Reader Forum

New Mexico Business Journal, Oct, 2001

Our Capital Outlay System Works

The New Mexico legislature was criticized recently by John Carey, president of the Association of Commerce and Industry, for the way it distributes capital outlay funding [NMBJ, July 2001]. We appreciate Mr. Carey's comments, as well as ACI's continued involvement in the legislative process. However, we would like to take this opportunity to better inform Mr. Carey, and the public, about how our capital allocation process works for the benefit of our citizens.

Contrary to Mr. Carey's implicationsl, the legislature does not create capital priority lists in a vacuum; we draw heavily on the work of the governor's office, the Commission of Higher Education, the State Department of Education, other government and private groups, and New Mexico citizens who bring the need for certain capital projects to individual legislators. Dividing up the capital outlay dollars requires weeks of legislative hearings with direct input from the communities and agencies involved.

During the 2001 regular legislative session, state lawmakers addressed many of the needs of the state with a $269 million construction and equipment package that provided for fair and equitable distribution of our limited capital outlay dollars. We were able to fund many critical statewide needs, such as $7 million for a state mental health facility, $20 million for public school educational technology, $20 million for higher education facility infrastructure, $3.4 million for state police radios and equipment, $17 million for the purchase of Eagle Nest Lake, $6 million for renovations to the School for the Deaf and $9 million for the Palace of the Governors history annex. Many of these important projects had been previously put on hold due to a lack of available capital; we were able to fund them this year due to temporary surpluses from oil and gas revenues generated by current high prices of these commodities.

Lest there be any confusion, the governor vetoed the capital outlay package not because the projects were unworthy or their selection process flawed. He vetoed the package that pays for water systems and senior citizen centers throughout the state because he didn't like the size of an unrelated tax cut package passed by the legislature--which is the subject of an entire other article. Suffice it to say briefly that the governor wanted to tie recurring tax cuts to temporary current surplus projections--projections that are dwindling even now. The legislature, along with the governor's own Department of Finance and Administration, were and are uncomfortable with projected surpluses based on highly volatile oil and gas prices. In fact this is exactly the mistake we experienced with the large tax cuts of the early 1980s, when the legislature and subsequent administrations were forced to re-raise taxes after temporary surpluses, upon which a major recurring tax cut was implemented, dried up.

The fact is capital outlay is one of the only mechanisms the legislature has to return dollars directly to communities. Not only are these capital projects crucial to many regions, they generate economic activity at a rate of about 1:2--every capital dollar spent generates two dollars in activity for the local economy. In other words, the governor is restraining half a billion dollars in economic activity for the state over a legitimate legislative concern regarding unrelated personal income tax cuts. And he has threatened to do it again next year if he doesn't get his way This should be of particular interest to ACI, many members of which benefit from these projects.

Readers also might be interested in a parallel capital outlay stream, one funded by the federal government. It is called the Community Development Block Grant program (CDBG), whereby the federal government gives block grants to states and communities to revitalize neighborhoods, expand affordable housing and economic opportunities, and/or improve community facilities and services. These grants are administered by an advisory board whose members are appointed by the governor and which is chaired by the lieutenant governor. In fact, the CDBG advisory board follows a process that is virtually identical to that used by the state legislature in deciding which projects to fund--the only difference being that, unlike the legislature, it has far less direct public accountability since members are appointed by the governor.

Finally, critics who charge the legislative capital process is too political fail to acknowledge the many changes that have been made. This year, projects that had the support of both House and Senate as well as the governor's office made the top of the list before other projects were considered; indeed, the executive and the legislature worked harder than ever to collaborate on the selection of worthy projects. Perhaps more significant are the changes lawmakers have made in accountability: A new capital outlay tracking system ensures the money is being spent efficiently and appropriately.