D e s e r t E x p o s u r e
December 2009
Bill's Black Hole
A few modest proposals for closing the budget gap,
post-gravy train.
Is this going to be Gov. Bill Richardson's legacy? Earlier in the governor's second term, when New Mexico's coffers were overflowing with oil and gas revenue and he was contemplating taking his act to the White House, Richardson no doubt envisioned being remembered in the Land of Enchantment for cutting taxes, cracking down on drunk drivers and expanding government services. Something like a hybrid of Ronald Reagan and FDR, with maybe just a touch of Huey Long.
Now, in the wake of an ugly special legislative session to slash state spending and with an even uglier regular session looming, Richardson's legacy looks more and more like a budgetary black hole. Even members of his own party, like Senate Finance Chairman John Arthur Smith from Deming, are criticizing the governor's approach to the budgetary crisis and warning that the worst is yet to come. It took borrowing from Peter to pay Paul and various one-time fixes to close — mostly — the $650 million budget gap in the current year's budget. Without those "gimmicks" (as Senate Republican Whip William Payne of Albuquerque called the budget-balancing measures) and the federal stimulus money used to paper over the shortfall, the 2010 legislative session could be looking at a $1 billion hole. And Smith says ominously, "A billion dollars could be a low number."
What the heck happened? Obviously, the worst recession since 1929 happened, for starters, hammering New Mexico's tax collections just as it did those of other states. But New Mexico is especially pinched by a decline in oil and gas revenue, which accounted for roughly one-sixth of all state revenues in FY09. For the quarter that ended in September, for example, the State Land Office reported a 54% drop in revenue from lease rentals, royalties and interest from oil and gas operations. Total Land Office revenue fell to $90 million in that first quarter of the 2010 fiscal year, down from $194 million in the same period last year.
That's the way it goes in the boom and bust world of energy production. As recently as the summer of 2008, remember, New Mexico was so flush with oil and gas cash that Richardson was proposing to use the windfall to fund universal health care. At that point in the palmy days of $4 a gallon gasoline, state analysts projected that the state would have $392 million in new money for the upcoming budget year and another $1 billion for one-time spending projects.
But, besides the revenue crunch, it's also true — as columnist Henry Lightcap pointed out in these pages last month — that state spending has ballooned on Richardson's watch. It's not just his special proposals for spending oil and gas windfalls; overall state appropriations have increased across the board. When Richardson arrived in Santa Fe in 2003, recurring appropriations totaled $4.1 billion. By the 2008-09 budget cycle, that figure had shot up to about $6 billion. That's a 46% increase in just six fiscal years. Drunken sailors on shore leave with newly cashed paychecks are more careful with their money.
Much of that additional spending, admittedly, has gone towards worthy purposes — from helping veterans and Native Americans to funding education and health care. But now that the gravy train has ended, it's time to look back down the track at where we started.
Rather than battling over where to slash, perhaps the governor and the legislature should go turn the budgetary clock back and rethink where we really need to add. Let's put the Land of Enchantment in a time machine and roll every line of the state budget back to FY03, before the great Richardson spending spree began. Somehow the state of New Mexico limped along on a measly $4.1 billion a year, without closing state parks or schools or tossing disabled veterans out into the street.
But, you say, prices have risen since 2003-04! Fair enough. Give every state agency and other outlay an increase equal to the rate of inflation between then and now. That brings the budget to about $4.9 billion — within striking distance of being balanced, depending on the revenue picture in 2010-11. (Exact budget numbers, by the way, are amazingly difficult to nail down: The $650 million shortfall faced by the recent special session was described as against a $5.5 billion FY10 budget. Executive recommendations for FY10 called for $5.88 billion in recurring appropriations. It all depends on what you count — a million here, a million there, and pretty soon you're talking about real money.)
Without at least a small revenue recovery — and unless you want to simply eliminate every state agency that didn't exist in 2003 — we'd still need to raise taxes. Increasing income taxes in a still-lingering recession — especially a recession that's been so hard on employment — seems like economic folly; besides, as of FY09, income taxes represented only about 27% of total general fund revenues. And regular readers already know our opinion of the regressive gross-receipts tax; an increase would make this tax even more of a drag on the economy and burden on those least able to pay.
An exception that the legislature should consider is restoring the gross receipts tax on sugared soft drinks, which was lifted along with other sales taxes on food (except for sodas sold through vending machines). New Mexico Voices for Children, which has suggested such a move, points out that this "would bring in millions of dollars and help the state offset the high medical cost of obesity and diabetes." Nutrition experts agree, and take the argument a step further, calling for an excise tax on soft drinks sweetened with sugar or high-fructose corn syrup. According to the Center for Science in the Public Interest, a five-cent tax on every 12-ounce sugared soft drink would raise $47 million in New Mexico — which has one of the nation's higher obesity rates, at 25.2%.
