News Column

NM Places 50th in Job Growth

Jan. 8, 2013

Bruce Krasnow

N.M. Gov. Susana Martinez
N.M. Gov. Susana Martinez

Dead last.

That is New Mexico's record for job growth over the past three years compared with the other 49 states.

The details are not pretty.

--New Mexico is one of two states still showing negative jobs growth during the 34-month period.

--New Mexico's nearby states -- Colorado, Texas and Utah -- have among the best economic growth in the nation.

--New Mexico even trails California and Nevada, which have crawled back from recession despite massive problems with home foreclosures.

The data, which covers a period from Jan. 1, 2010, to October 2012, was compiled by Jerry Bradley, a former state economist now with New Mexico Voices for Children, at the request of The New Mexican. It includes the last year of former Gov. Bill Richardson's term.

If more recent numbers were included, the picture would be even bleaker, as New Mexico has recorded year-over-year job losses every month since June -- a contraction of 4,800 jobs from November 2011 to November 2012, according to preliminary estimates from the U.S. Bureau of Labor Statistics. Even High Country News has weighed in with a recent article titled "What's the Matter with New Mexico?"

Christopher Erickson, a New Mexico State University economics professor, said Gov. Susana Martinez inherited a tough economic situation in 2011, but a stellar performance on the governor's part would have stemmed that somewhat.

"She's had a tough hand dealt to her, but it's not clear that she's played it well," he told New Mexico In Depth and the Las Cruces Sun-News.

"Those of us who have looked at this for a long time are somewhat shocked," Bradley said. Because of the large government sector in New Mexico, the state was somewhat cushioned from swings in the business cycle. No more, he said, and "we're still not out of [the recession]."

To boost the economy and wean the labor force from the public sector, Martinez is touting a $65 million package that would include a business-tax cut and additional money for private-sector job training and recruitment. She also is looking at tweaks to the tax system that, she contends, would make the state more competitive with its neighbors.

The measures will be brought before the Legislature, which convenes Jan. 15.

"A truly diverse economic approach in New Mexico will support small business growth while working to attract large employers at the same time," Martinez told the Albuquerque Chamber of Commerce on Thursday. "We have to level the playing field so that we can fight for jobs alongside states like Arizona and Texas, which currently have a more favorable tax climate."

Her proposals include:

--Increasing Local Economic Development Act funding by $10 million to help local governments invest in specific infrastructure or land needs to close deals with companies looking to relocate to New Mexico;

--Providing $4.75 million in additional money to the Job Training Incentive Program, which assists employers by covering the costs of training new employees;

--A targeted tax credit specifically awarded to small businesses over the next two years for each employee hired and retained;

--Reducing the tax that companies in New Mexico pay to 4.9 percent, from the current 7.6 percent.

Democrats, however, say the governor's plans are just a nibble, not an all-hands-on-deck response to the economic hurricane that has leveled growth.

"The governor has not proposed anything," said Fred Harris, a former Democratic U.S. senator from Oklahoma who teaches political science at The University of New Mexico. "Her projects don't amount to a hill of beans as far as jobs and the economy of the state is concerned."

And lawmakers remain skeptical of another round of tax cuts.

"Richardson tried it, there is no evidence that it works," said state Sen. Gerry Ortiz y Pino, D-Albuquerque. "It might keep businesses afloat another year, then they lay off people, get bought and they're gone."

State Rep. Luciano "Lucky" Varela, speaking in support of a bill already introduced by Sen. Peter Wirth, a fellow Santa Fe Democrat, said, "We should reduce the corporate tax, but let's close those loopholes and make it revenue neutral."

Tom Clifford, director of Finance and Administration for Martinez, understands wariness about tax cuts, but says the state's economic sluggishness has a lot to do with its reliance on the government sector and the construction downturn -- while being more competitive will yield long-term benefits. "We really don't know what would have happened in the absence of the Richardson tax cuts," he said.

The governor's initiatives would be paid for with money the state has saved by not filling jobs and from higher oil and gas revenue. In all, a surplus of between $625 million to $713 million may be carried over to the new budget year, 12 percent of the general fund, Clifford said.

