Wednesday, December 05, 2012
On The NM Econ Beat: Santa Fe's Too Big Surplus, Tax Cut Talk & Why It's Too Soon, Plus: Half a Billion For Construction? And: Our State's Current Curse: Apathy
New Mexico continues to gasp for air when it comes to the economy. We need to get money circulating, not stored away in a bank account that pays nearly zero interest. And that brings us to this item:
The state ended the last budget year in June with cash balances of about $755 million -- the equivalent of nearly 14 percent of spending. The reserves provide a cushion for the state in case of unexpected financial problems.
That reserve is way too high and reflects, in part, the large decline in state government employment, The administration has kept many positions vacant and the cash to pay for them is accumulating.
Reserves should be between 5% and 10% by most economists accounting.
THAT SANTA FE GAME
Meantime, Santa Fe is talking about a corporate tax cut as a means of stimulating the economy, but we could do that by getting that extra reserve money circulating.
And does Santa Fe really believe that a small corporate tax cut is going to make a difference in job creation? No. They are just so used to saying it that they think they believe it.
The Legislative Finance Committee continues to skew too far to the right. The state faces a human capital crisis. Cutting taxes is not going to put to work a workforce that is not prepared. We need further investment in drug and alcohol addiction programs and literacy programs and the like.
Until Santa Fe puts into the financial mix the vast social ills of this state--the worst in the nation--we are destined for stagnation--and you can take that and your corporate tax cut to the bank.
CASH COMING IN
The state says it will generate about $280 million in new revenue for the budget year that begins next July 1 and that's what they would finance the corporate tax cut with. But over $70 million of that is already committed to Medicaid and the like. That only leaves about $200 million for new spending.
A corporate tax cut is DOA in the Legislature. Supporters of the measure deep in the bowels of the LFC and on the Fourth Floor would be better off coming up with a plan to target any extra state money for spending that would serve a purpose and get the cash in circulation--like subsides for child care for working parents.
The modest state surplus--largely reflecting the oil royalty boom not a robust statewide economy--is good news and so is the availability of $500 million for capital outlay projects for the next budget year. The Governor has been more amenable to spending in this area than she has been in targeting what we call the human capital crisis. Will she recommend a full $500 million in construction projects? Construction company owners and workers sure hope so and so do New Mexicans who want to see bridge and road repair go forward. The Guv will have the wind at her back if she comes with a $500 million bill. That is economic stimulus badly needed in a state where employment growth has for months been ranked last or near dead last in the USA.
Maybe the long spate of warm weather has ushered in a laid-back attitude among the masses. Or is it downright apathy? Readers are picking up on the latest zeitgeist in our enchanted land with letters like this one from ABQ's Joe Craig:
Apathy is the key word for New Mexico. Maybe we should change the state motto from the "Land of Enchantment" to the "Land of Apathy." I was a the recent Urban Land Institute meeting and as questions were being asked of the national speaker, I just want to yell out that the problem with our state is lack of leadership. I refrained, which is unusual for me!
An apathetic state newspaper and a governor and a mayor leading the state's two largest public economic engines who don't get it. Continued negative growth amidst regional job growth and a Department of Justice investigation of the state's largest police force and both the Mayor and Governor being run by the same political consultant.
Well, I am probably just another failure of the state's "Flagship University." All those wasted classes in economics...Someone in the state Republican and Democratic parties ought to take a hard look at the last national election. Apathy in our government isn't going to cut it in the 2014 election.
Craig has a point. Did you get wind of that Monday night ABQ City Council meeting where more than a dozen members of families of the victims of police shootings expressed their outrage over the shootings and their thanks that the Department of Justice has decided to investigate? Not one of the nine councilors had a word in response--not a word, a smirk or a smile. Talk about bumps on the log. And talk about an opportunity for someone to step up and shake things up. But who?
MISSISSIPPI AND US
Mississippi because they often are the sole state that is worse off than we are. That brought this from a native of the Magnolia state
...It is extremely disconcerting to see New Mexico follow in the footsteps of such a poor state, (but) at least Mississippi has more industry and jobs. They somehow attracted Toyota to invest heavily and build cars there. The community colleges offer courses to get folks ready to take jobs like those at Toyota. New Mexico is doing nothing but bleeding jobs out of the state. And just so you know--even though poverty is the worst in Mississippi, those folks give more to charity than any other state. Yep, the poorest are the most generous.
Actually, Utah leads the nation in the share of income donated to charity, but Mississippi is among the top eight.
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(c)NM POLITICS WITH JOE MONAHAN 2012
Not for reproduction without permission of the author