Inside the Capitol

Saturday, July 24, 2010

7-28 Budget Deficit Worse Than Thought

Syndicated Columnist
SANTA FE -- The updates on state revenue projections are in. And we're even farther behind than we thought. What Gov. Bill Richardson had pegged at a $40 million to $80 million shortfall is now $200 million.
Economists for the governor and Legislature are in agreement on the figure. At the end of last spring's special legislative session, lawmakers gave Gov. Richardson unprecedented power to make cuts, not only to his own agencies but to all of state government plus education.
That cut appears to be around 3.5 percent across the board, except for Medicaid and some services for the developmentally disabled. The two exceptions are reported to be due to anticipated federal reimbursements.
The governor didn't do any prioritizing. The cuts are equal, even for the Legislature. Each series of cuts during the past two years has been progressively painful. This one will be no exception. Much of the public will see noticeable cuts in services.
The Motor Vehicle Division has announced shorter working hours. That will be a big inconvenience to many, especially in areas where readers complain about poor service already.
Courts are cutting back. So are summer services for youth. Parents will notice cutbacks in public schools and charter schools. Class sizes will be larger and elective courses will be trimmed. The emphasis will be on classes that prepare students to take standardized tests.
Small schools will be targeted. They currently receive an extra distribution from the state. That factor may be cut in the next legislative session. It may be totally eliminated for charter schools. Some districts are preparing for that eventuality by closing their smallest schools.
The big deficit for next year is occurring because of an overly optimistic six-percent increase in revenue for this year over last year. Columnist Harold Morgan reported last December that legislative economists called the projected increase a "dead cat bounce."
The reasoning was that the economy was so far down that it couldn't get any lower and that if a dead cat is dropped, there will be a slight bounce. The cat didn't bounce and $800 million in cuts the past two years is about to become $1 billion.
Both gubernatorial candidates have issued economic plans that include pledges not to raise taxes and to take a close look at tax credits, exemptions and deductions.
Republican Susana Martinez even proposes to cut taxes so businesses will be able to grow and get New Mexico out of its recession. Meanwhile we have to pay for those tax cuts and we can't borrow the money from China as our federal government does.
Martinez has run into some unfortunate timing on her proposal to do away with "pit rules" on oil drilling. She and the industry insist that the regulations are chasing companies out of the state.
But then Concho Resources, Inc., a Texas firm traded on the New York Stock Exchange, pays $1.65 billion for Marbob Energy Corporation, a family-owned Artesia business. Concho plans to increase activity by tripling the number of rigs. That sounds very encouraging.
Gov. Richardson was very happy to see a report from a large California think tank bemoaning the loss of a big chunk of the movie business to other states and countries.
New Mexico was one of five states mentioned. Three of those states have higher tax credits than New Mexico's 25 percent. Georgia and Louisiana are at 30 percent. Michigan's base tax credit is 40 percent.
Louisiana and Michigan have add-ons that can increase the credit even more. All three states are seeing big growth in the film industry. The fifth state, North Carolina, was a major player, with a 15 percent credit, until the other four states increased their credits. It is now losing business.
In addition, three Canadian provinces offer even bigger credits than any U.S. state and have been doing so for some time. The study's recommendation is for California to increase its tax credit.
It may be that New Mexico is at about the place it should be.
WED, 7-28-10

JAY MILLER, 3 La Tusa, Santa Fe, NM 87505
(ph) 982-2723, (fax) 984-0982, (e-mail)

Sorry about missing last Wednesday's column. I was getting ahead for the Western history writers convn and got ahead of myself.


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