LEGISLATIVE ROUNDUP: Whew! Senate Finance Committee Tables Overreaching Paid Family Medical Leave

“Today, I’m speaking in opposition to HB 11. Our reasons are very straightforward:

• This bill still imposes a tax increase on employers and on every worker in the state.
• Especially amid multiyear, billion-dollar budget surpluses, the state can afford to provide these benefits and should simply pay for them.
• The fiscal analysis shows the high likelihood that the family leave part of the bill will be under water within a very short period of time, causing payroll tax increases.
• There is no funding source identified for the Welcome Child “refunds.” If paid for by the general fund, this is nearly a $200 million hit at a time when there is uncertainty about potential federal budget reductions.
• Businesses are struggling to find full-time employees, and they are unlikely to find part-time fill-in workers.
• This legislation makes New Mexico less competitive and less attractive as a place to do business. Please vote ‘no’ on HB 11.”

Numerous business organizations also stood in opposition, including the Gallup/McKinley County Chamber, the Rio Rancho Chamber, the Santa Fe Chamber, the New Mexico Chamber, the New Mexico Business Coalition, the New Mexico Cattlegrowers Association, the New Mexico Farm and Livestock Bureau and a business coalition of 30 participants. Supporters include the AFL-CIO, the League of Women Voters, some individuals, the Veterans and Military Families Caucus and Los Alamos County. It’s interesting to note that Los Alamos National Labs, along with all federal employees, are exempt from the bill so they actually don’t have a lot of skin in the game.

The bill, sponsored by Reps. Christine Chandler (D-Los Alamos, Sandoval & Santa Fe) and Linda Serrato (D-Santa Fe), has two parts:

1. Family Wellness leave consisting of 6 weeks of paid leave for medical conditions, military exigency and “safe” leave. The leave is paid for by a new payroll tax on employees and employers that would raise over $200 million annually in revenue. The broad definition of “safe” leave is ripe for abuse. Fiscal analysis shows a high probability of the fund being insolvent within the first two to three years, forcing a tax increase or a bailout from the Legislature.
2. Welcome Child leave for birth, adoption or fostering of a child would grant 12 weeks of unpaid leave and a $9,000 “refund” per child escalated by the cost of living each year. Initially, the cost would be about $193 million annually, subject to future appropriation by the Legislature, which means either coming from the general fund (paid for by all taxpayers) or raiding the Early Childhood Trust Fund.

Chair George Muñoz (D-Cibola, McKinley & San Juan) asked why the approach to this topic isn’t to take baby steps, see how that works and then grow the program. “We always take this to the extreme,” Muñoz said. He pointed out that the CPI inflator on the Welcome Child refunds would boost the total cost from $193 million to around $260 million in just a few years. The Chamber has been advocating the same for at least two years – start with parental leave and build from there.

Other committee members probed for clarity in definitions only to receive the answer “that will be covered in the rulemaking.” Sen. Nicole Tobiassen (R-Bernalillo) pointed out that under the federal American Recovery Plan Act (ARPA), employees will be liable for income taxes on both the paid Family Wellness and Welcome Child payments. This could reduce the amount of actual payment to around 30% of normal take-home pay. Moreover, many taxpayers aren’t familiar with filing 1099 forms and could likely run afoul of the tax laws through no real fault of their own.

To read more about today’s hearing, click on the Albuquerque Journal’s coverage here.

Session after session, such complicated and “extreme” proposals have failed to pass the Legislature. Let’s hope the next time around that Muñoz’s advice is taken. Let’s take some baby steps and build out in the future once we know the real costs and risks. With so much current uncertainty about federal budget reductions and the potential for declining price and production of oil and gas, it’s no time to shoot the moon on a new program of this magnitude and complexity. Sometimes, small is truly beautiful.

AND WHERE’S THE TAX INCREASE?

