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Committee hears warnings that GRT changes could destabilize county and municipal budgets
Summary
Presenters told the Revenue Stabilization & Tax Policy Committee that New Mexico counties and cities rely heavily on gross receipts tax (GRT), that exemptions and rate changes can produce large, hard‑to‑predict revenue losses, and that a new LFC dashboard will help legislators monitor local finances.
The Revenue Stabilization & Tax Policy Committee convened for its second day to examine how gross receipts tax (GRT) changes and other tax policy proposals affect local governments across New Mexico. Presenters from New Mexico Counties and the New Mexico Municipal League warned that deductions and exemptions have eroded the municipal tax base and that recent reforms carry uncertain fiscal effects for counties and special districts.
Joya Sparsen, executive director of New Mexico Counties, told members that GRT receipts can be highly volatile in smaller communities and that property tax and GRT together often supply roughly half to 70% of a county’s operating revenues. “We don't yet have a clue what that disability veterans exemption will cost,” Sparsen said, describing a recent change that expanded eligibility and noting counties cannot yet quantify its fiscal impact because claimant disability levels and the types of properties involved vary widely.
Lisonbee Nichols, deputy director of the New Mexico Municipal League, estimated that local governments lose about $330,000,000 annually from medical and health‑care related GRT deductions. Nichols also highlighted an instance where initial fiscal impact estimates for House Bill 163 were small but later TRD reporting showed a much larger local toll: "the most recent TRD tax expenditure report showed the impact is 56,000,000 to local governments," she said, underscoring forecasting challenges.
Both presenters urged caution before adopting new exemptions or credits. They cited past episodes—such as the 2013 repeal of hold‑harmless protections and subsequent local rate increases via three‑eighths‑cent increments—as evidence that state policy changes can force local governments to raise rates or cut services. Panelists suggested alternatives, including preserving the local portion of GRT when the state reduces its rate or providing new, durable revenue sources rather than temporary state payments.
Committee members pressed presenters on technical issues including mill‑rate caps (a constitutional county cap of 11.85 was noted), the administrative timing for newly eligible veteran filers, and the limits of small‑cities assistance. No formal actions or votes were taken; the committee scheduled further briefings and bill presentations at its December meeting.
The committee’s next steps include additional information from TRD and DFA to refine fiscal estimates, and ongoing review of proposals that could affect local public safety, courts, and capital projects.
