PINCHING PENNIES

In the long term, state funds not nearly as scarce as people think

As New Mexicans, many of us can attest to a common refrain when we talk about our most important programs: “We just don’t have the funding.” The underlying theme throughout conversations about our state’s most pressing needs is that resources are scarce, and we simply don’t have enough of the pie to go around.

Through our work at the State Auditor’s Office, we’ve found a surprisingly different reality. While the plunging revenues certainly create a huge challenge in the near-term, the concept of long-term scarcity is more of a myth, one often perpetuated by those who control resources going back to colonial times. Over the last several years, we’ve researched three primary connections between government and economy that challenge the myth of scarcity.

Tackling these structural issues is not a substitute for addressing the shrinking budget that the Legislature is grappling with right now. But at some point we need to move beyond plugging holes and applying Band-Aids to develop lasting solutions for our volatile and struggling economy. Taking a step back from the yearly budget crisis, we have identified structural changes that can help New Mexico get off of the bottom of the bad lists. By rethinking the status quo, we can help government make better decisions and get out of the cycle that holds us back.

First, consider our annual “Fund Balance Report.” The report tallies government’s own financial audits and has identified billions of dollars sitting in hundreds of agency accounts across state government. Most of these dollars have already been allocated toward reserves, loan funds and thousands of specific projects. The Legislature has examined many funds closely to “sweep” out hundreds of millions of unused balances. The longer-term challenge is understanding why millions of these dollars never made it out the other end of the pipeline into our economy. The Fund Balance Report is a road map to help find ways to prevent buildups of underutilized stagnant funds so they can be put to use building infrastructure and creating jobs.

Second, it’s time to get serious about fixing our “Swiss cheese” tax code. Every year, our state loses over a billion dollars in revenue to over a hundred different types of tax breaks. We’ve fought for comprehensive reporting to understand which tax cuts are working and which are not. It’s very encouraging to see the Legislature is beginning to tackle legitimate tax-code reform. When there is a return, our government can justify doubling down, and when there isn’t, we need to stop giving away our tax dollars.

Third, let’s address the hundreds of millions of dollars that our government spends with out-of-state businesses. One example is in the information technology sector, where our research found that 84 cents of every public dollar goes to companies outside New Mexico. Awarding some of those contracts to homegrown businesses would go far to nurture our local industry and economy. Many of these out-of-state government contracts are awarded without a public competitive bid, never giving a local firm a shot at the business.

Instead of starting from the point of “we don’t have enough,” we need to find solutions for how to do better with what we have. Scarcity is a choice leaders make every time they avoid tackling these big issues. We should not shy away from the complexities that connect government finance and our economy. It also takes courage to stand up to the entrenched political forces behind this status quo. Let’s draw a line in the sand and not buy into the myth of scarcity, and fight for long-term structural changes to improve our economy, create jobs, and truly move the needle in our communities.

Details and full reports available at www.saonm.org/government_accountability_office.