Beverlee McClure – President ACI

When the legislature meets for a special session on October 17, the State of New Mexico will address issues shared with many private businesses in New Mexico; declining revenues and increased costs in a challenging economic climate. The New Mexico business community believes that the private, public and special interest sectors of New Mexico must collaborate to create long term solutions that provide for stable private and public sectors that allow both, as well as all New Mexico families, to balance their checkbook.  In contrast, short term, simplistic band aids driven by inflammatory rhetoric from all sides can easily lead to long term woes for all New Mexicans.

The State’s shortfall has been caused not only by declining revenues as is the case for many businesses, but also a dramatic increase in state government spending.  Until this year, spending from the general fund has increased by 40% since FY2003.  Needless to say, few private businesses have increased their spending 40% over the last seven years as the state has.

The response of private sector employers to the economic downturn has required tough choices in order to remain in business. Businesses across the state have cut expenses by at least 5% or more and are trying to run as efficiently as possible to protect limited resources.  In an attempt to preserve jobs, many business owners have taken personal pay cuts and others have had to cut health and other benefits for employees, including 401K plan contributions.  Nonetheless, New Mexico has seen the unemployment rate climb to 7.5% with a true rate of 11.7% when those who are no longer drawing benefits are included, according to the Department of Workforce Solutions.  These numbers represent people who were employed in the private sector.

But what about New Mexico’s public sector approach to balancing its checkbook?  While the private sector has cut expenses, many are calling for no cuts to government and education. Yet these are the two fastest expanding sectors in our state.  Despite so-called hiring freezes and cuts, there continue to be the same number of public employees.  In fact, the Department of Workforce Solutions shows that there has actually been job growth in the government and education sector.  Yet, some are calling for stressed private sector employers to support the public sector at the same level to which it has grown. Is it really fair to those employed in the private sector to face additional cutbacks in order that public sector employees can be spared?  How can New Mexico justify increasing taxes on businesses and private sector taxpayers in a time of increasing unemployment and declining benefits?  While it seems popular these days to call for increased taxation of businesses owners, the stark reality is that the impact of increased taxation spreads far beyond the owners who, unlike the public sector to date, must reduce spending on goods and services, freezing or reducing employee salaries, reducing or eliminating benefits, and as a last resort, layoffs.

New Mexico has substantial reserves to soften the blow of the recession on the public sector-reserves funded by the private sector taxpayers for times such as these. Furthermore, there are other potential solutions that should be explored before raising taxes, cutting jobs in the public sector or forcing further job losses in the private sector. For example, the State should use the Accountability in Government Budget Guidelines to prioritize projects and rate the effectiveness of programs. It cannot be expected that every program be sustained and some prioritization must take place.

Just as the private sector is not requesting tax cuts to reduce the effect of the recession on its finances; the public sector should not seek tax increases to reduce the effect of the recession on it.  Instead, we should work together to form viable solutions. Continuing to have a one-size fits all approach to cuts and tax increases is not healthy, and a more even-handed and long-term approach is needed.

The State of Louisiana created a group of public and private sector representatives who are charged with developing a long-term plan for the state. Louisiana’s Streamline Commission was “created to reduce the cost of state government, through all means available, including efficiencies, economies, greater effectiveness, and other means to streamline government in order to overcome the projected severe revenue reductions occurring through 2012 and to ensure that available state tax dollars are being spent efficiently and effectively.”

New Mexico needs a long-term solution to ensure sustainability in both the private and public sector.  Leadership in our state should consider forming our own Streamline Commission to work for solutions.  We are in this recession together, and it is only by working together that we are going to not only survive, but to thrive once again.

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