Revenue Growth Predictions

It looks like all of the movie magic in the Land of Enchantment has begun influencing financial projections by the Richardson Administration:

Economic analysts for Gov. Bill Richardson's administration said Thursday they remain confident that New Mexico revenues will increase by nearly $300 million next year, a day after legislators voiced doubts about significant rebounds in the state's economy.
        
The revenue estimates, which don't factor in proposed tax increases, are key to ongoing budget negotiations between top-ranking Democrats in the House and Senate. 

 That's a pretty amazing prediction. I'm wondering what the Administration's position is on Tooth Fairy and Santa Claus?

Richardson Approval Numbers in Free Fall

The Teflon Governor is Teflon no more.

We're going to have our New Mexico poll results out starting tomorrow- perhaps the most interesting thing we found is that Bill Richardson has become one of the least popular Governors in the country, with 63% of voters in the state disapproving of him to only 28% approving. He's even in negative territory among Democrats at a 42/47 spread.

I've always been amazed by Governor Bill Richardson's early popularity. Despite the rhetoric, the "successes" of this Administration have been nothing more than smoke and mirrors.

• The Richardson Administration threw more and more money to appease education special interests groups, while ignoring the fact that each year student performance is worse than the year before.
   
• The Richardson Administration raided our road funds to give $100 million dollar gifts to billionaires, and build a train that benefits only a tenth of a percent of the state's population.
  
• The Richardson Administration has been mired in one pay-to-play scandal after another.

And, this is just the tip of the iceberg. I could go on for days, but you can just hit the appropriate label button below and read it all without me repeating it.

So, what does this all mean for the Democratic hopefuls during this upcoming election year.  Well, right now it looks like Richardson Administration #2, Lt. Governor Diane Denish, is still polling out ahead... barely:

Where New Mexico departs from its regional counterparts is that it still looks favored to vote Democratic in its most significant statewide race this year. Lieutenant Governor Diane Denish leads her top Republican opponent, Pete Domenici Jr., by a 45-40 margin and has leads of 14-18 points over the rest of the GOP field.

Denish is by far the best known of the candidates running, with 41% of voters in the state holding a positive opinion of her to just 34% who see her negatively.

 Keep in mind, the Lt. Governor has been campaigning for this position for going on two years. So, I don't know that those  numbers are anything to celebrate about - especially, considering Pete Domenici Jr. just got in the race a couple of weeks ago.

It's going to be very hard for the Lt. Governor to start disengaging herself from the Governor after Denish has been so silent for so long. Only 34% of the voters see her negatively right now, but let's be realistic.  She has operated in the shadow of Governor for the last eight years. His failed policies are bringing him down very quickly.  It's not going to be very long before that same problem is encountered by Richardson's #2. This is particularly true when we consider that the Governor spent so much time out of state during his Presidential dream chasing, that the state was actually being run by Lt. Governor Diane Denish.

Compliance Trumps Jobs as Governmental Priority

There is well reasoned analysis out there that the high unemployment numbers we are currently experiencing might be with us for some time:

The unemployment rate hit 10 percent in October, and there are good reasons to believe that by 2011, 2012, even 2014, it will have declined only a little. Late last year, the average duration of unemployment surpassed six months, the first time that has happened since 1948, when the Bureau of Labor Statistics began tracking that number. As of this writing, for every open job in the U.S., six people are actively looking for work.

All of these figures understate the magnitude of the jobs crisis. The broadest measure of unemployment and underemployment (which includes people who want to work but have stopped actively searching for a job, along with those who want full-time jobs but can find only part-time work) reached 17.4 percent in October, which appears to be the highest figure since the 1930s. And for large swaths of society—young adults, men, minorities—that figure was much higher (among teenagers, for instance, even the narrowest measure of unemployment stood at roughly 27 percent). One recent survey showed that 44 percent of families had experienced a job loss, a reduction in hours, or a pay cut in the past year.

So, it is kind of interesting that federal and some state governments are more interested in "catching" businesses in a worker misclassification game to fill government coffers than making sure that people can work and feed their families.

