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 V.15 No.18 | May 4 - 10, 2006 

Ortiz y Pino

A Bulging Butter Bin

New Mexico government needs a lesson in spending

As was the case with many Americans of her generation, my mother was deeply scarred by the Great Depression. She was a teenager in small-town (Las Vegas, Rowe, Pecos) northern New Mexico during those years of scarcity and want, and the tough times burned too deeply into her mind to ever entirely go away, despite 60 years of post-war prosperity.

To her last days, she could not bear to throw out food—even long after it had passed beyond the edible. I remember many a lunch shared with her comprised of a dozen tiny portions of leftovers: indistinguishable dibs and dabs of what might once have been a casserole (or was it a salad?), fragments of stews, pot roasts, mixed vegetables, posole, beans or chicos.

Every microscopic remnant had been carefully preserved in aluminum foil, saran wrap or the recycled plastic margarine containers with tight-fitting lids that filled one entire drawer to overflowing in her kitchen. And I was not the only one of her children to perfect the art of surreptitious culling of the always-full refrigerator. This was not insubordination; it was self-defense.

I share this bit of family lore with you so you will appreciate what I mean when I explain that our state government budgets with this same mentality. I call it “scarcity-based budgeting” and, like my mother’s thrifty-’til-it-hurts approach, its historic origins are understandable. But it, too, requires re-examination now that times have changed.

Our recently concluded 30-day Legislative Session is on my mind a lot these days. I have a hard time explaining to constituents how it could be that in a year when state tax revenues exceeded budgeted expenditures by more than $1.2 billion, we would not have been able to put that money to better use than what ultimately resulted from the session.

Not that we legislators failed utterly. We managed to agree on a budget for the coming year that will increase spending on schools, higher education and Medicaid significantly and that will give real (if not spectacular) raises to public employees throughout state government.

However, we achieved that growth by spending scarcely 20 percent of the available new revenues. The rest was either spent on “one-time-only” projects (basically buildings or purchases) or was socked away for future emergencies (in aluminum foil, saran wrap and old margarine bins).

Why, in a state with the enormous needs that we have, didn’t we spend more of this surplus on meeting some of those needs?

Scarcity-based budgeting is my explanation; the mindset that hesitates to raise the public spending bar too high “because we might not be able to sustain it forever.” And (God forbid!) if we can’t sustain those higher levels we would be faced with choosing between raising taxes or cutting programs; a thought too painful to consider.

There are still many legislators in both houses who lived through that precise dilemma some years ago when overly generous tax cuts (the infamous “Big Mac” tax reductions of the late ’80s) followed by an economic downturn nationally led directly to the budget-tightening famine years of the Johnson administration. And no one wants to go through that again.

So as a hedge against that problem, we now have scarcity-based budgeting. It relies on three (count ’em, three) levels of fail-safe fiscal prudence, any one of which might be thought sufficient to insulate against some sudden fiscal catastrophe. But, like Depression-era survivors everywhere, we can’t be too careful.

Or can we?

I mean, really! Do we need all three sets of life preservers? At best, they make it hard to dance, do calisthenics or even swim. At worst, they actually impede the working of government … as when the backlog of capital construction projects (those notorious “one-time-only” expenditures) has gotten so great that contractors start competing for labor and materials, and the queue is longer than our capacity to get things done.

The first hedge stemming from thinking poor is that we deliberately underestimate revenue projections. We built next year’s estimates using gasoline and natural gas prices significantly lower than those we can already see in place at filling stations across the street from the capital … just to be safe.

Secondly, we set aside 10 percent (or even more, depending on whose figures are judged accurate) of the entire state operating budget (each percentage point this year equals $51 million, so 10 percent means at least $510 million of the surplus or almost half of it) as “reserve funds” … in case some catastrophe occurs this year.

Finally, don’t forget that New Mexico already enjoys a permanent reserve fund of at least $12 billion (there are also other permanent reserve funds backing up various other state commitments into the future), which is also nestled in the vaults (earning interest) “for the possibility of a rainy day” at some future date.

My mother would probably want one more level of reassurance but, gosh, the rest of us could sleep comfortably with any one of those protective strategies (OK, two for you queasy guys)—but three?

Scarcity budgeting, when you get right down to its core, is not intended as much to prevent overspending as it is to insulate lawmakers from making tough decisions. Blaming scarcity is easier than solving problems. But for a poor state, we sure are awash in money. We ought to be doing more with it than stashing it in Bluebonnet containers in the fridge.

The opinions expressed are solely those of the author. E-mail jerry@alibi.com.

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