SANTA FE, N.M. (AP) -- Republican Gov. Susana Martinez proposed a nearly $5.9 billion New Mexico budget on Thursday that's close to the overall spending recommendations of a legislative panel, but the administration's plan for tax cuts and merit pay for educators could run into trouble in the Democratic-controlled Legislature.
Martinez outlined a budget blueprint that provides for a 4.1 percent, or $232 million, increase in spending in the fiscal year that starts next July. That closely resembles the $233 million increase for public schools, higher education and general government programs proposed a day earlier by the Legislative Finance Committee.
However, there are plenty of areas of potential disagreements with Democrats in the details of the governor's budget.
Martinez proposed $11 million for a merit pay system for teachers and $47 million for tax cuts as economic development incentives. Unlike the legislative panel, Martinez did not recommend an across-the-board 1 percent pay raise for state workers and educators — a $32 million provision under the legislative committee budget.
"At a time when New Mexico families are still struggling across the board, pay increases for government employees is not something that I can include in my budget," Martinez said at a news conference at an elementary school in Santa Fe.
The Legislature convenes next week for a 60-day session.
Martinez proposes to implement a reduction in the corporate income tax rate over three years, lowering it from 7.6 percent to 4.9 percent, and revamp how New Mexico determines the taxes owed by corporations doing business in multiple states. Those would cost about $255 million when fully implemented. The governor also wants to establish a tax credit for small businesses that create jobs.
Senate Majority Whip Tim Keller, the No. 3 Democratic leader in the upcoming session, said lawmakers need to consider closing tax loopholes to offset the cost of corporate tax changes.
"Right now those cuts are just too big," said Keller.
He said many lawmakers want to reward teachers, but the dispute will be over how to measure an educator's performance to determine who receives pay incentives as proposed by the governor.
"Traditionally those have been decisions left up to principals and up to school boards. So the real question here is the state of New Mexico going to be the one handing these out? I think that's very problematic for any local school district," Keller said.
The first-term governor proposed a nearly $33 million increase in spending for Medicaid, which provides health care for a fourth of the state's population. Martinez announced Wednesday that her administration plans to expand Medicaid to cover more low-income adults under terms of a federal health care law. The change won't require additional state money initially because the federal government will pay the extra cost.
The governor's Medicaid recommendation — $933 million — is very close to the $940 million proposed by the legislative committee. However, there's a potential source of disagreement on Medicaid. The legislative spending plan assumes the administration can save almost $11 million next year when it reduces the number of Medicaid managed care companies. The governor's budget doesn't do that.
The legislative committee and the governor are in agreement on a more than $30 million plan to raise the state's contributions to pension plans for public employees and educators by 1.5 percent. That's needed to offset a scheduled drop in payments by workers. Pension payments by employees were increased and the government's contributions dropped by a similar amount as part of a budget-balancing plan enacted in 2009 but set to expire this year.
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