The Myth of ABQ’s ‘Structural Deficit’

Source: “Budget Deficit Initiative Report,” Albuquerque Mayor Tim Keller

Predictably prejudiced, Albuquerque Mayor Tim Keller’s “Budget Deficit Initiative Report” doesn’t have much to offer in terms of fundamentally fixing fiscal policy in the Duke City.

Batting leadoff for the document is Albuquerque’s alleged “structural deficit.” The term is used by the Big Government lobby, from coast to coast, to imply that there’s “a fundamental long-term gap in recurring revenue as compared to recurring expenses.” But the assumptions behind the claim are almost always erroneous, and that’s certainly the case here.

The report’s main flaws include:

* Whining about online sales: The city’s revenucrats estimate that Albuquerque “is losing at least $6 million per year (and growing) in taxes on internet sales — purchases that are a “creating a permanent change in the City’s tax base absent any move to change current tax laws.”

First, as currently interpreted by the U.S. Supreme Court, neither state nor local governments have the authority to assess taxes on vendors that lack a physical presence within their borders. The High Court is examining the issue once again, but there is no guarantee that justices’ multiple precedents will be scrapped. In addition, plenty of other cities “suffer” from the same denial of revenue, without experiencing a “structural deficit.” Finally, the city refuses to acknowledge the fact that much of the money that Burquenos save ordering online is used to buy goods and services locally — which are impacted by the GRT.

* The public-safety scare: It’s far from clear that “more cops = less crime” is a perfectly balanced equation. But leaving that issue aside, the city uses some dodgy data (see chart above) to argue for boosted compensation for current policemen and “strategic and targeted longevity increases for recruitment of lateral officers in order to adequately compensate them for their law enforcement time and experience.” The chart has a number of flaws, such as failing to adjust for the cost of living and leaving out the value of benefits.

* Insubstantial suggestions for savings: With 49 percent of the city’s budget devoted to personnel-related expenses, the “Budget Deficit Initiative Report” stumbles badly on compensation issues. For example, it boasts about reducing “employee wages by an average of 2.2% across-the-board” in fiscal year 2011 — eight fiscal years ago. It doesn’t discuss the raises that have been approved since the worst of the Great Recession, preferring to offer some piddling options, including increasing the employee share of healthcare premiums from 20 to 25 percent. (In the private sector, the employee portion is 33 percent.)

The Rio Grande Foundation has outlined an extensive menu of items that can right-size compensation in Albuquerque, including pension reform, the end of longevity bonuses, and elimination of payouts for unused paid leave. Yes, many of the alterations would, in the city’s words, “require changes to the current [collective-bargaining agreements] with Unions,” but given the threat of significant layoffs, labor bosses might be willing to come to the negotiating table.

The “Budget Deficit Initiative Report” is a deeply flawed document, catering to the status quo and government employees rather than the interest of overburdened taxpayers who are not well-positioned to absorb yet another GRT hike. Read the document for yourself, and compare it to the deep dive the Foundation made into promising fiscal reforms that the Duke City can implement to halt its structural overspending — and avoid the “need” for higher taxes.

Print Friendly, PDF & Email

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.