 2 and, upon Senate approval, return it to the House. 

The total general fund spending proposed is $10.8 billion in fiscal 2026, a 5.8% increase over FY 25 spending. The measure leaves a 31.2% reserve, or a little north of $3 billion (We have advocated for 30% reserves). The total budget proposal is about $100 million less than the governor's proposed budget. Here are some highlights:

• An overall 4% pay increase for all state employees, including public education and higher education.
• Minimum teacher salaries raised from $50,000 to $55,000 per year.
• A significant increase for the Economic Development Department's budget by 6.5% or $1.7 million. 
• In addition, $50 million appropriated for regional recreation centers; $50 million to establish a research, development and deployment fund; $24 million for site readiness; $16 million for tourism and international marketing/ $15 million for entrepreneurship incubators; $10 million for recruitment in emerging high tech fields; multiple investments in quantum science; and $7 million for the Local Economic Development Act (LEDA). 
• $15 billion to the Health Care Authority, including increases for Medicaid providers.
• Other one-time appropriations support transitional housing ($110 million) and building housing capacity.
• $40 million for the strategic water plan (the governor proposed $200 million).
• Funding for the Early Childhood Care and Education Department increased by $170 million or 21.6%. 
• Total public-school funding of $4.6 billion, nearly half of the general fund.
• Another $500 million to education improvement including $40 million for career technical education and $3 million each for STEAM and STEM initiatives.
• $3 million to the Second Judicial District (Bernalillo County) for establishment of an organized crime commission.
• $1.6 million to State Police step increases to prevent salary compaction and $500,000 for recruitment and grant support.

State revenues are expected to exceed recurring expenses by about $3.4 billion. This amount is called "new money." In general, the "new money" is used for no more than a 6% increase to recurring spending, one-time appropriations or contributions to the various trust funds. A 6% increase in recurring spending is considered to be sustainable into the future.

This extraordinary amount of new money that has occurred for the last few years is courtesy of the oil and gas industry. With all of this “new money”, we would like to see the legislature provide a significant tax reduction for New Mexico families. The Legislature is spending more than enough on new programs and projects. Taxpayers now deserve to be at the front of the line.

The Cost of Green Rules and Regs – “CLEAN HORIZONS” bill can’t see over the hill.

A BIG WIN FOR BUSINESS AND ALL NEW MEXICANS!

Senate Bill 4, sponsored by Senate President Pro Tempore Mimi Stewart (D-Bernalillo), would have required statewide greenhouse gas reductions, based on 2005 emission levels, to be set at:

• By 2030, a 45% reduction 
• By 2040, a 75% reduction 
• By 2050, a 100% reduction.

The scale and scope of the bill would have affected all buildings, structures, modes of transportation, home heating fuels, appliances, virtually every nook and cranny of our economy. The Chamber was deeply concerned with the unintended consequences to our jobs base and overall economy with such an overly aggressive, and quite frankly an un-needed mandate. The message to businesses wanting to come here and businesses trying to grow here would be even more negative and the cash cow of the state, the oil and gas industry would once again be negatively impacted. The Chamber has consistently opposed SB 4 along with a host of businesses and citizens that are very concerned about the impacts.

In prepared testimony, Bill Lee, Chamber president and CEO, offered the following:

“The Clear Horizons Act is a clear and unrealistic overreach that will have irreversible negative impacts across all sectors of New Mexico’s economy and our way of life.

The bill and its unrealistic standards only serve to harm every New Mexico business and every citizen will suffer the consequences from increased prices and job losses created by companies forced to leave our state due to a litany of standards and a timeline that are largely an unattainable fantasy by current technological capabilities.

Achieving emissions reduction through electrification, especially by alternative sources is more than challenging due to the state’s lack of electric infrastructure, this is especially true in rural New Mexico. In McKinley County our infrastructure is weak at best. Many residents don’t have electricity for their homes, let alone to charge vehicles or run appliances, making the mandates of SB 4 even more impossible to achieve.

Additionally, once again, in considering SB 4 you are relegating the legislature’s authority to provide oversight. By giving your authority away to the unelected Environmental Improvement Board, you will take away the ability of the citizens of New Mexico to ask for your meaningful help when the board creates and enacts rules that go too far.

Where they can, New Mexico businesses are already working hard and making significant strides in addressing climate change by reducing emissions.  More and more businesses everyday see the power of focusing on their people and the planet, and their relationship to sustainability and a strong bottom line. The private sector knows this is critical and does not need more government overreach that kills businesses and crushes innovation. We ask that you vote no on SB 4.”

Bill Lee stood in opposition on behalf of the Gallup-McKinley County Chamber of Commerce and for Terri Cole and the Greater Albuquerque Chamber. Other opponents included a host of small ranchers and farmers, many from the pueblos and Navajo Nation, citing the lack of electric infrastructure, unaffordability and impracticality of using electric vehicles for heavy transportation and farm equipment. Many people in remote rural areas are heating with propane, wood and coal and cannot afford to convert to electricity even if there is electric service available. Many business organizations also contributed to the opposition including the Santa Fe Chamber, the New Mexico Chamber, independent petroleum producers, the New Mexico Cattle Growers Association and Excel Energy Co.

Sen. Pat Woods (R-Curry, Harding, Quay & Union), a farmer, made this point: A diesel-powered semi-truck costs $185,000 and can go 1,200 miles. An electric semi costs $1 million, can go only 200 miles and carries one-third of the load. He noted how transportation costs and, therefore, food prices would soar. Other members of the committee echoed these kind of concerns as well as questioning if the Environmental Improvement Board would make reasonable rules. Several committee members pointed out that if the goals aren't achieved voluntarily then government mandates would be forthcoming.

The bill’s sponsor repeated over and over that New Mexico has made, and is making, significant strides in reducing greenhouse gas emissions, in no small part by voluntary actions of the private sector and their innovations. So, do we really need this government overreach?  No, not any more than we need to lock rigid rules that are poorly defined into our statute.  The unintended consequence would stifle the gains being made. In any endeavor, goals and rules must be well-defined and achievable. They should also balance all the needs of our citizens.

Thankfully Senator George Munoz and Senator Benny Shendo (both represent McKinley County) shared our views on balance and voted with the majority to table SB 4.

Coming to Agreement – Enter the Conference Committees -
How the Sausage is Made

As we get to the part of the session where bills are “crossing over,” i.e. being passed to the other chamber, it’s important to know what happens if a bill is amended in the “other” chamber. This can and does happen, for example, with the budget bill. The Senate adds its amendments to House Bill 2, reflecting expenditures that the Senate wants.

The bottom line is a bill cannot be sent to the governor for action until both chambers have agreed to the same, identical version of the bill. Using the budget bill as an example, after the Senate passes the bill, it is then returned to the House for what is known as “concurrence in amendments,” i.e. determining whether the House will accept the Senate amendments. If the House concurs, then the bill is off to the governor.

Non-concurrence

However, if the House refuses to concur, the chief clerk notifies the Senate. The Senate is asked to “recede” from its amendments, i.e. withdraw them. If it does not, then a conference committee is appointed to work out an agreement.

Each chamber has three members of the committee appointed by the Senate president pro tempore and the speaker of the house, respectively. Usually, this is two members from the majority party and one from the minority party. The “conferees” attempt to work out a solution. An agreement is reached only if at least two members from each chamber vote in favor. If agreement is reached, the “conference report” is sent to each chamber, which can only accept or reject the report (the report is yet another version of the bill). If no agreement can be reached, such is reported to each chamber. New conferees might be appointed, or the legislation might just die for lack of agreement.