NM tax reform a start for positive economic news

The steady stream of bad economic news for New Mexico is a harsh reiteration of themes we’ve heard for years. There is no comfort in the constancy. State legislators and the governor are considering serious tax reforms as an integral part of crafting an elusive budget for next fiscal year. If they can pull that off, it could move New Mexico in the only direction left. And that’s up. New Mexico is having a harder — much harder — time than most states recovering from the Great Recession that started in December 2007. We have fewer jobs now than when the recession began; our unemployment recently has been the highest in the nation.

We lead the nation in the loss of people of prime working age — 25 through 54 — since 2007, and an estimated 9,500 of those workers left the state between 2010 and 2015. Conversely, our neighboring states are seeing an influx of skilled workers.

For nearly a decade, New Mexico has been losing more jobs than it’s adding, leaving it among the 10 worst states for overall number of jobs. Meanwhile other states, and the nation as a whole, have seen a rise in overall jobs.

Our small businesses are struggling, in part because they can’t secure the capital needed to operate or expand.

Economists are pretty sure how we got here: A chronic overdependence on oil and gas revenues and government jobs; poorly performing public schools; a relatively low-skilled workforce; questionable economic development strategies; and a tax system that’s less friendly to businesses than most states.

And, of course, the Great Recession, which no state had control over.

Jeff Mitchell, director of the University of New Mexico’s Bureau of Business & Economic Research, says New Mexico’s slowerthan-usual recovery has brought deep and structural changes to the state’s economy and “no one really has a good answer or response to the problem.”

But pieces of the puzzle are evident. The state’s oil and gas sector — revenues of which account for about a third of the state’s budget — has been hammered by the slump in oil prices. At the same time, federal jobs and dollars have been dropping. Our poorly performing schools are not producing the quantity or quality of workers, entrepreneurs and skilled laborers we need to compete with other states. Mitchell attributes some of that to decades of under-performance and under-investment in New Mexico’s schools as the economy shifts to knowledge and skill-based jobs.

Meanwhile, places that have well-educated workforces are doing well nation- and worldwide, so new businesses tend to start in those areas. Similarly, existing businesses expand, drawing workers from other areas.

The lack of available capital for small businesses, partially wrought by post-recession banking restrictions, has forced some New Mexico businesses to shrink or close their operations.

And while Mitchell questions the state’s strategy of focusing on attracting/starting new businesses instead of helping existing ones, state Economic Development Secretary Matthew Geisel notes nearly 60 percent of the state’s key economic development fund has been devoted to existing businesses since fiscal 2014.

Regardless, the current strategy isn’t showing the results New Mexico needs. Manufacturing jobs have been disappearing for years, the construction industry has yet to fully recover from the recession, and except for a few notable exceptions, new businesses with well-paying, permanent jobs are not coming here.

Meanwhile, Medicaid expansion is booming. But being poor and sick is not a plan for economic independence.

It would be nice if you could attack all of these problems at once, but that’s a tough order.

Instead, as we’ve said before, the comprehensive tax reform bill crafted by Rep. Jason Harper, R-Rio Rancho — which passed the House unanimously and had bipartisan support in the Senate — is the best starting point we’ve seen in ages for getting the state on the right economic track.

Gov. Susana Martinez has expressed support for much of it. Some Democratic lawmakers are nervous it’s too wide-ranging and that insufficient due diligence has been done to determine its full impact.

But both sides should use this as an opportunity to implement systemic changes that move the state away from that constant drumbeat of negative economic news.