Alibi V.19 No.16 • April 22-28, 2010 

Ortiz y Pino

Hunting Elusive Budgetary Fat

Gov. Bill Richardson’s veto pen struck down the food tax and blew a giant hole in the state budget. So the need to destroy a mythical “budgetary fat” monster is sitting heavy on the shoulders of New Mexico lawmakers. Take it from me, a senator on the Senate Finance Committee.

We had hoped the patchwork quilt of taxes and “trimming” pieced together during the special session would last long enough for the economy to turn around. It might have spared us the pain of slashing state spending. But when the governor flip-flopped on an earlier agreement and killed a $70 million savings maneuver the press dubbed a “food tax,” there was a quick chorus of legislative groans.

The hunt for blubber has got to begin in earnest.

New Mexico’s share of federal stimulus money available for the operating budget, all $1 billion of it, will be spent by December. That federal help was certainly welcome (imagine the bloodletting without it)—but it’s spent and must either be replaced, or we have to learn to live without it. Twelve months’ worth of federal aid is about $300 million.

Plus, the budget was based on an unrealistic expectation of increased tax revenue—a Pollyanna-ish 6 percent, or about $320 million.

And now Gov. Richardson has created the need to find an additional $70 million—or fat to cut.

Add up those three factors, and even before dealing with growth in programs (more students; more health care costs; and hikes in utility, insurance and interest rates), it will take a combination of $530 million more in tax revenue or budget cuts just to tread water.

Republicans, of course, favor only cutting, finding that additional $530 million in what they confidently assert are myriad “pockets of padding” hidden all through the state budget. They ignore that in the last two budget cycles there have already been massive cuts, and spending dropped from $6.1 billion to $5.4 billion.

Problem is, while there is always someone who thinks every expenditure under the magnifying glass is purest lard, simultaneously there’s someone else who sees prime meat.

The cuts underway and the ones last year clearly changed public school operations, state contracting for services and state payrolls. Vacancies go unfilled and entire bureaus are merged. We have a far leaner (and, unfortunately, meaner) state government than just two years ago.

But the call for surgery to next year’s budget is growing shrill. Problem is, while there is always someone who thinks every expenditure under the magnifying glass is purest lard, simultaneously there’s someone else who sees prime meat.

Here are a few examples of why this process is so difficult and why it is undertaken so seldom:

1) The biggest fat deposit in all state government is Medicaid—or more precisely, the bloated managed care portions of that budget. Seven private companies “manage” (loosely) almost $4.5 billion (yes, with a “b”) in Medicaid spending. About 20 percent ($900 million) comes from the state, and the rest is federal.

These contractors make comfortable profits guaranteed by their contracts. There is no evidence that the benefit to the state justifies the cost, but tampering with those contracts will draw piercing shrieks. At the least, built-in profit margins could be adjusted to reflect the hardship and economizing that our budget crunch would seem to demand. That alone could save $5 to $10 million.

2) We have too many four-year colleges and too many two-year colleges operating independently under their own boards of regents. So why do we also have a state Department of Higher Education? We could either eliminate the department or combine some of the many colleges’ administrations to effect significant savings. But again, the gnashing of teeth will be tremendous.

3) New Mexico has 89 school systems, each with its own school board and superintendent. Half of them serve student populations of fewer than 1,000, and several enroll fewer than 100 students. But all of them churn out paperwork, hold meetings, compete for talent—and spend money needlessly. If we wait for those boards to voluntarily merge, we will never see improvement, and we will miss out on big potential savings.

4) The school bus contractor system in this state is rife with fat. The state buys new buses every three years for the contractors. The contractors keep them when they are rotated out of use and lease them profitably for other purposes. And every contractor budgets “fringe” costs in their contracts—even though they don’t pay either retirement or insurance since all employees are part-time. That mythical “fringe” is just another profit center.

There are definitely places to cut. But each proposed slicing will generate a chorus of opponents ready to define their fat as prime beef. It won’t be a pretty process. But then, neither is raising taxes. So, happy hunting!

The opinions expressed are solely those of the author. E-mail