Remember last November, when it slowly began to dawn on us poor sap taxpayers that the hundreds of billions of dollars of public money the federal government had poured into the bailout of our failing multinational financial industry was going nowhere but into the bankers’ pockets and their corporate lockboxes?
Remember just how genuinely ticked off we were to discover there would be no trickle down and instead many financial institutions were using that federal cash to bolster their reserves in order to buy up other banks?
And remember how that $800 billion vanished with nary a trace, leaving the national economy to continue to stagnate in quiet despair, untouched by the federal largesse to the Wall Street financiers?
Well, here’s an early warning to get ready for another bout of outrage. This one will be on a smaller scale but deserves to be just as passionately felt. Our anger will be directed at the New Mexico Legislature, which has just had half a billion dollars in school and Medicaid money dumped in its lap as part of the Obama stimulus plan ... and is determinedly sitting on it.
If that worthy body of fiscal conservatives follows through with its first announced plan on what to do with that new bonanza of cash, we all ought to be standing outside the Roundhouse screaming at them until they relent.
In the version of the state budget (House Bill 2) that passed the House and was sent to the Senate, the plans are clear. According to that document, most of the new federal cash will be placed in the state’s operating reserves instead of spent.
Now I don’t know about you, but I just spent a fruitless half hour searching through all my dictionaries for any definition of “stimulus” that involves banking the cash and resisting all entreaties to put it into the economy.
This stubborn legislative “thrift” posturing is not a virtue, not a sign of character, not a leadership trait. It is just plain old fear: “Our revenue forecast is not dependable; we might not have enough money to get through the year without this cushion; we might flop if we spend the cash.”
Most of the new federal cash will be placed in the state’s operating reserves instead of spent.
All are true. None outweigh the simple truth that Congress is sending that money to us with one thought in mind: Use it. Kick-start the economy, hire people, buy stuff. And don’t, in the name of all that is just, all that is merciful, merely sit on it!
Unfortunately (I have little hope that the first announced plan will be changed by the time the budget lands on Gov. Richardson’s desk), those in control of the state’s pursestrings are intent on doing precisely that. They want that cushion to be as fluffy and bounteous as they can plump it.
They have designed a budget for next year (starting July 1) that will have 13.3 percent cash operating reserves. Those would be larger reserves than even two years ago when New Mexico was flush with oil and gas revenues. As an indication of how fat that cushion is, most bond rating services will give a governmental entity the highest rating if the government is able to maintain 5 percent cash reserves.
What’s the difference between 13 percent reserves and 5 percent? You can figure that for a budget of $55 billion, each percentage point is worth $55 million. So I calculate that putting another 8 percentage points into the reserves amounts to $440 million being diverted from buying goods and services that are desperately needed by New Mexico if we are to have any hope of turning the economy around.
That $440 million is also the equivalent of 80 percent of the Medicaid and public education portions of our slice of the stimulus package not getting spent; getting saved for a rainier day—as if this state wasn’t already hip-deep in more trouble than we ever imagined possible.
The fear in Santa Fe over using the money for what was intended (stimulation of the economy) is puzzling ... until you remember that the biggest nightmare most of the senior legislators ever lived through was raising additional revenue in an emergency by increasing taxes. Nothing causes a cold sweat to break out on their brows faster than simply mentioning such an action.
Since the new federal money is not likely to be repeated next year, these seasoned veterans of legislative battles past prefer to treat it like an unbudgeted gift; or like found money. They appreciate it; they are willing to put it in the bank or to buy a one-time special purchase with it. What they get the shivers over is to suggest including it in the budget.
They especially don’t want to get caught counting on it.
But therein is the dilemma: The whole point of the stimulus package is to spark renewed economic activity. Hopefully, that will make further federal spending unnecessary because state tax revenues will have been improved by the next year. And that won’t happen if the federal check is stuffed under the mattress and ignored.
We generally expect a lot from our legislators. But this time, all we’re asking is to reduce the size of that cushion you’re carrying around. Start acting like local home-owned bankers instead of big-time financiers like Lehmann Brothers. Just spend the money, darn it. Put the stimulation back in the stimulus.