What to Cut: Finding $600 Million in Savings w/o Raising Taxes

ALBUQUERQUE — It is no secret that New Mexico faces serious budget challenges. Senate Finance Committee Chairman John Arthur Smith called the budget situation “a crisis” and noted that the State is facing a deficit of more than $150 million for the budget year that ended June 30 and faces a gulf of up to $500 million for the current fiscal year.

That means that New Mexico’s elected officials face the unpleasant task of making serious budget cuts in an election year. To assist in that effort, the Rio Grande Foundation has compiled a list of budget cuts that would enable policymakers to achieve needed savings. The paper, “What to Cut Solutions to New Mexico’s Budget Crisis” is available at the Rio Grande Foundation’s website www.riograndefoundation.org.

Said Rio Grande Foundation president Paul Gessing, the study’s lead author, “To her credit, Gov. Martinez has clearly stated that she opposes tax hikes. We applaud her strong leadership on the tax issue which also makes having a solid plan with specific budget cuts an imperative.”

Here are some of the specific ideas outlined in the new brief:

  • LEDA: $55 million; LEDA is classic “corporate welfare.” Worse, it is ineffective. Earlier this year, the Legislative Finance Committee (LFC) reported that “the state does not receive sufficient reporting from businesses using … LEDA … funds to properly evaluate” the program. Thus, “it is impossible to determine relative effectiveness and cost-efficiency” of it. Other dubious “corporate welfare” programs could add to the savings.
  • Film subsidies: $50 million; There has never been a justification for spending $50 million annually to subsidize Hollywood studios. Massive deficits should mean massive cuts or elimination. Recently, Alaska and Michigan killed their programs while Louisiana downsized dramatically.
  • Higher education: $30 million; Student populations are down by more than 8 percent, but the number of branch campuses continues rising. Reducing their number is an easy starting point. Cutting back on taxpayer subsidies for athletic programs (more than $4 million at UNM alone) must be considered as well.
  • Personnel: $165 million; a 2014 study by the American Enterprise Institute found a 24 percent advantage for New Mexico government employees when total compensation, including the value of job security, was scrutinized. A 10 percent reduction in the total cost of state-employee compensation is a reasonable goal. This could be achieved by reducing the size of the workforce, by reducing compensation packages, or both.
  • K-12: $252 million; at $9,012, New Mexico spends more on K-12 per-student than Utah ($6,555), Arizona, ($7,208), Oklahoma ($7,672), Texas ($8,299), and Colorado ($8,647).

The most promising tactic for immediate savings to is to renegotiate the collective-bargaining agreements that excessively compensate teachers and administrators, especially through an unfair and broken pension system that incentivizes longevity over quality. Expanding school choice is another way to save money and cut costs.

In conclusion Gessing said, “Cutting the budget is never fun. New Mexico needs a larger, healthier private sector built on sound public policies like economic deregulation, tax reform, educational choice, and a sound legal system.”