President Barack Obama's proposed 2011 budget suggests tough times ahead for employers who rely heavily on independent contractors in order to keep down labor costs.

If the budget is approved, the Internal Revenue Service will add 100 new enforcement personnel as part of a $25 million plan to crack down the misclassification of workers as independent contractors.

When you consider that 50 percent of jobs created during the economic recovery are contingent labor, you quickly see that a Catch-22 situation is unfolding.

Of course, many of the businesses that are able to survive the recession are also smart enough to quickly assess the forthcoming penalties and make employment decisions based on those pending government regulations.  Those decisions will be in the best interest of the business and its current employees, but will do nothing to put out of work Americans back to work:

And our associates voted to schedule 50-hour workweeks rather than hire new associates — even if it means working five 10-hour days or maybe even working on Saturdays when needed. We’re just not going to hire right now because we don’t know what’s coming next. We hope something will be made clearer in the next 90 days as our country focuses on what is necessary to create jobs in America. Then we can re-evaluate our decision.

Put yourselves in the shoes of the tens of millions of Americans struggling to keep their families fed and housed.  Now, think what this crackdown will mean to them.  Instead of earning a living, they will be forced to remain on the public dole or worse, so that tax collectors can go after those that are trying their hardest to survive.

Elect Officials Fail New Mexico

When the Legislature meets during the 30 day session, the constitutional mandate is clear:

B. Every regular session of the legislature convening during an even-numbered year shall consider only the following:

  (1) budgets, appropriations and revenue bills;

  (2) bills drawn pursuant to special messages of the governor; and

  (3) bills of the last previous regular session vetoed by the governor.

(As amended November 5, 1940, November 5, 1946, and November 3, 1964.)

Yet, despite this clarity of purpose, they adjourned the session without passing a budget:

The 30-day legislative session sputtered to a stop with no agreement on a budget or tax hikes, ensuring a special session that Gov. Bill Richardson said will begin Wednesday. 

Addressing the budget deficit was the singular most important item this session, but instead of focusing on the topic at hand, hundreds of other bills were introduced.  Which means during a time of budgetary crisis, the Governor will be calling the legislature into a special session at an extra cost to working families of $50,000 per day. Almost as offensive as the failure to get the job done because of a lack of focus, is the promise to once again introduce of legislation of no pressing consequence:

The special session would be devoted almost exclusively to budget matters, with perhaps "another item or two" on the agenda, according to the governor.  

You waste our money during the legislative session by refusing to focus on the singular topic of importance, and now you promise to do the same in a special session. Anyone who is elected, or seeking elected office, and does not take issue with this, does not deserve to hold elected office.

Misguided Priorities at Legislative Close

Huge budget issues continue to loom as the Legislature comes to a close today.  So, you've got to wonder how the Hispanic Education Act can be a priority:

But with only hours remaining in the legislative session at the time of the Senate's 25-13 vote, House Bill 150 was sent back to the House, which needed to approve it before it could be forwarded to Gov. Bill Richardson.
        
The bill's sponsor, Rep. Rick Miera, D-Albuquerque, was optimistic Wednesday night that the House would concur on the amendment by today's noon adjournment.
        
The legislation, which is supported by Richardson, would create a Hispanic education liaison position inside the state Public Education Department. It also would require an annual report card on Hispanic performance in New Mexico schools. And it would create a Hispanic education advisory council that would provide input to the education secretary. 

 Just to refresh your memory on why this is a bizarre initiative, please go back and read my original pre-legislative session post on this purposeless political soundbite effort.

Stitching a Budget Together With Disappearing Thread

They are feeling the pressure at the Roundhouse to get a budget approved before the strike of noon tomorrow.

"I'm hopeful we can come up with something (to avoid a special session)," said Senate President Pro Tem Tim Jennings, D-Roswell, who's participated in the budget talks.
        
The House approved cuts of about 1 percent for public schools and government services, while the Senate budget package calls for reducing spending levels by about 3 percent.
        
The shallower cuts in the House plan would be made possible by more than $300 million generated by tax hikes, primarily the gross receipts increase. The Senate plan relies on $180 million in new tax revenue.
        
