Session balances budget, but just barely

Lawmakers are returning to Santa Fe on Tuesday, May 30, two days before my filing deadline for this column—but I think I know what’s going to happen. They will meet briefly and go home, criticizing the governor for what little money is left in reserves but satisfied that at least higher education and other funding was restored for the coming fiscal year.

That may seem like a waste of $50,000 (the reported cost per day of having a special session), but I can understand why the legislators recessed rather than adjourned last week. They had to be sure Gov. Susana Martinez’s didn’t undo their balanced budget with her vetoes.

Martinez did as expected: She allowed the spending measures to be restored—she never intended to cut off funds to the colleges and universities, and the cuts to legislative services was just an attention-getter—while nixing everything else that looked like a tax increase. Fault her for depleting state reserves if you want, but you’ve got to give her this: She’s been nothing but consistent in her opposition to tax increases.

The Democrats call her “no new taxes” pledge an ideology, and maybe it is, but it strikes me more as an unpainted corner, and she’s trapped there by her own promises. She said she’d never raise taxes, so now, if she does, she’ll never live it down. Read George H.W. Bush’s lips if you doubt me.

When Martinez was sworn into office in January 2009, she inherited an economic mess. An epic credit crisis in 2008 had pulled the rug out from under the national economy, so that by the time she came into office, America was in the throes of the Great Recession.

Martinez, as governor, has never had a good budget year to work with.

Part of that is her fault, in that she’s been so unbending in her tax pledge. Over her six years in office, the price of a barrel of oil fell below $50 and the oil and gas industry went into a deep and prolonged slump. New Mexico gets about a third of its tax revenue from the oil and gas industry, so when that tanked, so did state government.

Such fiscal circumstances means that initiatives take a backseat to operations. If you want limited government, that’s not such a bad thing, but if you want to approach state problem in innovative new ways, you’re out of luck.

The problem is, New Mexico has become a bad investment. In state-by-state comparisons, we’re at or near the bottom in education, employment, child welfare and more. If a company is seeking to relocate, New Mexico’s tax base, workforce and quality of life makes us a less-than-attractive option.

It seems the things we’ve got going for ourselves—our diverse cultural underpinnings, an abundance of sunshine and open spaces, and more than our share of natural wonders—aren’t nearly as marketable as, say, a well-prepared workforce. It’s been said over and over again: New Mexico isn’t a business-friendly environment.

New Mexicans rely heavily on government, including the federal dollars that come in for our labs and air bases, so what Congress does in the coming months as they grapple with their own budget could have big consequences in our state.

Last week, President Trump submitted his first budget (based on the unrealistic expectation of 3 percent growth), which includes deep cuts into social services and environmental agencies. Bernie Sanders has called the proposed budget a massive “transfer of wealth” from the poor to the rich. If that’s true, a poor state like New Mexico can expect to suffer from such a shift in federal spending.

So even if New Mexico’s legislators meet and adjourn without any further action, our state’s financial problems are far from fixed. Yes, we have a balanced budget for fiscal 2018, but the price of that is in our reserves. For a $6.1 billion budget, the state has only $30 million set aside in reserves.

State officials like to keep reserves at about 10 percent of the annual budget. That $30 million translates to 0.5 percent. Not exactly a secure situation.

One of the measures passed in the special session last week was to establish a “rainy day” fund from surplus revenues during better economic times. That’s long overdue and badly needed. Only problem is, it hard to see better economic times ahead.

Tom McDonald is editor and founder of the New Mexico Community News Exchange and owner-manager of Gazette Media Services. He can be reached at tmcdonald@gazettemediaservices.com.