Now for the bad news. It will cost the state treasury about $75 million a year. And, guess what? The state’s out of money. The heck you say? Thought there was something like $3 billion in new state revenue, que no? There was, but the Legislature has done spent it all. So, what’s a poor old Legislature to do? Raise taxes! And, let’s raise it on the good old goose that lays the golden eggs – the oil industry. One tweak of the excise tax and like magic, another $140 million. Yahoo! Who’ll notice? Most oil gets shipped out of state, so no one’s the wiser. No one, that is, except the folks who have to invest in drilling wells and can move their operations over the state line to Texas.

Besides the obvious impact on the industry, it’s just plain wrong that there wasn’t money reserved in the budget bill to fund this tax cut. With the kind of money at the disposal of the Legislature, this is poor planning, at best. Our suggestion? Go over to the Senate where the budget is still pending and find a way to cut $75 million out of a nearly $11 billion budget and, like magic, you’ve got the money to fund this tax cut.

It’s also crummy tax policy because it makes the state that much more dependent on oil and gas revenue. The price of oil is softening as bans on drilling are being removed. The United States will once more become the world’s largest producer. With lower oil prices, consumers will benefit by lower prices at the pump. But, that means the state loses revenue. It’s a bad time to increase taxes on a commodity that may well fall in value. Better get ready to suck it up – we’ve been here, done that, when oil and gas prices receded.

The bill now proceeds to the Senate. Because of the amount of revenue raised by the new tax, the Senate has about $65 million to allocate to its favorite projects. Rumors we’ve heard: support for foster families, GRT elimination for medical service providers and funding for the UNM medical school construction. The Senate will likely take this bill up very promptly. We’re guessing the bill will go to the Senate Tax, Business and Transportation Committee and then to the Senate floor, and, when approved, back to the House for concurrence. We’ll keep you posted.

Enrique C. Knell shared the Chamber’s support in testimony:

“The Chamber very much supports the goal of creating a strategic water supply in order to improve the state’s drought resilience and for use in developing green energy. New Mexico has the most brackish water in the nation – almost as much water as in Lake Superior. Our neighbors in El Paso have been processing brackish water since 2007 with no health or safety issues. We need the research and development as well as aquifer characterization provided in this legislation. We also need to get some projects off the ground.”

The thrust of the bill is to move forward on projects and research to clean brackish water for use in New Mexico. The Chamber supports the bill and the goal of creating a strategic water supply for use in a wide variety of applications. The bill accelerates the use of brackish (salty) water found in deep aquifers. The town of Cuba, for example, is facing dire water shortages and is preparing to install a desalination (de-sal) plant. The bill is aimed at helping fund these kinds of projects and advance scientific work at New Mexico Tech and New Mexico State University. Tech is working on characterizing aquifers throughout the state – geological mapping to understand possible effects of tapping brackish aquifers. NMSU is working on how to improve treatment technology.

Several senators had some salty questions about the funding in the bill. Sen. Joseph Cervantes (D-Doña Ana & Otero) mentioned “drunken sailors” as he mused about the bill’s spending plans. “I sound too much like a Republican sometimes, but if we’re saying the taxpayers are expecting us to be responsible, how do I know that this funding, especially with the state engineer, is more important than water conveyances, than any number of other water projects and initiatives that will deliver the maximum return on the money we’re putting into that? I guess that’s a long way of saying, is there a list of projects and plans where this money is going to be spent, or are we just, again, we’re just kind of throwing darts at the wall and saying, ‘hey, this looks like this hits, and we’ve got so much money, we can spend whatever’s around?’”

The state’s newly minted state engineer replied, “we can get you more specifics from the New Mexico Tech team that manages that program. They do have a long-term plan in place for systematically, how do they work their way across the whole state? Multiple aquifers at the same time and building, and the data that’s already been collected. So happy to get some materials to you as a follow-up as specifically what the next two years looks like for them to ramp up this program. Again, we can get you specifics.”

More pointed questions about funding and budget plans are sure to come in the Senate Finance Committee. Sen. Candy Spence Ezzell (R-Chaves & Eddy) did quip back about one specific comment Cervantes made. “He said he was starting to sound like a Republican, and I don’t mind him sounding like a Republican, as long as he votes like one. Thank you very much.”