However, Jennings said he's concerned revenue levels might end up being even lower than projected and said Richardson has criticized more tax ideas than he's offered. 

 I'd say that Senator Jennings concerns about lower revenue levels are well founded.  Consider for a moment the source of some of the revenue being expected to help plug the gap:

The Finance Committee approved the budget on Thursday and sent it to the Senate for consideration.

The committee proposed spending about $5.5 billion in the next fiscal year, which starts in July. That includes about $200 million in federal aid that's replacing state money for Medicaid, public schools and higher education.

 Of course, there's one obvious problem with this plan. It seems to fail to consider the reality of what is being said about the future of federal money coming to the states:

Payments to states and individuals will fall to $11 billion, from $14 billion, per month. Much of this spending -- such as Medicaid funding and additional unemployment benefits -- was meant to stabilize the economy during the recession.

 Yuppers, it looks like that faucet is starting to be turned in the opposite direction. So, here's my prediction. Assuming a state budget gets approved by noon tomorrow, we will most likely see a special session before the summer is over to deal with the "surprise" lower than expected revenues.

Denish-Come-Lately

Denish-Come-Lately

Noun

Singular Denish-come-lately

Plural Denish-come-latelies

Denish-come-lately (plural Denish-come-latelies)

1. (idiomatic) A newcomer; a novice; an upstart. 

 Example in Common Usage:

Considering her complicit silence for seven plus years as Lt. Governor and many more years before that as the Chairman of the Democratic Party, many might consider Diane Denish's election year decision to become an open government advocate something of a Denish-come-lately phenomenon.

It's been more than half a decade, all of which Lt. Governor Diane Denish has occupied the number two seat in one of the most corrupt and backroom dealing administrations this state has ever seen, since I've lamented the fact that how the administration spends taxpayer dollars is done in secrecy.

Now that election season is in full swing, Governor Richardson's number two is trying to reposition herself as a "Champion of Sunshine."  Well, she may be able to fool some folks, but come November the voters are not likely to forget that when it came to letting the sun shine in this scandal plagued administration, Lt. Governor Diane Denish her time hiding in the clouds.

Even as recently as a few months ago, when this administration refused to identify those the 59 administration faithful who were supposedly being cut (probably to hide the fact that some were being moved to other positions), the sound of Lt. Governor Denish's silence was deafening.

Sorry, but being a Denish-Come-Lately to the sunshine brigade is just not going to cut it in November.

It Just Never Stops

Explaining it Another Way

Some of you, actually just one person, likes to take me to task time and time again for standing up for small business and insisting that the proposed gross receipts tax and income tax increase negatively impact those most likely to actually help the economy rebound by creating new jobs. This individual argues that a couple of hundred dollars more in taxes really shouldn't be a big deal to a business making $200,000 in profit. But, nothing could be further from the truth.

First, let's consider the environment in which these tax increases are being pushed:

Please note that no efficiencies to government bills have been adopted and no true cuts to the budget have yet to be made, however tax increases on the private sector are being considered.  Unemployment in our state is at a 22 year high, and our focus must be on job retention and creation. 

That's the current reality spelled out in a recent communication from the Association of Commerce and Industry (ACI).  Mind you, no efficiencies or true cuts are being made even though we know at a bare minimum there are $129 million in cuts that could be easily made. We also know that the despite all of the hype, government stimulus money did not create new jobs.  At best, it may have saved some public sector jobs.

We also know that big business isn't adding to their employee roles. So, that leaves small business to come to the rescue. Only someone who has never run a business could argue, "What's $500 in additional taxes?" They'll smugly try to make the case that $500 is not enough to put someone on the payroll. But, that's because they think jobs are added in the private sector in the same manner as they are in the public sector.  They are not.

In the government arena, if you want to add a $40K a year employee, you have to raise $40,000 a year in addition taxes. In the small business sector, a $500 investment could very easily result in a $120,000 to $240,000 in new salaries.

