Facing the largest budget crisis since the Great Depression, the New Mexico legislature opened up a special session Saturday. At this point the outcome is unclear, although the lines of debate have been clarified.
The Governor's Plan: More Smoke and Mirrors: Are You Really Surprised?
The governor's proposal is to balance the budget without increasing taxes, to cut the budget, and to fund shortfalls mainly using one-time-only, non-recurring funds originally intended for other purposes. Among these are $93.2 million in federal stimulus funds, to be spent next year, leaving none for the following year, in spite of more projected shortfalls. The governor also proposes to use so-called "sponge-bond funds," that is, revenues left over from bonds used to service the debt. These have not been used previously to cover recurring costs and, indeed, some have argued it may be unconstitutional to use them for this purpose. The governor proposes to de-authorize or swap (against severance bonds) $290 million in capital outlay funds, which are one-time only funds. He wants to raid a fund used for college loans, removing $44 million from a fund of $70 million.
The problem with using non-recurring funds for operational expenses, as explained repeatedly by Senate Finance Chair John Arthur Smith, is that they merely postpone the day of reckoning. You can pawn a watch and sell a car to get through this month’s expenses, but if your job doesn’t bring in as much as you spend each month, when those funds are gone you still face the same problem.
While the governor’s tactics might help reduce cuts this year, most of them involve questionable, unwise measures. Sure enough, at best they merely postpone the budget crisis for two months, when the 2011 budget needs to be designed, still in the face of a major fiscal crisis. In fact they are so unwise speculation among many legislators broke out this weekend to the effect that the governor is planning to leave office before the end of the year and won't have to face the consequences of his own actions during the next regular session. Whatever his motivations, smoke and mirrors financing is nothing new to his administration, which, among many other slippery moves, raided the Permanent Fund a few years ago, taking principal from it for his pet projects, with barely a peep of dissent from the legislature.
Conflict in the House
The House is internally divided about the crisis. At the root of the conflict is the Speaker's cozy relationship with the Governor. The Speaker has acted for years as chief enabler for the governor's programs, rather than as the arbiter of conflicting interests among House members and the architect of compromise. This has reduced the Speakers' flexibility in dealing with internal conflict and now, with painful budget cuts looming, his role as chief Richardsonista is alienating many House members. It should be remembered that the Speaker was unable on the last day of the session to deliver a number of key bills he had on his agenda, including the Sun Cal TIDDS. This crisis will clarify the limits of his power.
One issue causing alienation is tax policy. Liberals would like to roll back the tax cuts Richardson delivered in previous years, including the gross receipts tax on food, which would generate about $200 million. Rolling back this and other tax cuts would make it possible to reduce budget-cutting by a hefty amount, and not just for one year. But by backing Richardson in his current stance against the rollbacks, Lujan and his dwindling band of loyalists stand in the way of serious airing of tax policy alternatives.
Connected to this issue is education policy. Once Richardson decided, Saturday, that cutting education modestly was an option after all, Lujan went to work trying to sell it. Problem is many Democratic legislators, particularly the Liberals, are beholden to education unions who feel they have the clout to prevent education from being cut. For a moment Saturday there was the sad spectacle of Majority Whip Sheryl Williams Stapleton, a teacher, screaming back at the Speaker, who had suggested she wanted to protect education only in order to protect her own salary.
The Speaker’s response to these policy conflicts is highly revealing of the corner he’s backed himself into by allying himself to Richardson while ignoring the views of the Democratic caucus and dissident factions. Rather than taking charge and banging heads together to forge a compromise acceptable to all in a moment of crisis, the Speaker has resorted to forming broad subcommittees to deal with discrepancies between the governor’s agenda and that of the House. Delegating compromise at the very last minute strongly suggests the Speaker has no strategy to distance himself from Richardson (allowing himself more flexibility to deal with factional conflict) or to deal with the financial crisis itself. The result is a House that is rudderless, incapable of dealing effectively with internal conflict, and unable to act independently (that is, effectively reflecting the interests of the body of elected representatives) in the face of a major fiscal crisis.
This situation is cleaner in the Senate, where leadership has maintained a healthy distance from the governor. Win or lose on the specifics of dealing with the budget crisis, there will be no blood on the floor after the special session concludes since there is no doubt about the legitimacy of the internal workings of leadership. The Senate acted decisively yesterday to accept the governor’s premise that tax increases are not on the table for discussion this session. Proposals to the Committee’s Committee to consider raising taxes all failed. Now the fight begins about the governor’s proposals to finance the deficit and to decide what to cut. I suspect the Senate will assert it’s authority in pointing out flaws in the governor’s proposals and will fight for its own, internally generated view on what parts of the budget to cut.