Enrique C. Knell shared the Chamber’s support in testimony:

“HB 19 is a smart reinvestment of GRT and Motor Vehicle Excise Tax revenues into what drives those revenues: our supply chain. As Rep. Lundstrom has said, the goal is to make New Mexico more than just a bridge state. We have a built-in north-south corridor with the Santa Teresa borderplex ready to maximize expansions of manufacturing plants in Mexico. We have existing east-west corridors of Interstate 10 and Interstate 40 that are already getting goods to and from the West Coast and beyond. Communities from Bernalillo County, to Gallup and McKinley County, to Santa Teresa have recognized the opportunities in developing inland ports. HB 19 will help New Mexico get on the road to reaching our full potential.”

With $90 million in the budget bill, HB 19 would stimulate the development of integrated business plans that would surface viable projects for approval and leverage not only the money in this bill but other state funds. For example, part of a project may call for wastewater treatment improvements that might find funding support from the Environment Department. While Lundstrom’s primary interest is in Gallup, where 7,000 trucks pass daily, she pointed to other areas of the state that might also benefit, such as Bernalillo County, Carlsbad and Farmington. The Chamber has been working with Bernalillo County on the Interstate 40 Inland Trade Port for some time, and the county’s economic development experts have amassed close to $40 million in funding for the project.

Several senators questioned the blanket exemption from the procurement code that is written into the bill. Sens. Heather Bergman (D-Bernalillo), Peter Wirth (D-Santa Fe) and Josh Sanchez (R-Valencia) each said they were uncomfortable with the blanket exemption. After significant discussion, the committee and Lundstrom agreed to temporarily strike the blanket exemption entirely from the bill. However, Lundstrom will work on creating tighter exemption language that will make long-term projects work for potential investors and partners.

Lundstrom believes in the power of this bill to make New Mexico a global player in economic trade, and not just a nice place to drive through, “It is an economic development bill that is a proactive response to global economics. The proactive response focuses on the use of existing infrastructure assets. We often discuss the need for economic diversification, and one of the best practices used in economic development is to use existing assets, and in this bill, those are state and local infrastructure assets. New Mexico is seen generally as a bridge state. It’s a great place to drive through. This bill positions New Mexico for increase in trade, increase in re-shoring, increase in on-shoring, and most importantly, to put New Mexico in a place to help with elimination of supply chain disruption.”

Senate President Pro Tempore Mimi Stewart (D-Bernalillo), whose district contains the fairgrounds, is leading the charge with Senate Bill 481 to create a unique state tax increment development district (TIDD) that might issue revenue bonds (state credit is not affected) to finance whatever decision is made. The decisions will be made by a board subject to the State Board of Finance, New Mexico Finance Authority and legislative approval. The board consists of state and local elected officials with only one position appointed by the governor to represent the community at large. The Senate Finance Committee gave a thumbs up on an 8-2 vote today, sending the measure to the Senate floor.

The Chamber is a strong supporter of developing a plan and moving forward with redevelopment of the site. Terri Cole, president and CEO of the Chamber, has offered this testimony:

“If you will, travel back in time with me to 1938, the year the current fairgrounds was first utilized – it was outside the city limits, there were only horse stables on the corner of San Pedro and Central. Even UNM was considered out of town.

“Almost 90 years later, the city has grown up around the fairgrounds, and it’s way past time that we move forward to find a new home for the fair. I don’t know exactly where that is, and that’s what SB 481 is about – giving a platform to look at all the choices, make a decision and then move forward. We’ve kicked this can down the road way too long. We urge you to support SB 481.”

There are a lot of safeguards built into SB 481, including a four-year time frame in which to move forward or shut down, reverting any unexpended funds back to the state. This project is a huge lift for sure. However, communities that have revitalized a run-down area have seen great benefits with increased property values, reduced crime and vibrant commercial and entertainment venues arising. We’re very supportive of getting this bill on the governor’s desk, and we’ll keep you informed.