Let's explore this a little further with a real life example.  Last week, I spent $500 in travel expenses to meet potential customers for a new and innovative technology.  The meeting went very well. If the deal is closed it will result in a contract that could easily be worth $1M or more.

New people will be added to the payroll to fulfill the contract. They will have paid benefits and won't need to be supported by the state. The $500 that was not collected in taxes will likely save the state (i.e. taxpayers), tens of thousands of dollars in the form of unemployment benefits that will not have to be paid.  In fact, these wage earners will pay state income and gross receipts tax far in excess of the $500 in additional taxes on my business. If they get to keep their house because they are once again gainfully employed, they will also pay property taxes.

Now, let's go back to the scenario being pushed in the legislature. They want to take another $500 (or more) away from small businesses. This is a zero sum game. My business has a budget. If you pull $500 from it in the form of additional taxes that money has to come from somewhere. Due to the tight credit market, it can't come from my retained earnings.  Nor, can it come from any line item that will keep me from fulfilling my current obligations.

So, that means it will come from marketing dollars. It might be one less trip I can take to market my business. Or, maybe ten or more marketing lunches that can never be scheduled. Or, a critical conference that has to be passed up.

Those are all possibilities. The one undeniable fact is that it it will be four, five or a dozen jobs that will never happen because elected officials refused to do the right thing and cut unnecessary spending.

Complement Higher Taxes with Increased Energy Costs

Are you feeling the economic pinch? Well, when the dust settles from the current legislative session, that pinch is likely to feel more like a bone-shattering squeeze. We've got tax after tax after tax being proposed and pushed through, and that's only the beginning. 

There are other initiatives out there which will be equally successful at separating you from your hard earned dollars:

The greenhouse gas reduction sought by the advocacy group New Energy Economy would apply to oil and gas producers, refineries, manufacturers, coal-fired power plants and others in New Mexico that emit 10,000 tons or more a year of carbon dioxide.

Public Service Company of New Mexico estimates it would have to reduce current carbon emissions from its fleet of power plants by 36 percent to meet the proposed cap.

And the company says that would mean a big jump in electric bills.

In fact, if you follow the money trail, you'll see that big government lobbyists are behind all of the major wine and dining going on right now in Santa Fe:

However, the latest batch of lobbyist reports that trickled into the Secretary of State's Office last week showed that the lobbyists who were throwing the biggest parties for the senators and representatives were not from commercial interests. Instead, they represented state employees, community colleges and an environmentalist group. 

As legislators continue to take on the role of the Sheriff of Nottingham, they would be wise to take note of recent elections around the country. Continuously trying to take more from those making less inevitably has consequences.

Wall Street Versus Main Street Continues

I've wondered aloud on more than one occasion why the vast majority of stimulus efforts on the federal level were given to Wall Street versus Main Street. Of course, we all know the reason.  Democrats are providing special favors to their favorite campaign donors and making sure that big inefficient businesses with powerful unions can keep their doors open regardless of the lack of demand for their product.

Well, as near as I can tell, the same thing is happening in the New Mexico legislature - the interests of large business at the expense of small business. Only instead of giveaways of taxpayer money, we're talking about who the Democrats in the legislature are opting to tax.  Mind you, I say Democrats because the Republicans have made it clear that reining in the size of government should happen before increasing taxes:

Republicans in both the House and Senate are expected to take a hard-line approach against tax hikes, although they bristle at suggestions they're merely trying to block the Democratic agenda.
    
"They've never asked us to be part of the solution," said Rep. Jimmie Hall, R-Albuquerque.
    
Hall said he thinks there are still ways to trim the budget — by targeting administrative and vacant positions — without hurting core services.
    
"I can't support any tax increases until we shrink state government down to a level that a populist can support," he said. 

So, back to the tax, tax, tax enamored House Democrats. Let's take a look at their proposed solution:

Gov. Bill Richardson said Wednesday he supports the House's budget approach, which includes temporarily raising the gross receipts tax rate and imposing a personal income surtax on high-earning New Mexicans. 

