Stop leaving money on the table

Areport that New Mexico cannot handle another recession is hardly surprising. In many ways, the state never emerged whole from the Great Recession that began in 2008. For the past decade, while states around us have rebounded, New Mexico’s growth has stalled, unemployment has remained high and too many residents have left for greener pastures.

Compounding private sector woes were cutbacks in federal spending and shrinking state revenues as the oil and gas industry contracted. To avoid cutting necessary programs and services, state budget builders consistently dipped into reserves — leaving the state with little left for a rainy day.

That works, until the day revenues dip once more. Then, all the “easy” cuts in spending have been made and the savings accounts are depleted. The report, from Moody’s Analytics, says at that point, the state will be extremely vulnerable in an economic downtown. The recent state-by-state analysis from Moody’s shows that New Mexico is one of 15 states that could lack enough cash reserves to navigate a downturn. We need to be better prepared.

Legislators worked hard in building the budget last session, trying to restore reserves. They have been partially successful. Budget officials are projecting that the state will have about 3.4 percent in cash reserves by the end of June. That’s better than zero, but to be more fiscally solid, we agree with state Sen. John Arthur Smith — double-digit reserves provide a sounder financial footing.

With a governor unwilling to raise fees or taxes — Gov. Susana Martinez rejected sensible fixes earlier this year that would have shored up the state’s reserves — lawmakers will have to proceed carefully in building a budget come 2018, when the short fiscal session gets underway.

Before that happens, the governor needs to focus on how the state can improve its financial footing. If she won’t lead, then legislative leaders from both parties need to step up. The top priority has to be ensuring New Mexico is in better financial shape, ready for bad times and poised to take advantage of whatever good economic winds blow.

First up will be making sure all bills are paid. Look at news reports from Tuesday. Attorney General Hector Balderas went after the state’s largest health insurance provider, claiming it had not paid proper insurance premium taxes for two years. While the Presbyterian Health Plan admitted no wrongdoing, it did agree to pay the state $18.5 million to settle claims. The AG is dropping fraud charges against the company.

That settlement is part of a larger issue — the state is not collecting all taxes owed by insurance companies. A final audit from Examination Resources of Atlanta released last week documented not just taxes left unpaid by Presbyterian, but some $65 million in uncollected amounts from 17 insurers that sell products in New Mexico. A good chunk of that total was owed by Presbyterian (and the settlement takes care of that) but the rest of the millions need to be collected.

Lawmakers want to move collection of insurance taxes from the Office of the Superintendent of Insurance back to New Mexico Taxation and Revenue and we think that makes sense. Collecting taxes, after all, is job one at taxation and revenue — and we cannot afford to leave millions on the table. Good for whistleblowers in the superintendent’s office for coming forward, for Auditor Tim Keller for pressing the issue and for Balderas for reaching a quick and lucrative settlement.

Insurance companies might not be the only businesses falling short in paying what’s owed. We learned at the Taxation and Revenue Stabilization Committee earlier this week that self-reporting when it comes to oil and gas companies is not working. Those businesses, an appraiser told legislators, are not reporting all their assets, causing local governments to lose millions in revenues. Rio Arriba County hired the appraiser to survey a 15-square-mile piece of land with oil and gas activity to see what was being missed — an apparently, a lot of property is not being reported as required by law. Rio Arriba’s initiative could inspire counties across New Mexico. We cannot afford to leave money on the table.

Finally, from the Tuesday newspaper, a report by Bruce Krasnow about the future of Los Alamos National Laboratory. The contract to run LANL is up for grabs, and whether a for-profit or nonprofit entity wins the bid matters to state and local governments. In New Mexico, nonprofits do not pay gross receipts taxes. That big exemption has been debated at the Legislature, with it remaining in place.

For the lab, having a nonprofit in charge might be better for science. For the state and for nearby counties, the loss of those tax dollars would be huge; the consortium that runs LANL paid $77 million in gross receipts taxes to state and local governments in 2015. And that was lower than in boom years. Is anyone thinking about how counties and the state will make up that potentially lost revenue, should a nonprofit be chosen?

Collecting outstanding payments. Ensuring that taxes are fair and that businesses or individuals don’t try to escape payments. Keeping an eye on GRT exemptions and moving quickly either to close loopholes or to find ways to make up lost revenues. All of these must be priorities for the state of New Mexico if it hopes to improve its budget forecast for the longterm. Then, if the savings aren’t healthy, return to sensible revenue enhancements — last session, the Legislature considered such things as increasing fees for trucking permits and taxing internet retail sales. First, though, let’s collect the money that has just been sitting there, left on the table.