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Thursday, July 22, 2010

Santa Fe's Kicked Can Shows Up At The Door; Budget Debacle Continues; More Cuts Coming, Plus: More Coverage Of The Story Of The Decade--The Great Bear 

Guess just what showed up at the door? Why, it's the can that got kicked down the road by the no-can-do New Mexico Legislature. As you may recall, they walked out of their last session claiming they had a balanced budget. But now come the bean counters for the Legislative Finance Committee to tell us that we have to cut over $150 million for the budget year that just got started July 1. That's because the can lawmakers kicked had printed on it "Six percent revenue growth." What's in that can anyway? Those funny mushrooms?

Not to say that the no-end-in-sight-Great Recession isn't wreaking havoc with the budget. Growth is even slower than many expected. But when the lack of intestinal fortitude--a common ailment among today's political class--is allowed to go untreated, what you get is more uncertainty about public school funding as well as overall spending and tax policy.

We are now witnessing a government being run on the run. In response to the shortfall, the Governor says he will slash spending by three percent across the board starting in September. Priorities? Forget it. That would take contemplation. Just take the hacksaw and hack. (More state employee furloughs could be in the cards. As for layoffs, never say never).

This time the lawmakers took no chances of having to grow some backbone. When they left Santa Fe in March they knew they were doing some serious can kicking so they gave Governor Big Bill the authority to unilaterally cut the budget before they came back into session in January. We didn't know the children's game of "you're it" qualified as legislating, but if you're already playing kick the can, what the heck.

But don't shed any crocodile (or Alligator) tears for Big Bill. He went through a billion or so in state surplus dollars during his tenure (with the help of the Legislature) faster than Doug Vaughan can shout "Ponzi scheme!" Now it will be Bill's ironic duty to take out the shears. He's about as anxious for that chore as he is for another Elephant Butte boat ride. But somebody has to do it, and if you can't pull off an appointment to the Obama cabinet, or at least a summer vacation in North Korea, you get the job.

A LONG WAY OUT

Our Guv hopefuls--Dem Diane Denish and R Susana Martinez--are watching all this from the sidelines, but telling them that whoever wins will have less money and therefore less power than this governor is like telling a pit bull that hamburger tastes lousy. They're gonna take whatever you give them.

So what will the new Guv get when they take over January 1, 2011? According to the numbers crunchers, more of the same and maybe more of it--meaning less of everything--for their entire four year term. Isn't that special?

Another budget shortfall is already anticipated for the budget year that starts July 1, 2011. Of course, lawmakers could decide to stop the games of "kick the can" and "you're it" and give us a reality based budget. But that's no fun. A game of "keep away" is more in tune with the spirit of Santa Fe where Walt Disney's Magic Kingdom would feel right at home.

BEAR MARKET COVERAGE


Your blog's coverage of the story of the decade continues as reader Kevin McMullan writes:

Joe, Your blog last Friday summed up one big reason why NM is having major economic difficulties like being number one in jobs lost. This CNBC article shows NM to be 45th for " business friendliness."

Ask your readers for examples and we will become very knowledgeable about why it is hard to do business in New Mexico. If forty-four other states can do a better job, maybe Santa Fe and city halls across the state can ask how they do it. If Colorado can be 4th, Arizona 5th and Texas 19th in business friendliness, it is no wonder we have a capital exodus and brain drain with our kids. The money, jobs and kids do not have to go very far.


Thanks, Kevin. We appreciate you and the many others writing to express their concerns and offer their ideas to improve the state's economic climate.

As to your point, it's true that many of our young people leave here for greener pastures. But it is not a new development under the current governor. It has been that way for decades. The reasons are numerous and include the regulatory framework you refer to. But let's not leave out our underperforming educational system that repels prospective blue-chip employers. If you educate them, they will come.

Also, our dependence on government employment of all types has been a blessing as well as a curse. The government largesse has made the private sector here less than zealous in competing for capital and companies. When billions are pouring into the defense establishment every year, it can be hard to get motivated.

With the private sector flat on its back, we've argued that actually working to increase the Federal presence here offers hope for job growth. It really is the foundation of the state economy. Just look at what the expansion at Cannon Air Force Base has done for the Clovis area. It is driving economic expansion in the rural area.

How vibrant of a private sector New Mexico can have after lagging behind its neighbors for so many decades is questionable. But the debate is becoming more vigorous and that's a start as we face a new economic paradigm that is defying the understanding of even our state's most insightful intellects.

BACK IN THE PIT


Let's stay with the reader mail bag for more thoughtful stuff. We've challenged the notion that the environmental "pit rule" has directly cost us jobs in our oil and gas industry and asked for specific examples of those lost jobs. Neither the industry or the campaign of GOP Guv hopeful Susana Martinez, who also asserts the rule cost jobs, have provided specific examples of workers being laid off or fired because of the pit rule. Now to our reader who sends this along to add fuel to the fire:

If the oil and gas business in New Mexico is so bad, I wonder why Concho just paid $1.65 BILLION ($1.45 in CASH) for Marbob’s New Mexico assets, reserves, etc.:

Concho Resources Inc. (NYSE: CXO) announced that it has entered into a definitive agreement to acquire all the oil and gas assets of Marbob Energy Corporation and certain affiliated entities for $1.65 billion in cash and Concho securities. Marbob is a privately-held exploration and production company with substantially all of its operations located in the Permian Basin of Southeast New Mexico...


Indeed. The primary reason for the decline in oil and gas revenues is the worldwide bear market. Other reasons, at best, are ancillary. When prices go up the money flow spikes like a gusher. It's been that way--boom and bust--for the better part of 80 years. The major players in the energy industry are not talking about the pit rule. They know their history and it's demonstrated by the deal-making our reader made note of today.

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