Saturday, October 17, 2009

The Budget Debate: Where Things Are As the Special Session Begins

The Special Session of the Legislature is scheduled to begin in just a few minutes, today, Saturday, to deal with the budget shortfall. Here is where we stand so far, as I understand it.

First, the budget shortfall is serious. At an estimate $680 million, this represents about 12-13 percent of the budget passed during the 2009 session. There has never been a budget shortfall of this magnitude in New Mexico since the Great Depression. This is no joke and the state will be feeling this, almost certainly, until 2013, when revenues are projected to equal those of 2008. But purchasing power by then will have been eroded by five years of inflation, so it may take another two or three years after that for revenues in purchasing power to equal those of 2008.

Second, the institutions that must deal with the crisis--the legislature and the governor--are gravely weak. Deciding what must be cut, rather than expanded, is difficult, and neither the legislature nor the governor are likely to resolve the budget crisis in a way that highlights the largely petty reasons things end up as they do in the legislature. The effort will be to accommodate interests, rather than allow factions to walk away angry.

On the one hand the governor, already discredited by strong and believable allegations of "pay to play" politics, is partly responsible for the mess getting to the stage it is now. Governor Richardson was simply not minding the store responsibly as evidence mounted month after month for at least the past 15 months that a full-fledged fiscal crisis was brewing. Last year when Sen. John A. Smith tried to warn him and the public that the state's revenues were in sharp decline, the governor mocked his warnings, calling him "Dr. No," and insisting on a tax rebate that the best budget people in the state warned was untenable. This summer, as evidence continued to mount the shortfalls were still mounting, the governor continued to ignore the warning signs, while still playing politics with the budget. The recipient of the "Best Governor of the Year" award early this summer from the National Education Association, the governor boldly declared public education could not be cut no matter what, even as news media were full of reports to the effect that the educational outputs in New Mexico, after record amounts of funding increases for education, were still dismal, in virtually all categories.

The Governor's credibility in deciding what to cut, under all of these circumstances, is pretty low. Is there anybody in New Mexico who really believes the governor will make his decisions based on what he thinks is best for the state as opposed to what is best for what is left of his political career?

On the other hand, the legislature, especially the House, has shown very little leadership or courage in the face of a dysfunctional governorship coupled with a fiscal crisis of the first magnitude. Top leaders in the House are still behaving as though power relations in New Mexico are still as they were five years ago when Richardson still enjoyed the trust of the public, the legislature, and virtually all segments of society. Then it didn't matter if a few legislators acted more like cheerleaders for Richardson than responsible legislators. Today, with elections coming up and the state in crisis it looks more like a testimony to cowardice and lack of imagination, rather than the cold calculation of realpolitik. The ability of Republican legislators to articulate anything approaching a coherent message about the crisis of the governorship or the crisis of the budget appears to have gone AWOL. There is no lack of talent in the New Mexico legislature, either among Democrats or Republicans. That none is willing to step up to the plate, consistently, and tell it like it is, is a sorry commentary on the state of democratic practice in New Mexico today. That should be a source of serious concern for each of us, regardless of party or ideological orientation.

Third, look for face-saving compromises during the Special Session. The governor has already backed off of his foolish promise not to cut education. If you don't cut the budget for education, and you leave Medicaid and other 3-1 federal dollar matches alone, you must then cut something like 16% of everything else. That means jobs, and lost jobs means angry voters. Only those legislators tied completely to the apron strings of the education unions will end up putting up much of a fuss about this. Cutting jobs would be particularly troubling for legislators in the North, where state government jobs are a major force in the economies of many counties.

Tax increases? The governor was lavish in slashing taxes at the beginning. Remember how he removed food from the gross receipts tax? Restoring that would add about $200 million, I am told by a good source, making a good start at resolving the crisis. After all, New Mexican lived for nearly a century of statehood paying gross receipts taxes on food. During a crisis it might not be too burdensome to go back to it, to generate revenue. But will legislators have the stomach to do this, in the face of the governor's opposition, with elections just a year away? I doubt it, although it would probably be good public policy. Then there is the film tax credit, which I am told by a good source would generate $82 million, and for which New Mexicans get in return, according to serious studies, between 14 cents and 50 cents on the dollar, a net drain. Moreover, the accountability for this give away to the movie industry has been the source of major scandal in recent months. But will legislators have the courage to do away with a favorite pet project of the governor? I doubt it. Watch this proposal die a silent death behind closed doors.

1 comment:

Anonymous said...

Dr Garcia

Your insight is right on and you seem to be the only person in the media to tell it the way it is with Richardson he and his crew has set New Mexico back many years.

"Is there anybody in New Mexico who really believes the governor will make his decisions based on what he thinks is best for the state as opposed to what is best for what is left of his political career?"