Tax Veto Puzzle

Governor avoids straight talk about why she vetoed proposed alcohol tax rate hike

More than a month after Gov. Michelle Lujan Grisham vetoed tentative steps that state legislators had taken to address New Mexico’s worst-in-the-nation rate of alcohol-related deaths, her office offered rationales that don’t square with her actions.

The governor vetoed the first increase in alcohol tax rates in 30 years but she does not oppose increasing alcohol taxes, her spokesperson Maddy Hayden writes in an email to New Mexico In Depth. The one-penny increase—watered down from a proposed hike of a quarter-per-drink—”would not have a material effect on alcohol prevention and treatment,” Hayden adds, declining to say whether the governor supported a larger hike.

The governor also vetoed a measure that would have directed tens of millions of dollars of existing alcohol tax revenues to alcohol treatment and prevention but she “believes unequivocally” that New Mexico needs to devote more resources to addressing alcohol misuse, according to Hayden. The governor felt the Legislature’s tax package represented “a potentially untenable hit to the general fund” and vetoed the reallocation of alcohol tax revenues “out of fiscal responsibility,” Hayden says, declining to clarify why the governor didn’t then retain the alcohol tax hike, which would have generated $10 million annually.

The vetoes continue to puzzle and disappoint senior members of her own administration and Democratic legislators.

Neal Bowen, who since 2019 has directed the Behavioral Health Services Division, which oversees much of the state’s treatment and prevention services, called the outcome a “missed opportunity.” Even that “trivial alcohol tax hike,” Bowen writes in an email to New Mexico In Depth, would have put the state in “a position to support an expansion of screening, treatment, and recovery services specific to alcohol.”

Sen. Gerald Ortiz y Pino, D-Albuquerque, calls the governor’s vetoes “a serious misstep.” He had sponsored a standalone bill to shift half of alcohol tax revenues to treating and preventing alcohol misuse, about $24 million at current tax rates, rather than depositing them in the general fund. Health department data show the state has a serious shortfall of alcohol treatment services: In 2020, an estimated 73,000 people in New Mexico had untreated alcohol use disorders, exceeding all other substance use disorders combined.

There was unusually broad support for Ortiz y Pino’s bill. In a Feb. 23 hearing of the Senate Tax, Business and Transportation Committee, alcohol industry lobbyists and lawmakers of both parties commented favorably on the proposal and no one spoke in opposition. The Legislature’s final tax package maintained this concept, shifting alcohol tax revenues from the general fund into an Alcohol Harms Alleviation fund for treatment and prevention services.

Over the last six years, the governor has accepted nearly $100,000 in political donations from the alcohol and hospitality industry, but nixing the measure put her at odds with them, too. In the wake of the veto, Carol Wight, CEO of the New Mexico Restaurant Association, says that although her organization opposed an alcohol tax increase, it had “always supported” dedicating all the existing revenues to addressing alcohol’s harms. “It’s ridiculous that half goes to the general fund,” Wight says.

It’s difficult to square that veto with arguments of fiscal restraint, says Ortiz y Pino, because reallocating alcohol tax revenues to alcohol treatment for beneficiaries of Medicaid would generate tens of millions of dollars of additional revenue. Every dollar the state spends on Medicaid, which insures 34% of New Mexicans, gets matched by the federal government by a ratio of nearly three to one. “We could have seen a $50 million or larger pot of money available to expand treatment,” Ortiz y Pino calculates.

“We’ll have to try again,” he adds, “but it sure would have helped if the governor’s staff had reached out to explain what was behind her decision.”

It often takes years for lawmakers to pass substantial legislation, and efforts to reduce alcohol deaths may be no exception. Hayden says the governor was talking with legislators “about a path forward on this issue,” indicating that she preferred a “more deliberate, cohesive” proposal that affected tax rates and specified how the revenue is spent.

The co-sponsors of last session’s alcohol tax increase—Sen. Antoinette Sedillo Lopez, D-Albuquerque, and Rep. Joanne Ferrary, D-Las Cruces—confirm they had communicated with the governor’s chief of staff and expected to meet with Lujan Grisham this month.

For now, the governor’s office touts its proposal that the Legislature devote $5 million to a new Office of Alcohol Prevention in the health department. Lawmakers ignored that request, leaving the health department to reallocate $2 million from its base budget for a scaled-back version of the office.

Health Secretary Patrick Allen, who was confirmed in February after holding a similar position in Oregon, says even a down-sized alcohol office would be “an incredible step forward” for the state. But he is uncertain when it would begin operating or what it would do. In an interview with New Mexico In Depth in April, he says the health department had not begun filling the office’s dozen positions and he could not predict how long that would take. As of last year, 28% of the positions in the health department were vacant.

He declined to identify strategies the health department would pursue to reduce alcohol’s harms, saying, “I’m not sure I can answer that with specificity yet.”

Although alcohol is involved in one in five deaths of working-age New Mexicans, the health department has not shown much public interest in excess drinking. Of nearly 1,800 press releases the agency issued over the last decade, just four related to alcohol, fewer than for wildfire smoke or the Zika virus, according to an analysis by New Mexico In Depth.

Signaling a possible change, Allen says “we should be talking more about alcohol and the impact it has on New Mexicans.” A $750,000 public information campaign he launched in Oregon entitled “Rethink the Drink” might be a “roadmap,” he says.

The citizen advocates who led last session’s push for changes in alcohol policies were undeterred. According to public health consultant Shelley Mann-Lev, who helped organize the effort, the group has continued meeting twice monthly and recently dubbed itself the Alcohol Harms Alleviation Coalition. Over the next year, they intend to educate the public about and advocate for the passage of policies to reduce excessive drinking, she says, including an alcohol tax hike. This week they launched a website,, to recruit new members.

Bowen, the state official, says he hoped lawmakers would revisit the issue. But he won’t be on the governor’s team if they do. He recently announced his resignation, effective May 19.

This analysis was published by New Mexico In Depth, an SFR partner.

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