Inside the Capitol

Wednesday, July 28, 2010

8-2 Take a look at Other State's Woes

Syndicated Columnist
SANTA FE -- If you think we've got economic woes in New Mexico, take a look at what's happening with other states. That's what the Pew Center on the States has done.
You probably can guess which state is suffering the most. California makes the news often for the extreme measures it has had to take to keep its head above water.
But Pew identifies nine other states that are in the same boat as California. All these states, it says, are in fiscal peril.
Most prominent among those nine states are all three of California's neighbors -- Arizona, Nevada and Oregon. The Midwest also made it with Illinois, Michigan and Wisconsin, as did the East Coast with Rhode Island, New Jersey and Florida.
Their dissimilarities make clear that the recession has severely impacted states from different geographic regions with different types of economies, tax structures and political leanings.
The Pew Center scored all 50 states according to six factors that contributed most to California's economic problems. Points were assessed against states for bad economic practices. Data is as of July 31, 2009.
The worst possible score was 30, which California managed to achieve. The national average was 17 points. New Mexico came in at 12. A handful of states were in single digits.
Decline in revenues was the first factor. The national average drop was 11.7 percent. California declined by 16.2 percent. New Mexico was down 12.8 percent.
Montana and North Dakota have remained relatively unscathed. That is attributed to agriculture and energy being their biggest industries. Oil and gas revenues are the only bright spot among New Mexico industries. The stability of federal spending also has helped.
The second factor is the budget gap between revenues and expenditures. The national average is 17.7 percent. California was at 49.3 percent. New Mexico had a 6.3 percent gap.
The third factor was increase in unemployment rate. The national average was a 4.4 percent increase. California's rate was 4.6. New Mexico came in at a 2.4 percent increase.
Foreclosures were the fourth factor. The national average was 1.37 percent. California was at 2.02. New Mexico foreclosure rate was 0.74 percent.
The fifth factor concerned a state's ability to act on budget problems. Seventeen states require legislative supermajorities on budget votes.
Some states even require constitutional amendments. New Mexico isn't encumbered by such restraints. California and most of the states listed above are constrained.
The final factor relates to state fiscal practices. Some states don't have to balance their budgets as New Mexico does. Others borrow to balance their budgets. The average grade was a B-, which is what New Mexico was awarded. California got a D+.
New Mexico's only average grade is likely due to its dreadful method of allocating capital outlay funding on a political basis rather than according to need.
The study focused on the 10 states in greatest fiscal peril and the reasons why they find themselves in the predicament. So it didn't say as much about New Mexico as it did the 15 states in greatest peril. The other five states are Colorado, Georgia, Kentucky, New York and Hawaii.
One reason for New Mexico's relatively strong showing is the amount of rainy day funds it socks away. We have had a large state permanent fund since our early years as a state.
Then in the 1970s boom years, lawmakers created another permanent fund to stash severance taxes from oil, gas and mining. In many states that money was rebated to taxpayers shortly before elections.
In Oregon, a constitutional amendment requires the rebates. Little is left over for emergencies. Most states don't get close to a five percent emergency fund.
New Mexico had a healthy emergency fund of over 10 percent, which was the first line of defense when the recession hit. And we still haven't tapped our permanent funds.
We're hurting but not as much as most states.
MON, 8-02-10

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



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