Challenges in Funding State Government

Challenges in Funding State Governments

It is the economy…still the biggest challenges facing state and local governments.    State and local tax revenues have been declining since 4^th quarter 2008, and corporate income taxes have been declining since 3^rd quarter 2007.   The recession impact was felt at the state and local government tax receipts for 5 quarters (4^th Qtr 2008 through 4^th Qtr 2009).    Year over year for 2010 inched up at about 2% rate (1^st and 2^nd quarter 2010 compared to 2009) state tax revenues.     This according to the Rockefeller Institute recent report on state and local government finances.   www.rockinst.org   

             However, state revenues took a major hit as tax collections were off about 20% below expectations over a 2-year period of economic slowdown (late 2008 through early 2009).   Planning for FY 2011 budgets will be a challenge, as all of the stopgap measures have been exhausted and some real budget cuts will still be required to balance state budgets.    In Colorado, the FY 2011 budget shortfall is estimated to be $1.5 billion, as compared to a $19 billion state budget.   In New Mexico, another $250 to $400 million needs to be cut from this FY budget, and it is likely that more reductions will be needed for FY 2012 (that starts July 1, 2011).

The Southeast and Rocky Mountain regions reported the largest declines in personal income tax collections at 9.6 and 6.3 percent, respectively. In fact, each single state in both regions reported declines in personal income tax collections.    In Colorado, personal income tax withholding was down about 4% in late 2009, but had slightly increased to about 3% (increase) in 2^nd Quarter 2010.   According to the Rockefeller Institute, Colorado and New Mexico were experiencing declining economic activity in August 2010, as compared to the rest of the United States.   Texas continued to maintain economic growth, although is has slipped from 7^th in FY06 to 13^th in FY11 on the Tax Foundation state business tax climate index.   www.taxfoundation.org 

The Rocky Mountain States are slipping on the Tax Foundation index, with New Mexico falling 10 slots from FY10 (#23) to FY11 (#33).   Under 4 years of a Democrat majority in both legislative assemblies and a Democrat Governor in Colorado, the state fell from FY08 (#10) to FY11 (#15) in the Tax Climate index.    Whereas the state of Utah as steadily moved from FY06 (#15) into the top ten FY11 (#9) in the Tax Climate index.  Arizona dropped one notch below New Mexico to FY11 (#34) after several years in the high 20’s in the Index.

Bring up the rear in FY11 are New York (#50), California (#49), New Jersey (#48), Connecticut (#47) and Ohio (#46).     Each of these state are characterized by high tax rates, significant public labor unions, and significant taxes on capital (such as California with almost 10% state tax on capital gains).

As various states struggle with a weak economy, it is likely that those states that reduce public spending and reduce dependence on government programs (and thus are able to reduce tax rates), but at the same time create a business friendly environment, are more likely to succeed economically going forward.   Clearly, as California and New York have experienced, their model is not working.  Whereas the Texas model and the Florida model are enhancing economic growth due to a better tax climate and business friendly state policies.     In the United States we have 50 models of state level democracy and free market capitalism underway.    The high tax, high regulation and high public union states are not competitive (nor financially sound), whereas the lower tax, lower regulation and less public union states are more competitive and fiscally sound.

© 2010, Jasper Welch, Four Corners Media, www.jasperwelch.org  

NM Governor & Staff Trying to Change Story

NM Governor & Staff Trying to Change Story

With the famous NM political blogs still humming along (see Joe Mohahan www.joemonahansnewmexico.blogspot.com and Heath Hausseamen www.nmpolitics.net ), another “on-line magazine” has been introduced by long time NM journalist Jack Swickard called 575 Magazine http://575magazine.com/ The feature opinion article that Jack and his staff rolled out over the weekend involved the “boating accident” that Governor Richardson and his senior staff were involved in at Elephant Butte reservoir, in southern New Mexico. It has all the classic elements of political intrigue and being above the law that seems to follow Governor Richardson where ever he goes.

A quote from Michael Swickard, opinion writer for 575 Magazine:
New Mexico Governor Bill Richardson achieved a zero point zero rating for style points this week. A large houseboat with him, some of his staff and security detail was docking at an Elephant Butte marina September 5th when it ran expensively into some other boats and the dock which certainly is not the textbook way of docking and sure to attract attention. You might ask, “How did a simple incident get such media legs?”Any story including the governor automatically has legs and while the press knew something happened involving the governor it was several days until a press report. Several statements in the report raised media eyebrows. Richardson’s Chief of Staff was listed as the co-driver of the boat when it hit the dock along with the owner of the boat who had just grabbed the controls. The Chief of Staff was cited for the accident alone. What should the real driver have done after doing $15,000 of damage? You or me would have stood and taken the scolding.The media erupted when they learned that despite the crash Governor Richardson, members of his staff included the Chief of Staff and Richardson’s security detail were gone in seconds. The unfortunate boat owner stayed for the unpleasant conversations to follow.The authorities arrived in minutes. It was noted that there were people unavailable at the time of the investigation. Two days later, after time to “freshen up” the governor’s party contacted the authorities. Shuckins, too late for a breathalyzer test. I’m not saying there was drinking happening on the boat - just noting a convenient fact. http://575magazine.com/opinion/mswickard/mscbuttegate.html

