Most business owners will tell you that uncertainty is their greatest challenge. Trying to budget — which involves decisions about hiring and investments in equipment or larger quarters — become high risk when the rules keep changing.
Now our city and county governments find themselves in a similar situation. As lawmakers in Congress and the Legislature move toward smaller government and approve successive budget cuts with little, if any, new revenue, the impacts truly are trickling down.
And what is trickling down is instability.
The county faces a loss of more than $2 million if the "payment-in-lieu-of-taxes" program is not funded. That program was created in the 1970s to compensate counties for lost revenue due to the fact that they couldn't collect property taxes on federal land. New Mexico and San Juan County have significant tracts of federal land.
The program was cut out of the "Omnibus" budget bill. New Mexico's U.S. senators managed to get it into the Farm Bill, which passed the House last week.
But even if the bill is approved by the Senate and signed into law by President Obama, the battle likely will have to be fought again next year.
Another source of instability is the 15-year phase out — between 2015 and 2030 — of the state's "hold-harmless" payments. Those payments were created when the New Mexico Legislature decided to exempt food and medicine purchases from the gross-receipts tax.
In 2013, "hold-harmless" sent $5.7 million to Farmington and $2.5 million to San Juan County.
The program is going away because it has become a significant drain on the state budget.
Part of the problem for the state was that when the "great recession" hit, spending on just about everything but food and medicine dropped. As other revenue sources dried up, the state was still on the hook to replace revenue lost from the food and medicine exemptions.
Ultimately, lawmakers decided to eliminate "hold harmless."
State Sen. Steve Neville, a Republican who represents San Juan County, has introduced a bill in the current legislative session that would dedicate about half the gross-receipts tax that was created to pay for the hold-harmless program to cities and counties. In some cases, local governments would be able to impose a small additional gross receipts tax increase.
Neville said his plan likely won't completely make up for the "hold-harmless" payments and City Manager Rob Mayes said Farmington ultimately would receive about $500,000 less than the most recent "hold-harmless" payment.
Opinions across the state range from reinstating the tax on food, which some say will hurt the poorest New Mexicans, to reinstating "hold-harmless," which Neville characterized as "sloppy tax policy." Gross-receipts taxes can fluctuate significantly from year to year, which is another source of uncertainty.
As we have said, some people habitually grouse about government waste and indiscriminately cheer budget cutting. Well there isn't much fat left, and lawmakers at both the state and federal level are pushing the hard decisions down to the local level.
That tax revenue pays for vital services such as law enforcement, fire protection and infrastructure, including roads, bridges water and sewer. Those are not frills and they are vitally important for economic development. If the county and its municipalities take on the characteristics of the world's poorest countries, it will be even harder to attract businesses with jobs that pay well.
It's not clear whether these changes will provide tax relief, and if they do, who will benefit. That likely means increasing taxes locally or doing without.
We'd like to see this disjointed, often indiscriminate, frenzy of budget cutting slow. We are for fiscal conservatism, which, in the past, has meant working for a deliberate rate of change. Let's take a breather and see what damage has been done before charging off on new missions to strangle government.
The current pace of change is creating the worst possible climate for businesses and governments — one of uncertainty and instability.