States with families reporting the highest prevalence of food insecurity during 2005-07 were Mississippi (17.4 percent), New Mexico (15 percent), Texas (14.8 percent) and Arkansas (14.4 percent). source

On Friday (10.17.08) various representatives of New Mexico, including Governor Richardson, Senate President Pro Tem, Tim Jennings (D-Roswell), and Senate Minority Leader, Stuart Ingle (R-Portales), called for immediate cuts to government expenditures. Whoa! This is 100 percent wrong. This will make the current financial crisis worse.

Current economic forecasts for the state suggest that tax revenues have decreased and will continue to decrease over the next 24-48 months. The slowing economy also means that taxes and royalties from gas and oil will decrease as well. In response, Governor Richardson proposes to immediately freeze certain spending and reduce operating expenses by 5 percent. These actions could save as much as $440 million.

The problem is that the both New Mexico's and the national economy are recessing. By cutting $440 million, the state adds to the downturn. I have included my plea to New Mexico's leaders [1] and Governor Richardson's initial press release [2] below.

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[1] Dear Honorable Governor Richardson, Honorable Senator Ingle, and Mr. Gallegos:

I am writing as an expert economist who loves this nation and the great state of New Mexico. I just spoke on the economy this week and here is a summary:

new mexico independent.com/4874/political-economist-america-is-bankrupt

I received Governor Richardson's press release and read Dan Boyd's article in the Journal quoting Senators Ingle and Jennings today.

I am pleading with state leaders to reconsider their current proposal. To enact government spending freezes, cancel projects, cut payroll or stop pay increases is the exact OPPOSITE of what is needed. In fact economic experts believe President Herbert Hoover's similar reaction in 1929 made the Great Depression worse. It took the U.S. over 29 years to recover after that meltdown.

When faced with this type of emergency, the government must spend -- even more. This is what is referred to as "priming the pump" in Keynesian economics. The nation is facing a crisis in financial confidence. We all know the financial structure is collapsing, or deleveraging as experts say. The private sector is falling into a recession. How deep this goes depends on government.

Most of the private sector is cutting spending, which leads to additional cuts by business and corporations. This will result in increased loss of jobs and greater financial difficulties for consumers and families. They, in turn, will cut their spending, and this continues the cycle -- it can go down and down and down until we have a complete crash. Further, keep in mind that as employers squeeze workers' wages, there will be an increase in defaults on credit cards, car loans and mortgages. This will increase the toxic assets that are currently clogging our financial system.

Although this downward spiral leads to reduced government revenue, the only solution to the crisis is for government to inject funds -- to spend. The federal government, as we all know, is working on this. Yet if state governments do not participate, if they work in opposition, the federal effort will be partially or fully neutralized.

Keep spending! This is why we have wisely built up the $600 million in cash reserves. This is the state's rainy day fund and it's a downpour out here.

While I am a respected local economist, don't trust me alone. Here's what the recently recognized Nobel economist, Paul Krugman, had to say on the matter (NY Times, 10.17.08):

"It’s now clear that rescuing the banks is just the beginning: the nonfinancial economy is also in desperate need of help.

And to provide that help, we’re going to have to put some prejudices aside. It’s politically fashionable to rant against government spending and demand fiscal responsibility. But right now, increased government spending is just what the doctor ordered, and concerns about the budget deficit should be put on hold.

...there’s a lot the federal government can do for the economy. It can provide extended benefits to the unemployed, which will both help distressed families cope and put money in the hands of people likely to spend it. It can provide emergency aid to state and local governments, so that they aren’t forced into steep spending cuts that both degrade public services and destroy jobs."

We are correct to be concerned about deficits, and Governor Richardson and our legislative leaders have done a phenomenal job managing our state. It's critical that we do the right thing now and without delay.

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[2] For immediate release
Contact: Gilbert Gallegos
Oct. 17, 2008
(505) 476-2217

Governor Bill Richardson Outlines Plan to Cut State Spending

Plan will Balance Budget without Increasing Taxes - no need to Tap Reserves or Reduce Services

SANTA FE -- Governor Bill Richardson today responded to the global financial crisis and its effect on state revenue by outlining a fiscally responsible plan to immediately freeze certain spending and reduce operating expenses by 5-percent, saving $114 million. Overall, the Governor's plan, if adopted by other state officials and the Legislature, could save as much as $440 million.

Governor Richardson's plan includes an aggressive effort to identify $200-$300 million in stalled capital projects. The Governor will work with the Legislature to cut those stalled projects and shore up state revenue without raising taxes, tapping cash reserves or cutting services to New Mexicans.

The Governor directed his Cabinet Secretaries to move forward on his plan to curb spending after receiving confirmation today that revenue for the ongoing 2009 budget year will be about $344 million lower than previous estimates, and $200 million less than FY 09 budgeted expenditures. State revenue has dropped as a result of the ongoing financial crisis on Wall Street and the corresponding drop in oil and gas prices.

"New Mexico is still outperforming the national economy, and is much more financially sound than many other states where people are being laid off to balance the budget," Governor Richardson said. "But the reality is that the global financial crisis is hitting us all, and we must tighten our belts and budget responsibly.

"We will balance the state's budget. And we will do it without raising taxes, without tapping into the $600 million in cash reserves, and without reducing services for New Mexicans," Richardson said. "We can accomplish this by taking simple steps like reducing expenses and eliminating capital outlay projects that are not moving forward."

The Governor today directed all executive agencies under his control to take immediate action to cut costs and to develop longer-term plans to reduce spending – saving $114 million. The Governor also called upon legislative and judicial leaders to follow his example and help reduce this year's operating costs by another $16 million. Those steps, combined with an aggressive effort to cut stalled capital outlay projects, could save the state as much as $440 million.

The Governor is making every effort to ensure that funding for education stays in the classroom; however public schools and higher education institutions are advised to develop a strategy for reducing next year's budget.

The Governor directed executive agencies under his control to take the following action:

• Immediately freeze non-essential overtime and exempt employee annual leave buy-outs
• Effective Nov. 15: Freeze all hiring and pay increases
• Plan for 5 percent cuts in agency budgets for non-essential operations and miscellaneous expenses, including:
• Contracts
• Grants
• Care and support services
• In-state travel
• Out-of-state travel
• IT equipment
• IT exempt inventory
• Office supplies

The Governor also directed Cabinet Secretaries to implement new policies for making the best possible use of every tax dollar by conserving energy and reducing waste, which would save $2 million.

Finally, the Governor directed executive agencies under his control to identify $5-$10 million in potential cuts from what is referred to as the Junior Budget bill passed last session. The Governor asked agencies to target money not directly related to core services, or that only serve a narrow sector of the population.

Governor Richardson is calling for the deauthorization of several capital outlay initiatives previously passed by the Legislature to free up additional funding. For example, there are $63 million in capital projects that are more than three years old and have not moved forward. There is another $168 million in projects -- valued at less than $100,000 each -- that are not moving forward.

The Governor directed the Department of Finance and Administration to reevaluate existing capital projects and identify delayed initiatives around the state. The Governor will work with legislators and local governments to provide closer oversight of their outstanding capital projects. Those projects that are stalled, under-funded, or not up-to-date in their financial reporting will be identified for potential cuts.