Thoughts on the upcoming special session
February 26, 2010
By Jerry Ortiz y Pino
The Governor has called the Legislature back into session starting Monday, March 1. He has decided to bring us back to Santa Fe just over one week after our budget session ended—without a budget.
I would very much like to explain how I see this fiscal situation that the state faces and what I will be working for during the special session. I hope you will never hesitate to contact me by email during the session to keep me informed of your own views on these issues. And I would remind you that now our Senate floor sessions are all webcast (for your viewing pleasure and insomnia treatment) so you can follow along in excruciating detail as we try to find a path through this dilemma. The webcast address is: nmlegis.gov
To start, let me share a letter I received earlier this week from a businessman:
“As a business owner, a tax payer and a voter – please know my position on the State Budget. It has grown 50% in the past 8 years. The number of state employees per capita is 50% higher than other western states. New Mexico is one of the poorest states in the nation. The state’s economy is in a recession that will not end in the near term.
“Discussions of budget cuts of 1-3 percent are an insult to anyone that has ever managed a budget in the real world. Cut government spending as required to balance the budget for 2011 and ensure that we do not require tax increases for the next 3 years. As stewards of taxpayer’s money, do what is required, do it this year. Thank you for your public service.”
That is what I get in a lot of emails. It is also the argument put forward by many within the Legislature of both parties: get serious about cutting government spending a whole lot more before you raise taxes.
I definitely don’t agree with that and here was my explanation of why not that I gave to that businessman.
“As a business owner, you must also have to deal in reality, not myth, so I know that you will be glad to learn that the ratio of state employees to the population in New Mexico is no higher after eight years of the Richardson administration than it was during the last two years of the Gary Johnson (!) administration. That was reported in Appendix C of the report on improving governmental efficiency issued by former Governor Gary Carruthers right before the legislative session started.
“While our ratio is certainly higher than many of our neighboring states, it is mostly because we have state-provided (not county-provided) public health and public welfare departments, unlike the way Colorado and others do. Two years ago, when our budget was $6.1 billion, we had so much tax revenue coming in that we held a special session just to give back the surplus (August of 2008). Then the housing bubble burst and New Mexico went from 7,000 housing starts in 2007 to less than one thousand in 2009. Gas and oil prices stabilized at a more “historical” level…and the world economy went in the tank.
“All that led to a budget of $5.7 billion in 2009, a reduction in one year of 7% (twice the level of cutting that you are crediting). Now we have anticipated revenue for 2010 of $5.1 billion, or another shortfall of $600 million from last year (down 10.5%). As a businessman, I would think that you would consider that size of cutting to be far beyond the realm of “trimming fat”–more like amputation of limbs and removal of vital organs. Real cuts of almost 17% in two years.”
The point I was trying to make to that businessman is one I want to leave you with: In my view our problem is not one of “over-spending,” it is one of under-funding. So the task for the Legislature in this special session is to figure out how to fill that $600 million “shortfall”: i.e., what combination of cutting and taxing will make-up the difference between our anticipated revenue ($5.1 billion) and our current level of spending ($5.7 billion). This is made considerably more difficult because every faction within the legislature has an idea about where the best places to cut would be (someone else’s favorite program) and what the best new taxes should be (someone else’s burden–not mine).
I think that the Senate budget proposal (rejected by the House) which we developed during the just-completed session, which called for $180 million in new taxes and $420 million in cuts (about 7.4%, though not applied equally to all programs or departments) was definitely out-of-balance to avoid heavier taxes. To me the fairer approach would be 50/50: cuts of $300 million (a bit over 5.2%) and taxes of $300 million…just about where the House budget landed. I know this is a crucial issue for you–and for all of us.
The key is to find something that works for the state that won’t slow down economic recovery and won’t burden businesses. To me this “ideal” solution involves restoring progressivity to our higher income tax brackets. We destroyed progressivity four years ago when we flattened all those upper brackets into one single rate (4.9%). That’s what everyone now pays: millionaires and multi-millionaires as well as all those married couples earning as little as $26,000 a year of taxable income.
Rolling back those breaks for our wealthiest citizens, those who are most able to pay a fairer share for the costs of State Government services from which they benefit, is where I’d start. That’s my preferred path for avoiding major cuts, but every legislator has his or her own ideas on the topic, making for a very noisy debate.
Let me know what you think.
Jerry Ortiz y Pino, State Senate District 12
Candidate for the Democratic Nomination for Lt. Governor
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