Morgan: New Mexico budget crisis looms

Farmington Daily Times


Harold Morgan, columnist


"Not very good,” said David Abbey, describing the state’s economy. He switched to “bad” for further descriptions of matters such as job (non)growth.

Abbey, executive director of the Legislative Finance Committee, was in his traditional program start slot at the annual legislative outlook conference of the New Mexico Tax Research Institute. It was five days before Christmas. 

Not that the state’s situation was good last summer, but things deteriorated between the August consensus forecast and December. The August forecast was 1.7 percent job growth during the current budget year, FY '17, that ends June 30. Zero was the December job growth forecast. The December forecast for wage and salary growth was 0.7 percent, a quarter of the August estimate. Gross state product growth now figures at 40 percent of the August forecast.

The “bad” litany includes employment. The state has lost wage jobs the past three months on a year over year comparison. There were 2,300 fewer wage jobs in November than in November 2015. Wage and salary growth has dropped for two years. No wonder retailer jobs in November were 5,500 fewer than a year earlier. No money to spend.

For wage employment, “the last 10 years are a lost decade,” Abbey said. Wage jobs are 5,000 less than 2005. “To me that’s really incredible.”

As Abbey spoke, the Census Bureau released state population estimates for July 1, 2016. After two years of losses, New Mexico’s population increased, sort of. The qualifier is that the population numbers are estimates, meaning the numbers are within a range rather than being one single exact number. Our population increase between 2015 and 2016 was 687.

Our July 2016 population was 2,081,015. The so-called increase is small enough to really mean the population stayed the same. Within that sameness is a number big enough to count.

People did move to the state during the year, but departures, presumably people seeking jobs and decent schools, were 9,748 more than arrivals.

Moving to his presentation visuals, Abbey said revenue offered “ another ugly chart.” The December revenue forecast is $130 million less than the adjusted August forecast for both this budget year and for next year. Ugly indeed.

For the first quarter of FY '17 (July to September 2016), state revenue is down in all major categories. If nothing is done, FY '17 spending will consume all reserves and end $85.5 million in the hole. That can’t happen. FY '17 revenue is projected at $237.9 million less than appropriations.

“The state is really challenged,” Abbey said. There are “significant constitutional issues.” One of those issues is paying the bills. “We have the state treasurer worrying about having enough cash.” Writing hot checks won’t work.

Medicaid is the elephant in the budget room. Since 2001, Medicaid’s share of the operating budget has doubled to 15 percent. Since 2015, all other spending has trended down. 
Good news: mining may have finally hit bottom. Oil and gas prices appear stable, though at half the 2014 level.

The scramble to patch FY '17 finances starts about five minutes after the 60-day session begins Jan. 17. Around $200 million must be pulled from the hats of spending cuts and tax increases.

LFC’s thoughts, Abbey said, include speeding revenue collection, delaying capital outlay spending, hitting the economic development loan fund and the high wage tax credit. 

The six legislators speaking at the conference are all being buried in “don’t cut me” emails, which Sen. Carlos Cisneros, a Questa Democrat, said don’t provide a solution. 

Las Cruces Democrat Rep. Bill McCamley said, “It is vital that we work with people we don’t necessarily agree with.”

We don’t have any choice.