State government escapes major disruption

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By Harold Morgan

By hook, crook, shifting from Peter to Paul, and hundreds of millions of federal stimulus dollars, state government survived, without major operational disruption, three years of less money coming into the general fund, the states principal pot of operating money.
The period ended with the 2011 fiscal year (FY 11) that closed June 30 of this year.
Survival came through easing down spending 3 to 4 percent per year for four years, said David Abbey, Legislative Finance Committee director.
Abbey spoke Dec. 15 at the annual legislative outlook conference of the New Mexico Tax Research Institute.
The overall spending cuts ended with FY 11. For the current year (FY 12, ending June 30, 2012), the state has gotten lucky.
Abbey didn’t cite luck, however. Just as one-time options ran out, revenue has increased, he said.
“The FY 13 revenue outlook suggests steady but moderate growth consistent with a slow economic recovery,” Abbey said.
That “moderate growth” projection is considered somewhat conservative.
What may be the best news isn’t a number but rather a trend, or perhaps the beginnings of what may become a trend.
The revenue from broad-based taxes is growing a little. These taxes include gross receipts and income taxes. Taxable gross receipts have grown 12 percent in the past six months.
“New money” for FY 13 is estimated at $250 million. That figure is FY 13 estimated revenue minus FY 12 spending.
“The challenge,” Abbey said, “is not to go back to old spending practices but to invest in programs that will yield better results.”
That means serving the “most needy” or producing the best return on investment.
In job terms, the projected growth averages 1.5 percent per year for the next five years.
Such job growth, if it happens, will bring the state back to the pre-recession employment peak of just under 830,000.
Oil and gas revenue per unit of production is projected to be fairly steady the next few years with oil in the $8-to-$9 range per barrel and gas from $4 to $6 per thousand cubic feet.
The amount of money to the state will be determined by the amount of production.
State pension funds remain a huge and pretty much unaddressed problem with respect to action, though all sorts of people are working on proposals.
The pensions are outside the general fund.  
“Our benefits are generous,” Abbey said. The cost-of-living adjustment for the pensions of the main group of state retirees “is remarkably generous.”
Applying changes only to new state employees, a sometimes argued approach, will never get to a solution, namely solvent funds.
Conventional wisdom lurked in a few speakers. Richard Berry, Albuquerque mayor, pitched the fantasy of luring the headquarters of national corporations to locate in Albuquerque.
Terri Cole, long serving president and CEO of the Greater Albuquerque Chamber of Commerce repeated an old and destructive complaint, that “we are a public sector economy.”
As is nearly always the case, Cole failed to exempt the national laboratories and other public research institutions from the evils of “the public dollars.”
Opportunity may lie with speaker after speaker discussing aspects of the absolute mess of the state tax system.
We have narrowed the tax base and raised the rates, was the comment, repeated across philosophies. This can’t continue, all said.
Keith Gardner, chief of staff for Gov. Susana Martinez, cited the administration’s commitment to substantial first-term accomplishment.
“We must change our way of doing business in New Mexico,” Gardner said.
The statehood centennial will be 2012. What better time to take risk, to start over with action, not just talk.

Harold Morgan
© 2011 New Mexico
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