State Sen. Tim Keller of Albuquerque, a Harvard business school graduate, and other Democrats want the surplus used for economic stimulus projects that could jump-start the construction industry, where employment is at an 18-year low. Using some $300 million of the surplus, plus $250 million from the regular capital outlay cycle, "would be the biggest infrastructure spending our state has ever done," Keller said.

"There is no way we can improve the economy without creating more jobs," Varela said. "Especially with the needs we have for our infrastructure."

"I don't think that would be an appropriate use," Clifford said. An economist himself, Clifford said it would not be prudent to allow the surplus to drop below 10 percent -- and Martinez wants to target one-time needs, such as replenishing the health insurance premium fund or technology purchases.

Clifford doesn't question the need to invigorate the construction sector and argues there is going to be more than enough capital outlay money -- perhaps $223 million for new projects that are ready and justified. "We're hoping to work with them on a way of prioritizing the projects," he said.

The debate is not unique in New Mexico, as Martinez and Republicans lean on a smaller government sector to grow the private economy -- and that means fewer government employees.

It has not escaped the eye of Varela, who chairs the Legislative Finance Committee, that the Martinez administration has not filled hundreds of state government positions. He claims there are 3,000 fewer people on the state payroll today since Martinez took office, in part because of a hiring freeze initiated by Richardson. That is part of the reason the proposed House budget will have modest salary increases in the range of 1 percent to 2 percent for state employees, many of whom are doing more work because of nearby empty desks.

Wirth is again sponsoring a tax change that Martinez vetoed, which aims to close the corporate tax loophole that benefits multistate corporations. That revenue would be used to lower the corporate rate, not the surplus. "I am encouraged to see Gov. Martinez discussing corporate taxes. New Mexico businesses, large and small, are the big winners if there is a level playing field," he said. Wirth also backs the "Build Green New Mexico" tax credit program as a construction stimulus.

Keller has bills to encourage more technology investment and the hiring of New Mexico college graduates, while Ortiz y Pino backs neighborhood stabilization funding that would stem foreclosures, thereby helping home prices; Democratic House leaders want to tap $100 million a year from the state Land Grant Permanent Fund for early childhood education.

Yet, there is not a comprehensive Democratic package for the economy and no sense of what should come first.

"The key word is comprehensive," Ortiz y Pino said. "A lot of us individual senators are working on specific ideas, but there is not much of an economic agenda put forth by the administration, either. There's some tax breaks, some tax credits, no real vision and certainly nothing that would produce the kind of turnaround we need."

Wirth said, "My sense is a coordinated Democratic effort on legislative priorities will occur after the House-Senate leadership decisions are made on the opening day of the session."

What Democrats and many economists do agree on is that the biggest boost for jobs would come with a decision that is now squarely before the governor: expanding the Medicaid insurance program to an additional 150,000 residents who are just above the poverty line.

More insured people would bring increased utilization of primary-care services and less reliance on indigent emergency care, according to an analysis by The University of New Mexico's Bureau of Business and Economic Research.

"We estimate that the expansion of Medicaid under ACA will generate from $4.8 billion to $8.6 billion of economic activity in New Mexico [between 2014 and 2020] and create 6,000 to almost 8,500 new jobs depending on Medicaid enrollment levels," according to the analysis by Lee Reynis.

"There is not a whole lot of ways a state government can increase state employment, but doing the Medicaid expansion would do the most," said economist Bradley.

Clifford said the economic impact of Medicaid is a factor as the administration deliberates. The risk, though, is "if they [the federal government] scale back that match, we will have to step in and replace that money out of local tax revenues," he said. "That's the tension we've been concerned about."

Harris added that it's the nature of a Legislature for each member to have his or her own agenda and ideas. But it should be the governor who leads. "She needs to get off the topic of driver's licenses [for undocumented immigrants] and flunking third-graders and get onto jobs," Harris said. "I'm sure the Democrats would back her up."



Source: (c)2013 The Santa Fe New Mexican (Santa Fe, N.M.) Distributed by MCT Information Services


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