Budget Deficit or Deficit in Clear-Thinking? You Decide.

There is a good deal to decipher in the Governor’s claims that the State is bankrupt and as always, much of it is smoke and mirrors and bad decisions on the part of the GOP and a few Democrats.  Retake the Roundhouse is committed to creating the kind of responsible, progressive government that asks all of us to contribute a fair share and invests our resources in our children and families and to build a sustainable economy.

Budget crisisApologies to those who have signed up for doing research on the legislature or for being part of a Progressive Hub. The work involved in getting Retake the Roundhouse off and running got more complicated when it became clear that to operate within state election law there was a need not for one organization, but for two. Our attorney recommended that we form a 501-C-4 organization to do the lobbying and progressive network development.  The 501-C-4, to be named Retake Our Democracy, now has a board of directors and is finishing up the paperwork to be submitted to the State.  Retake the Roundhouse will be an Independent Expenditure Political Action Committee to do the political campaigning and its paperwork will be filed next week.  So, I’ve been juggling a few balls getting these organizations legal and creating a second website, while trying to keep the momentum going with Retake the Roundhouse.

And we have made great progress in the two-weeks Retake has been live. We have nine counties interested in forming hubs and four of them have Coordinators and members who are already forming. I will have emails and “next steps” going out to all of them tomorrow, but wanted to wait til then as more folks are signing up today as a result of an e-blast from SantaFe4Bernie.

I also wanted to also get a content-focused blog out as there is much to-do about the State’s budget crisis and the options being considered to address it. The remainder of this post will address this issue. I will have more on the budget crisis and NM tax and revenue policy in the next e-blast.

The New Mexico Budget Crisis

There has been quite a bit written in the news of late about how New Mexico is broke. Much of the blame has been cast upon falling revenue from gas, coal and oil. But there are many problems with this analysis, as other factors are involved.

Falling revenues from oil, gas and coal should have been seen coming, five years ago. Anyone paying attention to the trends in energy across the country could have seen this coming. Concerns about the need for greater regulation of extraction processes; the falling price of wind and solar; and the continuing drop in the cost of transmitting and storing wind and solar energy have made coal and gas artifacts destined to disappear. Financial institutions and hedge fund operators have abandoned their investments in oil and coal. And many of the largest coal and gas companies have gone bankrupt. But New Mexico’s GOP leadership has operated as if this train wasn’t headed right at us.

GOP insistence upon corporate tax cuts and personal income tax cuts for the wealthy drain our budget. Instead of planting economic seeds for new industries like industrial hemp production, wind and solar energy, and investing more in the film industry, tourist industry and other potential economic drivers, Governor Martinez chose to cut corporate and personal income taxes dramatically and use lack of funds as an empty excuse for not investing in a 21st century economy and for not shoring up our social safety net. Since 2003 corporate and personal income taxes on the wealthy have been cut in half. Did you realize that as a result of Martinez (and some Dems.) tax cut policies, today our lowest income earners actually pay a higher proportion of their income in state and local taxes than our wealthiest New Mexican’s?  We will discuss this in depth in our next RetaketheRoundhouse blog, so sign up.

Failure to invest in promising new revenue sources. Just to take one example of the short-sightedness of GOP leadership, let’s look at the potential benefits of industrial hemp production. In 2015, Senate Bill 94 called for the establishment of the New Mexico Industrial Hemp Research and Development Fund to cover the research costs. The measure passed with overwhelming bi-partisan support in both the House and the Senate: 33-8 in the Senate, 54-12 in the House. It passed with the full and active support of the Department of Agriculture and of New Mexico State University, whose representatives testified that the bill’s language complied with and conformed to all relevant federal laws. But despite compelling evidence of industrial hemp’s potential for job creation and income production in hard hit rural areas of New Mexico, Governor Martinez vetoed it.

In 2016 HB 148 was introduced, but Martinez never needed to veto this one. The bill called for joining 22 other states in conducting research on the profitability of industrial hemp production, but it was stalled in committee by GOP members and failed to even get to a vote. For more on the potential benefits of developing industrial hemp production and for an excellent description of how good ideas die in our current NM government, check out this article by Alicia Smith and Alan Webber of OneNewMexico.

And so now with our reserve depleted, funds from the tobacco settlement about to be used to fill the 2015-16 deficit, and a huge 2016-17 deficit ahead, Governor Martinez has signaled her refusal to consider any reversals of previous tax cuts or other revenue-generating options and insists that by cutting social services, healthcare, Medicaid, and education still more, the budget can be balanced. It is truly a sad state of affairs.  One that we can begin to address by Retaking the Roundhouse.

My next two RetaketheRoundhouse.org blogs will expand on the above and focus on:
The budget and the real causes of our current crisis. Here I will draw upon the research of Bill Jordan of New Mexico Voices for Children and others to describe the extraordinarily regressive tax structure in operation in New Mexico and its devastating impact on most of us.
The GOP stranglehold on any and all sensible, progressive legislation. Here I will draw upon my own research, as in the past week I have poured over 1700 bills introduced at the last Roundhouse session. I will describe how incredibly good ideas die slow deaths without ever even reaching a vote.

Together, these next two blogs will provide more than ample evidence that we must Retake the Roundhouse. So please, share this blog with others.  We need to build a base and develop Progressive Hub activity throughout the State.  That means folks like you talking with others like you and getting them active.

We can do this.


Categories: State Budget

2 replies

  1. Facing a $400+ million reduction in New Mexico state’s 2016 revenues (about 7% of a $6.2 billion budget), Governor Martinez has called for a special session of the legislature to fix the problem. In the interim she has slashed the state contribution to Medicaid, thereby saving the state about $30 million while costing recipients (and in-state providers) over $120 million in federal matching contributions for those most in need. She has also called for a 5% across the board spending cut and refused to consider a tax increase.

    Better solutions exist.

    Much of the state’s revenue shortfall comes from a decline in oil and gas tax revenues (and a concomitant reduction in gasoline costs for consumers).

    A practical solution is relatively simple – raise New Mexico’s tax on gas purchases to offset the decline in oil and gas tax revenues (and gasoline costs to consumers).

    To fully offset revenue losses we would need to increase the gas tax by about $0.50/gallon. The current New Mexico State tax on gasoline sales sits at $0.17/gallon and has not increased in over twenty years, since 1995! (Pennsylvania has the highest state gas tax today at $0.50/gallon.)

    Raising the gas tax to about $0.34/gallon would only keep the tax at the same inflation adjusted rate as in 1995. Raising the tax to $0.67/gallon would fully eliminate the revenue deficit, without raising overall taxes (a decrease in oil and gas tax revenues would be offset with an increase in gas tax revenues).

    The taxpayer/consumer would see no impact on the overall household budget as gasoline cost declines would be offset by the gasoline tax increase. (By linking the gas tax to the price of gasoline and rate of inflation, as 19 other states and the District of Columbia have done, we could easily avoid this issue in the future.)

    This solution would also provide many other important benefits to New Mexico, promoting public transportation and more fuel efficient vehicles, and reduced traffic congestion and air pollution.

    I would propose we consider this solution to solve the state deficit.

    Ron Flax-Davidson
    Santa Fe, NM

    • While NM has among the lowest taxes on gas and the lowest prices for gas, we also have a highly dispersed state and gas tax is one of those regressive taxes that force our lowest income earners to pay the same rate as those with high incomes. I think a far better plan is to reverse the litany of tax loopholes and tax cuts that have benefited the wealthy and corporations. All of Martinez’ tax cuts and corporate giveaways have netted us exactly zero jobs.

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