Welcome to NM, Land of (Dis)enchantment

By Rob Nikolewski │ New Mexico Watchdog

SANTA FE — A recent study raises some troubling questions about New Mexico‘s dependence on federal government spending.

New Mexico’s economy has the highest percentage of public sector and government contract jobs in the country, according to a national survey by two researchers at the Mercatus Center, a market-based research organization at George Mason University.

Nearly 32 percent of New Mexico’s non-farm payroll employment is attributed to government-financed jobs, the analysis by and Keith Hall and Robert Greene says. Just more than 68 percent came from real private-sector jobs.

“It was interesting, for example, to see something like New Mexico pop up there,” Hall told Watchdog.org on Monday. “I know they’ve got some military facilities and a couple of national laboratories. But apparently that makes a bigger impact on a fairly small state like New Mexico than I would have guessed.”

Here’s the national map from Hall and Greene (click on the map to see it unobstructed):

Since New Mexico is large in area but relatively small in population, federal jobs — such as those at military bases and the Los Alamos and Sandia national labs — make up a good chunk of the state’s economy.

But policy makers across the state have worried the state is too reliant on dollars from Washington, making New Mexico economically vulnerable.

Those concerns have only been heightened after October’s government shutdown and sequestration debates in Congress.

“Sequestration and the like do reflect the over-reliance on federal spending in the state of New Mexico,” Sen. John Arthur Smith, D-Deming, told New Mexico Watchdog when the shutdown started. “In time, I think there’s going to be a reduction in (federal) spending regardless who’s president. I don’t want our state to be the bug on the windshield.”

The state’s economy appears to have become even more dependent on money from Washington, D.C.

Hall and Greene compared the size of each state’s real private-sector labor market in 2012 relative to its size in 2007. The researchers found New Mexico experienced a 5.8 percent decline, ninth-worst in the country.

“A state like New Mexico may be worried about larger government deficits,” Hall told New Mexico Watchdog on Monday. “That’s because if deficits continue to grow, that could lead to the government cut spending and if spending goes down, New Mexico, because of its reliance on federal dollars, will be disproportionately affected.”

“At the very least, we’re not becoming less reliant on federal dollars,” said Paul Gessing, the president of the Rio Grande Foundation, a free-market think tank based in Albuquerque that has urged lawmakers to more aggressively grow the state’s private sector.

“It’s not only that Washington is the huge factor in New Mexico’s economy and continues in that role, it’s that there’s nothing on the horizon to help the economy in the state in a major way,” Gessing said.

Republican Gov. Susana Martinez and Democratic leadership in the statehouse hammered out a corporate income tax reduction last year in the hope of spurring private-sector investment. But that legislation won’t take full effect for a number of years.

“There’s just a philosophical belief in New Mexico that Washington will drive the economy in this state and that’s OK,” Gessing said. “That needs to change.”

Click here to read the Mercatus national study.

Contact Rob Nikolewski at [email protected] and follow him on Twitter @robnikolewski