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Gessing: Santa Fe Spending Binge Kicks Into High Gear

on November 1, 2019 - 6:50am
By PAUL J. GESSING
Rio Grande Foundation
 
The Legislative Finance Committee recently reported the requests of New Mexico government agencies for FY 2021.
 
Last year the Legislature increased general fund spending by a robust 12 percent, but with oil production growing rapidly and prices per-barrel holding stable, New Mexico government is planning for another year of massive growth.
 
In fact, (not including funding requests for public school support and from higher education institutions) agencies are looking to further increase their budgets in Fiscal Year 2021 by a shocking 17 percent.
 
Some of the “highlights” or low-lights if you believe in limited government include:
  • 260 percent from the Spaceport Authority;
  • 72 percent from the Environment Department;
  • 58 percent from Higher Education Department (the administration, not the schools themselves);
  • 43 percent from the Tourism Department; and
  • 28 percent from the Secretary of State.
 
This is obviously just a partial list of the dozens of government agencies’ funding requests. When taken together, however, it is clear that New Mexico government is on an epic oil-and-gas-fueled spending binge.
 
Will anything actually improve as a result of all this new spending? It is hard to see what all of this new spending will do to improve New Mexicans’ lives considering that New Mexico’s government is already among the largest in the nation.
 
According to a ranking published by the conservative group Americans for Tax Reform, New Mexico’s state government is the 2nd largest as a percentage of GDP. The biggest state governments were ranked as follows:
 
1. West Virginia (23.3 percent);
2. New Mexico (20.8 percent);
3. Arkansas (20.3 percent);
4. Alaska (18.9 percent); and
5. Mississippi (18.5 percent).
 
But, according to Wallethub, New Mexico taxpayers receive the 2 nd -worst return on investment of any state in the union.
 
To summarize, we have very big government already. Taxpayers are getting a poor return on their tax dollars. And, fueled by oil and gas, the growth of New Mexico government is about to be turbocharged.
 
Will all of this money be used to improve New Mexico’s education system, improve public safety, build roads, or reform its economy? Jobs and economic growth are plentiful right now, but this is driven by oil and gas and the strong national economy.
 
Unless tough changes are made to the systems undergirding New Mexico’s education system and economy, it is hard to see what this spending is going to achieve.
 
Our neighbors in Colorado have the best known solution to the boom and bust of state budget cycles. That State’s Taxpayers’ Bill of Rights (TABOR) which is part of their State Constitution limits annual spending growth at all levels of government to inflation and population growth. Surplus government revenues are returned to taxpayers.
 
Better still, all tax hikes in Colorado must be voted on and approved by the citizens.
 
Despite resembling New Mexico as a “blue” state, Colorado’s State government was just 29th largest and consumed 10.5 percent of the State economy.
 
That’s less than half of what New Mexico spends as a percent of GDP (according to the Americans for Tax Reform study above).
 
This preserves more money for Colorado citizens who, according to the Federal Reserve Bank of St. Louis, earn $58,000 per person annually. Here in New Mexico that number is closer to $41,000. That is an incredible difference given two neighboring, similar states.
 
For New Mexico to succeed policymakers need to slow the growth of government.
 
Reform problems in the tax code like the gross receipts tax and give voters a break on their taxes. Funding another massive expansion of government with this oil surplus is not going to help our State succeed.
 
Paul Gessing is president of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

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