NM Politics.net (see above) also carried the Michael Swickard post in the upper right hand column of their home page. The New Mexico Independent carried the story, along with many media outlets in New Mexico. http://newmexicoindependent.com/36063/officers-eyewitness-contradict-richardsons-statement-on-houseboat-accident Other nationally know web sites posted the Governor’s mishap (and fleeing from the scene) as well: http://tpmmuckraker.talkingpointsmemo.com (see Richardson post) and Stateline.Org, a web site focused on state by state politics & policy http://www.stateline.org/live/states/New+Mexico

With these NM Political blogs, the national blogs that cover New Mexico, plus some Google word and phrase searches (“Google” Governor Richardson boating accident) will yield plenty of traditional and on-line press reports, opinion pieces and blogging articles. Certainly, the NM Governor is getting much more press, media and web coverage that his press secretary and senior staff wanted on his “boating accident”. Don’t we live in a great country, as the world of reporting, observation, news and opinion goes online? And a simple word search can bring a focused perspective to the news, as you choose the details.

© 2009, Jasper Welch, Four Corners Media, www.jasperwelch.org

Pay to Play Politics: The Gov Richardson Un-Appointment

Pay to Play Politics: The Gov Richardson Un-Appointment

On Wednesday December 3, 2008 President Elect Barack Obama announced the appointment of New Mexico Governor Bill Richardson as the next Secretary of Commerce.   “As Governor of New Mexico, Bill showed how government can act as a partner to support our businesses, helping create 80,000 new jobs. And under his leadership, New Mexico saw the lowest unemployment rate in decades.” Barack Obama, Chicago, Illinois.    Other press coverage, spun up by the Legacy Media and the Obama transition machine waxed eloquently about Governor Richardson’s qualifications and political career.    So what really happened in New Mexico during six (6) years of one party rule (Democrat) with Governor Richardson at the helm?

            In an exchange of e-mail with Representative Tom Taylor, R-Farmington, who serves as the Minority Leader of the New Mexico House of Representatives, sheds a different light on the results of Governor Richardson’s term in New Mexico.  “They (the Legacy media) didn’t mention in the article that all those wonderful things he did for us (in New Mexico) can’t be afforded.  We have increased (by) 4770 permanent (state of NM) employees or (an increase of) 24% over the last 6 years.   This is going to be interesting (as to whether we can afford this large increase in NM government employees going forward).”  Representative Tom Taylor, R-Farmington, 12.3.08

            Fast-forward one month later to January 5, 2009, and the surprise announcement that Governor Richardson is withdrawing his name from consideration as the next US Department of Commerce Secretary.    What happened in the course of one month?     Or better yet, what has been happening in New Mexico at the Governor’s office over the last 6 years, in particular over the last Presidential election cycle?    Political sources in New Mexico have long held that the Governor was engaged in “pay to play” politics, a term that has received much more use during the on-going Governor Blagojevich corruption scandal unfolding in Illinois.   This light of national press attention on Illinois is proving to be uncomfortable for the Governor of New Mexico.    At issue with Bill Richardson, D-New Mexico, is campaign contributions to Richardson by CDR Financial and state of NM government “sole source/no bid” contracts with CDR Financial, how they were linked and what was expected as a result of the political money flow (from CDR to Richardson).  Since word of a US grand jury investigation leaked out in mid December, the Governor who is usually media savvy, hasn’t been talking.  This silence was broken on Monday, January 5^th during a 7-minute press conference in Santa Fe, NM.  The embattled Governor expressed disappointment in having to step aside, but also steadfastly refused to answer questions related to the CDR investigation. 

Behind the scenes, NM legislators and political operatives in New Mexico are scrambling to prepare for a rough 2009 legislative session, made more challenging with a lame duck Governor now unable to exit to Washington DC during a New Mexico budget crisis.  In the meantime, Lt Governor Diane Denish is engaged in a Governor transition process, predicated on the Guv being appointed as the new Secretary of Commerce (done in early December 2008, but undone in early January 2009).   Time will tell whether this “Denish transition team” effort is premature, but it appears to be on hold as a result of Governor Richardson withdrawing his name from consideration.  Stay tuned, as New Mexico politics at the Roundhouse have been turned upside down prior to an expected 10% shortfall in state revenues for FY 2009/2010.  As a result of the Governor unexpectedly staying in New Mexico, a tough NM legislative session on FY 2009/10 budget issues becomes even more unpredictable.

© 2008, Jasper Welch, Four Corners Media, www.jasperwelch.org