Tuesday, December 09, 2008

NM Budget Deficit Explodes As Downturn Intensifies; Spending Party Over; Ideas Offered To Ease Pain, Plus: More Light Guv Talk 

No Customers
The not very good photo posted here today taken by cell phone is of ABQ Romano's' Macaroni Grill on Sunday night. It was so empty you could go bowling in the place. Despite its location near the state's major shopping centers and it being the middle of the Xmas shopping season, there were no customers. And the food isn't half-bad. It's a scene being played out across New Mexico. What it means was driven home hard Monday when legislators were told the state budget deficit for the fiscal year that ends June 30 will be over $450 million. And next year? The shortfall for the year starting July 1 is put at up to $400 million.

We can't blame all of it on the economy. Lawmakers--including conservative Republicans--have approved big budget increases for years as they partied on money raked in from skyrocketing oil and natural gas prices. They did not plan on a day of reckoning, but they got one with oil plunging to near $40 a barrel and natural gas prices along with it. Now with a recession that is shutting the doors of businesses and causing brutal layoffs--600 copper miners just this past week at Silver City--the party is over and the hangover begins. So what now? Herewith some worthy suggestions garnered from across the political spectrum on how Santa Fe should deal with the pain.

PORK PROJECTS--The Guv and the Legislature need to bite the bullet and throw in the towel on at least $200 million in stalled capital outlay projects. The money has been sitting there unused. It can be used to balance the budget, but both sides are going to have to take a hit and give up favored projects. We need the Democratic Legislature and the Democratic Governor (s) to get on the same page. Can Santa stuff some unity in the stocking?

CASH RESERVES---The state has about $600 million in reserves. Some lawmakers are saying some of it may be difficult to get at. Well, just get at it. That's why the money is there--for times like these. If we transfer the stalled pork barrel spending to the general fund, take into account savings measures already implemented and transfer what is needed from the reserves--perhaps up to $200 million--we have balanced the budget for the year.

Secretary Miller
HIRING FREEZE--The Guv in October slapped on a state hiring freeze that is already getting results. If it does not become riddled with loopholes it is going to go a long way toward cutting into the fiscal 2010 shortfall. Perhaps many of those frozen positions should never be filled, resulting in permanent savings. Senator "Dr. No" Smith should have a field day with that.

NO GROWTH--It goes without saying that at a minimum we have to have a no-growth budget. Next year's projected revenues are already about $293 million less than the spending in this year's budget.

RESERVES---With all due respect to Finance Secretary Katherine Miller and Big Bill, in these troubled times the state does not need to keep 10 percent of its $6 billion budget in cash reserves. It used to be 5 percent. If we insist on a 10 percent reserve for the next fiscal year, we may need a tax increase to fund it. Even if we spend $200 to $300 million of the current $600 million reserve for this year's shortfall, we will have $300 million left. That can be our reserve for next year.

Ms. Miller and company need to take a hard look at the choice they are advocating here--clinging to an artificial reserve number and perhaps putting people out of work or raising taxes. The administration became fiscal hawks on the reserve when the Governor was running for president and the state was awash in energy money. Times have changed.


--It's the worst possible time for a tax increase. Educators pushing for one to fund a new school funding formula are out of sync. Actually, the explosion in administrative costs at all levels of education is a prime target for cuts, especially before we impose a tax increase on the already overburdened consumer. The administration now says "small" cuts in education appear necessary. The administrative level at the public schools and universities is where to look.

If we must, lawmakers could look at boosting the rate on the wealthiest taxpayers. Big Bill had the top income tax rate cut from 8.2% to 4.9% as he worked to garner support for his presidential campaign and, in fairness, to boost the economy. But a temporary increase in the top rate would not be an economy killer. An increase in the broad based gross receipts tax would be most burdensome on the low and middle income taxpayers who are the vast majority and also suffering the most from lost jobs.

New Mexico has had a great run. Now it's time for a time out on the big spending. The bloat has got to go so service cuts and layoffs can be avoided. If interest groups can't accept that reasoning, it will be up to the Legislature and Governor-to-be Denish to impose the necessary discipline. If they can't do it, then the voters at the next election will be asked to do the job.


Insiders say debate continues in the Denish camp on whether she should name a lieutenant governor who will run with her in 2010, or name a "caretaker"-- a gray beard--who would hold the post through 2010, but agree not to run for the office. Whatever Di decides, names continue to float. Former ABQ State Senator Tito Chavez says he could do the job. Tito is a former attorney for Bernalillo County. He joins a long list of possible lieutenant governors. State Auditor Balderas has been at or near the top of the list of prospective choices, but there's plenty of time to lobby.

We understand the caretaker argument. What if the Light Guv she chooses is opposed for the 2010 nomination and loses? Denish would look pretty weak. And then there is the dog fight created when you pass over a bunch of candidates. Still, if you want to look strong, you lead strong. That would mean naming the permanent team and getting on with the challenging business of running the state.


Reader reaction to the death on Sunday of the former NM first lady. First from Mike Parks of ABQ:

Joe, Thank you for your homage to Alice King, which was spot on! What a marvelous woman! You might mention that contributions to one of the many organizations that try to help children in need would be one excellent way for people to honor her.

And ABQ reader Michael Barnes:

I moved to Santa Fe in 1974 to work for an air conditioning company, My first project was to install refrigerated air in the Governor's Mansion. We were on the roof on a very hot day. Mrs. King came out and called us all in for iced tea and bizcochitos. I later wrote to a friend in Tulsa, where I had moved from "what a great place NM is, I have been here less than two weeks and have already been invited to have tea and cookies with the First Lady of NM!" At that time there were no fences around the Mansion, and anyone could play tennis on the courts. There was a sign saying, "Please check in at the house before playing." Alice King was a NM treasure.

Alice King will lie at the capitol Wednesday from 10:00 a.m. until 2:00 p.m. The funeral will be Thursday at 9:00 a.m. at the Moriarty High School gym.


Big Bill is raising some eyebrows by having a Washington fund-raiser Thursday to help him retire his $150,000 presidential campaign debt. It's at the home of a D.C. lobbyist but the Guv's office says the party was planned before he was named commerce secretary. Still, Obama's crusade against lobbyists takes a hit....It was GOP Chairman Lattuzio who brought in an out of state executive director in the mid-90's. GOP Chairman Dendahl stayed with that decision, but did not make the original hire as we blogged Monday...Word comes to us of the death of outgoing Grants area State Rep. George Hanosh. He did not seek re-election in November. The seat will be filled by Eliseo Alcon...

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