Profound forces have impacted New Mexico over the last year in unforeseen ways.
- The governor and COVID shut down much of our state for much of the past year. COVID is declining, but New Mexico remains among the most locked-down states in the nation;
- Oil and gas prices plummeted last April due to the pandemic and an international price war, but have come roaring back and produced $300 million in “new” money and a budget surplus;
- Democrats in Washington recently passed a $1.9 trillion “stimulus” that will dump an astounding $9 billion on New Mexico state and local governments. Meanwhile, the administration’s moratorium on oil and gas production on federal lands will cost our state more than $700 million over the next few years, according to Gov. Michelle Lujan Grisham;
- While New Mexico governments are awash in money, businesses are struggling. The state’s unemployment rate is 8.7 percent, fourth-worst in the nation.
With the Biden Administration targeting the oil and gas industry, the legislature must diversify our economy.
The unprecedented stream of federal spending flowing into our state is augmented by a flow of people. Housing markets are tight in most of our cities as Americans from expensive states like California embrace remote work or simply move to states where they can spread out and buy a house for a lot less money.
Current trends are favorable, but long-term economic prosperity requires enacting policies that make the state a more attractive business destination. The 2021 legislature had a few successes but ultimately failed to enact policies that will bring long-term prosperity.
Despite a budget surplus, the legislature raised taxes on health insurance (Senate Bill 317). They imposed a new sick leave mandate on businesses, including small ones (House Bill 20). Passage of House Bill 4, the misnamed “Civil Rights Act,” will impose massive new legal costs on governments without improving policing or protecting civil rights.
There were bright spots. HB 255 reformed New Mexico’s liquor licensing to make it easier for bars and restaurants long-term. HB 177 passed, allowing New Mexicans to start micro-businesses by making non-perishable food items in their homes for sale.
But the gross receipts tax on business inputs and services remains a stumbling block for businesses. New Mexico also remains among a relatively small group of states that tax Social Security.
No significant tax cuts or reforms were adopted. Also, there was no widespread reform of burdensome regulations, like the state’s “prevailing wage” law that artificially increases costs on public works.
Some will argue that tapping the permanent fund to boost education programs will help improve our workforce, but the track record of governments spending more money to boost education outcomes is spotty at best.
Empowering families with resources to choose the educational option that is right for them is more likely to succeed, at a fraction of the cost. But such legislation was quickly defeated.
Until the legislature gets serious about reforming our economy, we’ll continue riding the wave of luck, boom and bust in the oil patch and Washington debt.
(Paul Gessing is president of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.)