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Money is rolling in, but budget makers are cautious

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By Harold Morgan

During the 2018 legislative session, held in January and February, the Legislature passed a budget for the 2019 budget year that starts July 1.

The news is not that the Legislature did its job of passing the budget, but that the task, straightforward if difficult, was done without headline-generating nastiness, a difference from previous years.

Possibly the biggest difference was that some new money was available. Saying yes to proposals always makes elected officials happier. The task of no is difficult, involving choices and facing constituents convinced of the righteousness of their cause.

In her cover letter to the Legislative Finance Committee’s annual Post-Session Review, LFC Chair Patricia Lundstrom said, “An economic rebound made the 2018 legislative session a very different experience from the session of a year ago.”

One significant item adds $28.4 million to early childhood programs, continuing a years-long commitment from the Legislature and Gov. Susana Martinez.

The additional money stands in the face of claims that raiding the permanent funds would somehow make something magic happen.

Charles Sallee, of the Legislative Finance Committee, said of early childhood education and funding that there has been “a big bipartisan effort over the years. Investment has been made by the Legislature” and likely will continue.

Sallee spoke May 10 to the Tax Research Institute’s annual policy conference.

The bad but unsurprising session news is the absence of fundamental reform of anything, due to, it is supposed, Gov. Martinez having just under eight months left in her term. Change happens at the start of an official’s term when there is enthusiasm and political capital to spend.

Along the way something interesting happened. The amount wasn’t large, “only” $30,000, a significant sum but trivial on the scale of the $6.3 billion “spending plan” for the coming year. State government spends $3,000 for each of the 2.1 million (or so) New Mexicans, not counting capital projects, typically financed with borrowed money, and transportation.

Getting stuff through channels outside the organization’s operating (General Fund) budget is a bureaucratic imperative.

This column has occasionally complained about buying little things from capital funds such as senior center kitchen cookware. Good financial management would match the payback period (say ten years) with the life of the items purchased. The policy question is whether the right money is being used in the right way.

Martinez vetoed the $30,000 for the national champion University of New Mexico cross country team. Replacing treadmills was to be one use. Martinez got editorial support for the move from the Albuquerque Journal, but the Journal wrongly claimed the treadmills would be “short-lived.” In fact, according to my expert, the operator of the gym I use, treadmills might last ten years, with appropriate maintenance, depending on their quality. My expert’s treadmills are tanks. A private individual is supplying the $30,000, raising the question of using public money at all.

Jon Clark, LFC chief economist, told the Tax Research Conference that the LFC views state finances with “a mix of equal parts joy and caution.”

Yes, the money is rolling in due to “an incredible surge of oil production” plus increased prices. But mining, construction and trade (retail and wholesale) account for 70 percent of the fiscal year-to-date growth in what are called “matched taxable grow receipts.”

Activity in Lea and Eddy counties plus out-of-state buyers provide 80 percent of the growth in these four sectors. But Permian production bottlenecks, including congested pipelines, are appearing. Little is happening elsewhere. Retail gross receipts are down in Bernalillo County.

Caution is the mode with attention focused on increasing state financial reserves in the face of the next decline in the highly cyclical oil and gas business.