Tax and spending limits lost at the ballot box last November in several states, but a new effort to limit spending has popped up in New Mexico.
State Sen. Kent Cravens (R-Albuquerque) and state Rep. Tom Taylor (R-Farmington), minority leader in the House, are the lead sponsors of New Mexico’s “Taxpayer Protection Act,” a bill that would add a spending limit to the New Mexico Constitution.
Cravens announced the bill at a February 5 news conference in Santa Fe, saying, “It’s unacceptable to spend money just because it’s there. … We need to start exercising some fiscal restraint.”
In “Stop State’s Spending Insanity,” published in the Albuquerque Journal, Taylor wrote, “If we fail to enact a tax and expenditure limitation, we will continue to see massive spending increases. With our current oil and gas windfalls, we are not getting hurt as badly. But when this windfall is over, we will pay a grave price.”
Limit Allows Growth
As it is currently formulated, the Taxpayer Protection Act would limit annual spending growth to 3.6 percent plus the rate of population growth. Sixty percent of any excess revenue would be deposited in the state’s “permanent fund” to be invested and spent in the future, and 40 percent of the excess would be refunded in the form of rebate checks to New Mexicans who filed tax returns during the previous year.
Since 2000, the annual inflation rate in the United States has never exceeded 3.4 percent, with the average rate at approximately 2.8 percent.
Opposition Lines Up
Proponents of taxpayer protections in New Mexico face an uphill battle.
Rep. Luciano “Lucky” Varela (D-Santa Fe), deputy chairman of the state House Appropriations and Finance Committee, told the Albuquerque Journal, “For Republicans to say we should never make expenditures on better schools or needed roads does not help move New Mexico forward; it keeps us down.”
Gerry Bradley, research director at the left-of-center New Mexico Voices for Children, said, “While the Taxpayer Protection Act attempts to account for population growth, it fails to do so because populations of various populations like K-12 students and recipients of government services may rise faster. Inflation in the broader economy also rises and falls at rates different from specific government programs.”
Bradley also said, “New Mexico’s General Fund relative to overall personal income levels has been quite stable in recent years, obviating the need for artificial limits.”
Revenues, Spending Soar
Oil and gas revenues have played a big role in New Mexico’s revenue growth. In fiscal year 2006, the oil and gas industry paid $2.83 billion to the state, up from $1.13 billion in 2004. Oil and gas by themselves earned the state more than 55 percent of the $5.1 billion that was spent on all General Fund obligations last year.
State spending under Gov. Bill Richardson (D) has grown quickly with the influx of oil and gas money. This year, with $720 million in “new money” expected, Richardson proposed a one-year budget increase of 11 percent. Richardson’s predecessor, Gary Johnson (R), held down spending during his eight years as governor, which ended in 2002.
‘Every Dime Spent’
“Gary Johnson, by threatening to veto any effort to grow government too fast, kept a lid on government spending, but oil and gas revenue was not a factor then,” said Harry Messenheimer of the Rio Grande Foundation, an expert on New Mexico budget issues. “Unfortunately we now have consensus among the political leadership of the state that every dime collected should be spent.”
Messenheimer noted per-capita spending, adjusted for inflation, has grown 24 percent during Richardson’s four years in office.
“The big spenders refuse to acknowledge that their profligacy has produced nothing,” Messenheimer said. “The kids still don’t learn, the poor remain in poverty, and the health care situation remains unchanged.”
Paul Gessing ([email protected]) is president of the Rio Grande Foundation in Albuquerque, New Mexico.
