WASHINGTON SNEEZES, NEW MEXICO CATCHES A COLD: New Mexico is heavily reliant on the federal government and state policy makers say New Mexico must diversify its economy. AP photo.
By Rob Nikolewski │ New Mexico Watchdog
SANTA FE — Regardless how it eventually ends, the partial government shutdown has highlighted how much New Mexico is dependent on the federal government.
And that leads to the next question: what can New Mexico do to diversify its economy so it will be less vulnerable to political bickering on Capitol Hill?
New Mexico Watchdog asked a host of policy makers and business advisers what are some things the state should do to improve its economic health. Among the suggestions: streamlining regulations, attracting more businesses and improving the state’s lagging performance in educating young people.
Here are examples of New Mexico’s economic reliance on revenue from the federal government:
*More than one-third of the state’s gross domestic product comes from federal spending.
*In excess of 40 percent of the state’s land is held by the federal government, which provides more than a quarter of the state’s jobs.
*In 2005, the federal government spent $2.03 on New Mexico for every dollar in tax revenue collected from the state — the highest rate in the country.
*In 2011, The Economist magazine looked at the difference between the amount states paid in federal taxes and the amount they received in federal dollars. New Mexico finished with the largest imbalance in the nation (with only the U.S. territory of Puerto Rico receiving more federal dollars opposed to tax revenue):
*The federally-funded Los Alamos National Laboratory, which employs around 10,000 people, is the sixth-largest employer in the state, and the Sandia National Laboratories, with a workforce of 9,000 in Albuquerque, accounts for an estimated $7 million a day in economic impact in the state.
*More than 20,000 people work at the state’s four military bases, including the White Sands Missile Range.
“What we need is flexibility to attract business,” said Simon Brackley, president and CEO of the Santa Fe Chamber of Commerce. “There’s also a lack of understanding that businesses create the tax base for the state to grow.”
Two weeks ago, Think New Mexico, a non-partisan think tank, released a three-pronged strategy to create jobs. That plan includes trying to increase the number of young entrepreneurs by allowing out-of-state students majoring in science, technology, engineering, math and business to attend New Mexico schools by paying the lower, in-state tuition rate.
“These kids are disproportionately linked to creating jobs,” Think New Mexico executive director Fred Nathan told New Mexico Watchdog. “It’s really a cost-benefit analysis as to what we would pay in terms of discounting their tuition and what they would bring. Many of them will stay and create jobs.”
Think New Mexico also calls for imitating a plan Utah created, giving in-state businesses that expand a 30 percent tax rebate, as well as following the lead of 18 other states that have established a “one-stop portal” for business fees, licenses and filings.
A one-stop center appeals to Brackley.
“You can’t buy a business license online in Santa Fe,” he said, adding that when business people come to pay fees or apply for a business license in the state’s capital city, “You speak to someone through bulletproof glass … It’s not exactly a business-friendly attitude.”
Paul Gessing of the Rio Grande Foundation, a free-market think tank based in Albuquerque, offered his own suggestions.
“If pressed, I’d say that in the immediate future we need right-to-work (legislation) and tax reforms that reduce the tax burden on starting and growing a business,” Gessing said in an email.
Passed in 24 states, “right-to-work” laws give employees the right to decide for themselves whether to join or financially support a labor union. Fiercely opposed by unions, a “right-to-work” law hasn’t come to the New Mexico’s governor’s desk since 1979 and 1981, when Gov. Bruce King vetoed bills that had been passed by the Legislature.
Terri Cole of the Greater Albuquerque Chamber of Commerce called for coordinating business leaders, New Mexico’s national labs and the state’s three research universities to create business opportunities, but emphasized that improving the state’s performance in education is crucial.
“We don’t yet have enough leaders in key positions who have it as their goal to create a student-centered educational reform movement,” Cole said. “Until we get that in place, it’s going to be an uphill battle.”
Cole said she recently met a chief executive from Boeing, which has recently expanded operations into South Carolina.
“I asked him what is the one thing New Mexico can do to attract companies like you and he said, ‘Create an excellent education system … That you will be able to provide a work force for me for a hundred years.’ And that’s how you get plants like that.”
“Our workforce is weak,” Brackley said, pointing to employers who need workers who “show up on time, dress professionally and communicate well with customers.”
Potential solutions span the political spectrum, with some liberal groups calling for the state to dip into the permanent fund to pay for more early childhood educational programs, while fiscal conservatives point out that New Mexico is 25th in the nation in per-pupil spending yet consistently finishes 48th and 49th in reading proficiency.
New Mexico Watchdog reached out to one of the leading progressive nonprofits in the state, New Mexico Voices for Children, for suggestions on diversifying the state’s economy but the organization didn’t respond.
In the meantime, some lawmakers hope the fiscal crises that have become part of the political landscape in Washington, D.C., can prompt some concrete solutions to diversifying New Mexico’s economy.
“Sequestration and the like do reflect the over-reliance on federal spending in the state of New Mexico,” Sen. John Arthur Smith, D-Deming, told New Mexico Watchdog when the shutdown began. “In time, I think there’s going to be a reduction in (federal) spending regardless who’s president. I don’t want our state to be the bug on the windshield.”
Here’s Fred Nathan of Think New Mexico with more on his group’s call for New Mexico to imitate Utah when it comes to tax rebates for expanding companies:
Contact Rob Nikolewski at email@example.com and follow him on Twitter @robnikolewski