Brandt took to the Senate floor Saturday morning to explain his bill. “Most doctors, when they graduate from medical school and their residency, come out with about $300,000 in debt. SB 411 actually makes it where if they will sign a four-year commitment to come to New Mexico, that we will pay up to $75,000 a year for them to serve in New Mexico. Now, it does have to be in one of our underserved communities. We need more doctors in the state. Our population is getting older, as we all know. This program will hopefully help us bring more doctors to New Mexico.”

The Chamber has supported SB 411 and other legislation throughout the session that’s designed to recruit, and keep, medical professionals here.

Sen. Cindy Nava (D-Bernalillo & Sandoval) added an amendment that made the loans available to doctors regardless of citizenship status (i.e. DACA recipients, legal permanent residents, etc). The amendment, and then the overall bill, were both quickly accepted without debate or discussion on a unanimous voice vote. Brandt says his bill does give preference to students who went through a residency program in New Mexico.

Brandt sums up the issue he’s trying to help resolve with “the problem is we need doctors, and we need to recruit them from everywhere. We are hemorrhaging doctors right now. We’ve lost over 600 doctors in the last two years. We have got to add doctors to our state. This is just one way of doing that.”

SB 411 heads to the House now, with exactly one week left in the session.

The advocate would be housed in the Department of Justice and be an independent source of investigating complaints received, initiating prosecution, if appropriate, and holding the Children Youth and Families Department (CYFD) accountable for delivery of quality services. The office would increase transparency by publishing reports on CYFD’s performance, actions taken by the advocate and generally requiring accountability. Specifically, the Child Advocate would:

• Review the Children, Youth and Families Department’s (CYFD) service delivery to children and families or of any entity that provides services to children and families through funds received from CYFD;
• Investigate and receive complaints made on behalf of children receiving services from CYFD;
• Determine the extent to which CYFD’s policies enhance the protection of children and their personal dignity, right to privacy, health care and education.
• Set up a system to receive complaints, monitoring best practices and new federal or state laws affecting child welfare. The advocate has the power to subpoena witnesses to provide testimony in cases of fatalities or near-fatalities.
• Refer any instances of violation of constitutional rights, reckless disregard for the health and safety of a child or repeated instances of violating child welfare laws to the attorney general.
• Provide children and families with information about their rights as they relate to CYFD.
• Issue an annual report with specific information related to child welfare and juvenile justice.

There is some concern among legislators that the governor might veto this bill. Consequently, there is interest in placing the bill on her desk no later than noon Wednesday since a bill presented to the governor during a legislative session must be acted upon within three days unless presented during the last three days or later – those allow her 20 days to act. Therefore, presenting her the bill by Wednesday would give the Legislature the opportunity to consider a veto override.

• First is Senate Bill 464, sponsored by Sen. Bobby Gonzales (D-Taos), which would distribute the governmental gross receipts tax revenues paid by hospitals to the “University School of Medicine Fund” created by the bill. The money in the fund is dedicated to fund construction and reconstruction of the UNM School of Medicine. The School of Medicine must kick in $4 million to the fund annually (each July 1 from 2025 through 2034) from funds other than state appropriations.

• The second is House Bill 449, sponsored by Rep. Derrick Lente (D-Rio Arriba, Sandoval & San Juan), creates a statutory framework for a fund to support major academic and research projects at higher education institutions as well as student housing and student life projects, which are not currently eligible for funding through the statewide higher education capital outlay process. According to the fiscal impact report, “General obligation (GO) bond capacity is insufficient to meet demand to replace and repair higher education facilities. Construction costs have risen steeply over the last several years and have far outpaced modest annual increases to general obligation bond capacity. From 2022 to 2024, requests for new construction projects from higher education institutions increased by 81% on a per square foot basis. General obligation bond capacity rose only 12% over the same period. This has made it increasingly difficult to fully fund new construction in any single year.”

• Finally, we’re looking forward to seeing the capital outlay bill early next week. UNM is looking for $30 million to get the design phase of the project underway and completed. This is a necessary step before funding, can be obtained for actual construction. This will be a flagship project for our community and we’re very pleased to offer support.