Another way to improve New Mexican's physical and fiscal health would be to resurrect the proposal from the 2009 session to add $1 a pack to the tobacco tax. That would bring in about $30 million while discouraging the single greatest contributor to health-care costs. At 91 cents a pack, New Mexico's tobacco taxes rank 29th in the nation; even at $1.91, our rate would still be nine cents lower than neighboring Arizona. A poll earlier this year found that 76% of New Mexicans supported an extra $1 a pack, and even 57% of smokers approved. With nationwide smoking rates increasing in 2009 for the first time in 15 years, the time is right.
The state also needs to take a hard look at the millions of dollars in tax credits that suck money away from the budget. According to the Center on Budget and Policy Priorities, New Mexico gives away almost as much tax revenue in special exemptions, deductions and credits as it spends in the general fund budget. And we're one of only nine states not requiring a "tax-expenditure report" to let the public know the true cost of these tax breaks and whether they're still accomplishing their goals.
To single out just one example: Is the state really getting its money's worth from incentives for the film industry, which now total $98 million a year? An Ernst & Young study calculated that state and local governments get $1.44 for every $1 in moviemaking rebates. But an earlier study by NMSU's Arrowhead Center put the figure at just 14.4 cents. Taxpayer irked by recent highway closings to accommodate film production just might be willing to accept the NMSU numbers and bid Hollywood hasta la vista, baby.
Of course, New Mexico's expanded film role is part of Gov. Richardson's legacy, and he'd no doubt be loathe to relinquish it. But it's looking like New Mexico taxpayers just can't afford that legacy. The party's over — and we're stuck with the bills.
Not So Wild About Harry
Teague disappoints Democrats with health-care votes.
New Mexico Democrats who exulted in Harry Teague's victory in the Second Congressional District election just over a year ago understandably expected a sharp break from the hard-right voting record of Rep. Steve Pearce, the Republican who held the seat until making an unsuccessful US Senate run. Especially on the issues that really count in pushing President Obama's agenda forward, Second District Democrats no doubt believed the newly minted Rep. Teague would vote like, well, a Democrat.
But on the most important House vote of 2009 — the Affordable Health Care for America Act — Rep. Teague voted like a Republican. He was one of only 39 Democrats to vote against the bill, and one of only 12 from a district in which Obama got at least 49% of the 2008 vote. Both of New Mexico's other two Democratic House members supported the health-care reform bill. Teague also voted in favor of the Stupak amendment, which tacked on extreme restrictions on insurance coverage for abortions; then, having saddled the legislation with that amendment, Teague turned around and voted against the whole package.
Teague explained that he was "concerned that American taxpayers will end up footing a nearly $900 billion tab for a bill that doesn't do enough to 'bend the cost curve' in a way that permanently reduces both costs and the national debt." According to the nonpartisan Congressional Budget Office, however, the bill would yield a net reduction in federal budget deficits of $129 billion over the next decade.
One UNM political science professor characterized Teague's votes as an effort by the congressman to make his positions closer to that of his 2010 opponent, the returning Steve Pearce. Second District voters who pulled the "D" lever in 2008 must be wondering whether their vote made any difference — and why they should bother to support a pale imitation of Pearce in 2010.
Teague took a lot of heat for voting in favor of a controversial climate bill earlier this year, and perhaps calculated he needed to tack rightward. And, to be fair, he has voted with fellow Democrats nearly 90% of the time since taking office, according to the Washington Post.
But we can't help recalling that when running for Congress last year, Teague stated he supported "allowing Americans to buy healthcare coverage through the same plan that members of Congress enjoy." That sounds a lot like the much-debated "public option" — only more so. What happened to that stance once he got to Washington?
When it comes to being represented in Congress, Second District voters deserve to get what they thought they cast their ballots for. And come Election Day 2010, Rep. Harry Teague may discover that his efforts to appeal to more conservative voters cost him the enthusiasm of the progressive activists he needs to win re-election.
Moving On
Fans of Donna Clayton's popular Business Exposure column will flip the pages of this month's issue in vain looking for their favorite. Sadly, the demands of Donna's full-time job commitment have caught up with her after nearly a year of juggling work plus the extensive research and writing the column required. We and Desert Exposure readers will miss Donna's engaging and often news-breaking (pretty amazing in a monthly publication!) column. Over the years, not only her column but her lively features — not to mention all she did for Desert Exposure behind the scenes — have been essential to the editorial excellence we always strive for. We'll try to continue that standard while wishing her the best, but it won't be easy!
Local business coverage will find a new, albeit briefer, home in our Tumbleweeds section; email business news to editor@desertexposure.com
Fleece Fun
Finally, as we close out another calendar year (already!), we want to thank all the advertisers and readers who helped make 2009 memorable for Desert Exposure. Despite economic gloom and countless obituaries for other publications, your support has continued to make Desert Exposure a bright spot in southern New Mexico every month.
As usual, our December cover doubles as our holiday card to you all. While "Fleece Navidad" puts a punny spin on the season, we trust this issue puts a warm glow in your heart for the holidays.
We hope to meet you again in these pages in 2010. We'll be here, looking forward to a new year serving advertisers and readers with "the biggest little paper in the Southwest."