New Mexico: Will It Go The Way Of Oregon and California?

Last week we were in New Mexico and during our visit I was invited to a meeting between local business leaders in Santa Fe and the chairman of the Finance Committee for the New Mexico State Senate, Sen. John Arthur Smith (D-Deming). The subject was New Mexico’s Public Employee Retirement System (PERS) and the fact that, like Oregon, the unfunded future liability exceeds the state’s general fund. And I was privileged to engage in a private conversation with Sen. Smith prior to the meeting in which we discussed the overall financial picture of New Mexico.

I thought of the states west of the Mississippi, only California and Oregon had entered the race to drive the bus over the cliff, but it appears that New Mexico is in serious contention and may even overtake Oregon. It is a disaster and, like California and Oregon, the Democrats have refused to take any serious steps towards fiscal responsibility. Unemployment in New Mexico stands at 8.3 percent in August compared to Oregon’s 10.6. However, that rise in unemployment started from a figure of about 3.5 percent compared to Oregon’s habitual 5.5 percent.

Like Oregon, New Mexico’s projected budget deficit for the next biennium is closing on nearly twenty-five percent. However, New Mexico is the twelfth poorest state in the nation with a median income of about $43,700 while Oregon is thirty-second with a median income of about $50,900. For those of you who have had to endure a public education in Portland’ schools, that means that the resources available from New Mexicans to make up the budget deficit are materially lower than those available in Oregon.

But there are some critical differences that suggest that New Mexico may be more apt to weather the storm than Oregon. First, Sen. Smith, while a Democrat, is a fiscal conservative and has been calling on his fellow legislators for quite a number of years to address their free spending ways. He is particularly critical of the legislature’s disregard for fiscal integrity in dealing with both the numbers of, and the benefits for, public employees. Contrast that with Oregon’s Democrat Party who continue to increase budgeted spending by double digit amounts each biennium without a single dissenting voice.

Second, New Mexico has already made substantial cuts in spending in the last biennium whereas Oregon increased its spending and, of late, has simply substituted federal dollars for state revenue shortfalls to substantially continue its reckless ways. Neither the Democrat candidate for governor nor the Democrat legislative leadership in Oregon has provided any guidance in dealing with the budgetary problems other than raising taxes or hoping for more federal funding.

Third, the reckless spending by Democrats in New Mexico is coupled with a history and culture of corruption. Budgetary shortfalls have been coupled with missing money – tens of millions of dollars of missing money. New Mexico newspapers regularly carry stories of politicians arrested, accused, convicted and jailed. The current governor, Bill Richardson, was under federal investigation in connection with a pay-to-play scheme that cost him an Obama nomination for Secretary of Commerce. The investigation was subsequently squashed by the Obama Department of Justice. But both the Democrat candidate for Attorney General and the Republican candidate for Governor (both leading in local polls) have taken square aim at the corruption and vowed to end this checkered part of New Mexico history.

And fourth, the New Mexico Supreme Court, unlike the Oregon Supreme Court, has not yet declared that public employees have a constitutional lifetime right to PERS which cannot be altered or terminated. In fact, Sen. Smith speaks freely about the need to terminate the existing PERS defined benefit program and to adopt a defined contribution plan on a going forward basis and is even open to exploring bankruptcy as the “nuclear option.”

And finally, New Mexico’s major newspaper, the Albuquerque Journal, unlike the Oregonian, appears to recognize that the free spending liberal policies are not working – not at a local level, not at a state level and most certainly, not at a national level. In an October 14, 2010, entitled Learn Lessons From Cuba, Spain, Greece, the Journal opined:

“Passing in the dark night of recession, the United States and its long-time Caribbean nemesis, Cuba, seem to be drifting closer to each other’s ideology.

“The Obama administration in its short time at the helm has grown government — and the national debt — by jaw-dropping leaps and bounds. More social programs, billions in stimulus handouts with little permanent job creation to show for it, a confusing health care overhaul that will increase costs, and unemployment refusing to budge from 9.6 percent all signal it’s time to pause and think about the consequences of where the U.S. is heading.

“Meanwhile, consider these recent developments in Cuba and elsewhere:
• Cuba plans to lay off half a million state employees in an attempt to salvage its troubled economy by creating a private sector and introducing some semblance of capitalism. This is a sea change for the communist country and a recognition that its “government as nanny” economic model isn’t working.
• Greece and Spain are mired in debt and saddled by union benefits they simply cannot afford to the extent that some observers fear their economic crises and high unemployment rates could threaten the euro. Workers in France are striking at the possibility of raising the retirement age to 62 and moving up to a 40-hour work week. Mon Dieu!

“There are lessons to be learned here, but it seems like folks in Washington aren’t paying much attention. Cuban President Raul Castro is. In a major speech, he noted: “We have to erase forever the notion that Cuba is the only country in the world where one can live without working.”

“So are some leaders in Europe who have finally come to grips with the concept of unsustainability.

“Which begs the question: How far down this tack of bloated government, high unemployment and public employee union self-largesse do we want to go here in the USA?

“It’s time to turn the ship of state around and head back to sounder financial and philosophical waters.”

I’m not sure what it took to rattle the confidence in liberalism that has been a trademark of the Albuquerque Journal but it should be packaged and sent out to all of America’s major newspapers.

There is no question that New Mexico is in a race with Oregon to self destruct; however the winds of change – reform and fiscal responsibility – appear to be blowing stronger in New Mexico than Oregon. November 2 is a critical date for both states – let’s see which path the each take.

Oregon Catalyst