I've explained in a previous post that what is really being proposed is a tax increase on the profitable retained earnings of remaining small businesses.  In other words, the money they need to weather the storm and keep key employees at work is the target of the tax increase. Now, yes, I'm of the mind that significant spending cuts should be made before even considering any tax increase, but I can't help but wonder if the Democrats are so bent on raising taxes, why they are targeting small New Mexico businesses instead of large Wall Street firms.


Think about it.  The general consensus is that small, not large businesses are the key to a true economic recovery. The irresponsible stimulus spending may have helped keep the doors open of those who are "too big to fail," but it did nothing to keep your neighbors, family and friends employed:

Unemployment rates were higher in December than a year earlier in 371 of the 372 metropolitan areas and lower in 1 area, the U.S. Bureau of Labor Statistics reported today. 

President Obama is finally awakening to the fact that America (and his popularity) is hurting because he has put the interests of Wall Street and unions before that of Main Street families:

Faced with a national 10 percent unemployment rate and a corresponding erosion in his popularity, President Obama delivered his first State of the Union address tonight and offered up a laundry list of proposals aimed directly at the small businesses who do 60 percent of the hiring in America.

So, you've got to wonder why House Democrats in the legislature have targeted small businesses and left big businesses alone. Sure some big business tax bills were introduced, but bills like HB 62, which would could raise taxes on large out of state corporations, got a pass in favor of taking more money away from job creating small New Mexico businesses.

Come Election Day 2010 the House Democrats, all of whom are up for re-election, are going to find that it is the Main Street business owners, employees and their families that are going to vote.  You know, the ones that actually live in the state.

Before You Raise Our Taxes

Legislators who are interested in continuing to serve past November 2010 would be wise to consider cleaning up the mess that is state government before further increasing our taxes. A good place to start might be with the people put on the government payroll that do little more than collect a check:

One of them is Charles Lipski Sr., who was hired at the Department of Transportation two months before the freeze, at $65K a year, with a resume that had his last job ending in 1994. He was given a state job that had no title and no description. Lucky for Lipski and others like him that these temp jobs don't have to be advertised to the public.
        
Getting that information wasn't easy — NMDOT tried to make a reporter go to Santa Fe to "sign in" to see Lipski in Bernalillo. Asked about what he did, Lipski would only say he was very "excited" about doing a job on the public payroll that he couldn't talk about publicly. 

You see, when the House Revenue and Taxation Committee votes today on passing a 1% tax increase on Main Street small business owners throughout the state (see this post), they will be removing $44 million from the economy that could be used to save or create real jobs in order to continue do nothing patronage jobs as noted above:

Consideration of a bill that would impose a 1 percent surtax on the taxable income of high-earning New Mexicans was delayed Friday by a House committee.
        
However, Rep. Edward Sandoval, D-Albuquerque, the chairman of the House Revenue and Taxation Committee, said House Bill 9 will be debated by the committee on Monday.
        
If enacted, the measure would generate an estimated $44 million in the coming year.  

When you consider that we're still losing jobs, now is not the time to force higher taxes on small businesses throughout the state that are trying their hardest to help rebuild the economy:

New Mexico’s seasonally adjusted unemployment rate was 8.3 percent in December 2009, a sharp increase from 7.8 percent in November and 4.7 percent a year ago. The national unemployment rate stayed at 10.0 percent.

The rate of over-the-year job growth, comparing December 2009 with December 2008, was negative 3.1 percent, representing a loss of 25,900 jobs. New Mexico’s ranking among the states was twenty-eighth highest at a time when all 50 states reported declining year-over-year employment.

December was not a good month for employment in New Mexico, with the seasonally adjusted series showing a decline of 4,800 jobs. This may be an indication of reduced seasonal hiring, compared to what is normal. However, we still believe that we are several months into a slow recovery. There are typically a number of setbacks in any recovery, as we take two steps forward and one step back. December appears to one of those steps back.

A tax increase on top of all of the other economic pressures would be yet another step back. There are an awful lot of qualified New Mexicans who are out of work because of the downturn in the economy, and they're not going to take kindly to being kept out of work because our elected officials refuse to supress job creation so that they can keep dole out political favors at taxpayer expense.