Legislature: Leave the Santa costumes at home

“We can’t do very much this year. There’s no money.” That’s been the refrain I’ve heard since joining the state Senate two years ago. True to that refrain, little has been done. We have not addressed the structural budget problems that face the state.

Instead, we’ve relied on Band-Aid fixes, temporary federal stimulus funds, and hopes that the economy will right itself.

The truth is we could accomplish a lot by eliminating special favors and waste. The holidays are over. It’s time to take off the Santa costumes, stop showering gifts on special interests, and look out for everyone’s welfare. It’s time to send an honest message. New Mexico can deliver quality essential services for less money, but only if we remove the cherry on top of everyone’s piece of the pie.

The challenges are daunting. New Mexico faces a $250-450 million budget shortfall for 2012, plus a $330 million hole in Medicaid due to disappearing federal stimulus support. Here are steps I believe we should take to better secure our fiscal future.

Eliminate questionable subsidies to private ventures

Taking money from taxpayers to give to a few favored private businesses is bad policy. Substantial savings can be realized by controlling this practice.

The Legislature recently earmarked nearly a billion dollars in future revenues to help pay the costs of two large private development projects through tax increment subsidies. Forty years of experience with these subsidies in other states has produced no hard evidence of lasting economic benefits. We should outlaw future tax increment subsidies for private ventures.

New Mexico spends about $70 million annually to pay a 25 percent rebate to film producers on expenses incurred in our state. One study says we are losing $86 of every $100 spent on this rebate; another says we are gaining $50 per $100 spent.

One thing is certain: If every business got this benefit, there would be no money left in the treasury to provide basic services. We should cap the amount of these debatable subsidies.

Eliminate arbitrary special-interest tax breaks

Ending these tax breaks will help us balance the budget in the short run and lower overall tax rates over the long term. Eliminating a number of the largest special-interest tax breaks would have an immediate positive impact on our fiscal health.

Oil and gas concerns enjoy a wide variety of special tax breaks that have cost the treasury $150-250 million annually in recent years. Each of these breaks deserves careful scrutiny before continuing.

Multi-state businesses avoid New Mexico taxes through accounting tricks that shift reported income to states with lower tax rates. Most states close these loopholes by implementing Consolidated Corporate Reporting. New Mexico loses from $10 million to $70 million annually because we do not do the same. It’s time big national retailers pay their fair share of New Mexico taxes.

New Mexicans pay a 3 percent excise tax on auto purchases and a 5 percent state gross receipts tax on nearly everything else. Other states charge the same sales tax on autos as on every other item. This tax break primarily benefits higher-income folks who purchase new and expensive vehicles, and it costs about $60 million annually.

There is no evidence that it boosts the economy. We should charge the same 5 percent state tax on vehicles as all other items. Low-income buyers could be protected by applying the current 3 percent rate to the first $10,000 of a vehicle purchase.

Implement sustained initiatives to improve government efficiency

People assume cuts in services are the only way to reduce expenses. I believe we can significantly cut expenses without loss of services if we tackle the real work. Waste has been ingrained so deeply into the system that a sustained five to ten year process is required to clarify priorities, untangle and streamline overlapping programs, and better align state and federal initiatives. The overarching theme is to simplify, simplify, and then simplify some more.

Over 80 percent of our state budget is devoted to three areas: K-12 education, health care (Medicaid), and higher education. Meaningful cost reductions cannot be achieved without tackling these areas. Here are a few comments on each.

State and federal funding per full-day classroom in New Mexico now tops $350,000 annually; yet, students often lack study materials to bring home, teachers are often forced to buy their own supplies, and New Mexico ranks 49th in student achievement. Spending must be refocused on effective instruction.

Medicaid has developed piecemeal through an ongoing series of loosely coordinated legislative mandates and regulatory initiatives. Complicated administrative procedures, costly and inappropriate use of emergency facilities, outsized profits for insurance companies contracted to administer payments, unnecessary benefit frills, and opportunities for provider fraud are some of the resulting issues. A sustained redesign effort that addresses each of these problems can result in substantial savings.

New Mexico spends more per capita on higher education than almost every other state. We know why. The system is split into a far-flung maze of separate institutions that are extraordinarily expensive to operate. We cannot afford to build new facilities for every area that wants one. A long-term effort is required implement new approaches to distance learning and facility sharing, and to gradually phase out unaffordable facilities.

Fiscal stability and robust state services can be compatible, but only if we have the willpower to manage services and stop using government as a gifting service.

State Senator Steve Fischmann represents District 37 in Las Cruces.