Posts Tagged ‘Budget Shortfall’

Budget Shortfall Surprise

Monday, November 15th, 2010

How can anyone be surprised that the budget shortfall is much worse than projected? The outgoing Administration is putting a spin on it that doesn’t make any sense:

Richardson spokesman Gilbert Gallegos fired back, saying Martinez doesn’t understand the state budget and the growth of the Medicaid health care program.
Gallegos also criticized Martinez campaign promises to reject tax increases and balance the state budget while also avoiding cuts to Medicaid and public schools — pledge that didn’t differ from Denish’s campaign rhetoric.
Interesting. But, let’s get back to reality.  There is one reason the budget shortfall is worse than expected. Namely, the outgoing Administration spent most of the economic crisis believing in make-believe:

Economic analysts for Gov. Bill Richardson’s administration said Thursday they remain confident that New Mexico revenues will increase by nearly $300 million next year, a day after legislators voiced doubts about significant rebounds in the state’s economy.

The revenue estimates, which don’t factor in proposed tax increases, are key to ongoing budget negotiations between top-ranking Democrats in the House and Senate.

Welcome to the real world.

Adding Insult to Injury

Monday, January 11th, 2010

Wow, talk about adding insult to injury.  Taxpayers are bilked out of tens of millions while the Richardson Administration was at the helm of the State Investment Council. Now, they are making matters worse by requesting CYA budget increase funds:

The State Investment Council has asked for nearly $6 million in additional money to cover legal expenses associated with the ongoing investment scandal, and a leader in the state Senate is none too happy about it.
        

“It just doesn’t make any sense to me,” President Pro Tem Tim Jennings, a Roswell Democrat, said Friday. “I’m concerned that everyone is concerned with protecting themselves instead of protecting the public.”
        

The State Investment Council wants a $1.7 million budget adjustment and a $4 million supplemental appropriation to cover the legal expenses. Much of the money would go to a San Francisco law firm that is charging up to $950 an hour and can earn up to $5.8 million under a contract that started at $30,000. 

Just to make sure that everyone is on the same page.  We have legislative committees recommending tax increases and 2 percent pay cuts for government workers and teachers while $950 an hour is being spent on San Francisco lawyers. 

Yeah, that makes sense.

Richardson Threatens Public Safety

Thursday, October 29th, 2009

There’s a time to play politics, and there’s a time to solve problems. Apparently, someone forgot to clue Governor Richardson into this fact:

The state of New Mexico would have to shutter two prisons, give early releases to up to 660 prisoners and lay off and furlough Corrections Department employees if Gov. Bill Richardson signs budget cuts approved by the Legislature, his office said Wednesday.

Richardson’s office raised that grim possibility as his staff analyzes the impact of $253 million in spending cuts legislators passed during a special session last week to deal with a revenue shortfall.

If the real measure of leadership is how someone performs in a time of crisis, Governor Richardson is failing miserably. The Governor has always been a great campaigner, there is no question about that; however, now that we actually need an executive leader, he is seriously falling down on the job.

He’s still in political spin mode, which is nothing short of ridiculous considering that he can’t run for re-election. In fact, his attempt at side-stepping responsibility by choosing to threaten the public with the unleashing of criminals rather than cut fat from a bloated bureaucracy is very likely going to hurt the campaign prospects of those who wait quietly in the wings.

The Governor has been shown to be quite enamored with all things Cuban, so I can’t help but wonder if his strategy is not just a bit Castro inspired:

It is true that Castro opened his jails during the 1980 exodus, flooding Miami’s streets with criminals, drug addicts and mentally unhinged people, which contributed to Miami’s skyrocketing crime rate and helped it become murder capital of the world by 1981.

Fidel Castro did it to take make a point and causes chaos for those who didn’t agree with his style of governing, and it appears that Governor Richardson is doing the exact same. Worse, it looks like there isn’t a single person in his administration with the backbone to step up and say, “Hey Governor, threatening to unleash criminals on the taxpaying public is not a viable option.”

It is true that one Richardson Administration politician has publicly noted that “the state can only have one chief executive at a time.” But, it is equally true, that a public official’s first responsibility is to the public. Of course, this is a fact that seems to be long forgotten by the ruling political elite in New Mexico. They work for us, we do not work for them. We put them where they are, and we can take that away. And, if they continue to choose to threaten instead of lead, I’m sure come Election Day, we will do precisely that.

The Governor of La La Land

Monday, October 26th, 2009

That’s the only way to look at it. Governor Richardson has officially relocated to La La Land:

  1. Los Angeles, California (often abbreviated L.A.). This expression pokes fun at the alleged eccentricities of the city’s inhabitants. For example, What do you expect? Frederick has lived in la-la land for ten years and it has rubbed off on him. [Slang; c. 1980]

  2. A state of being out of touch with reality, as in I don’t know what’s going on with Amy–she seems to be in la-la land. [Slang; c. 1980] Also see cloud-cuckoo land; never-never land.

No, I don’ mean that he has moved to Los Angeles – although, one could only hope. But, like Frederick in the example above, it appears that Governor Richardson’s contact with Hollywood’s elite has altered his perception of reality:

New Mexico lawmakers on Friday wrapped up their special legislative session, sending Gov. Bill Richardson a package of measures to repair a $650 million budget shortfall this year.

“It isn’t pretty. It doesn’t solve the problem; we know that. But it’s a step forward,” Majority Leader Michael Sanchez, D-Belen, said before the Legislature adjourned.

The package includes spending cuts of about $253 million this year in public schools, colleges and other government programs.

Richardson criticized what he said were “excessive” cuts to state agencies, and warned they could result in layoffs and reduced services.

That is the only possible explanation for the Governor’s reaction to the recently ended special session. See, when you have a $650 million deficit and growing, and you only cut $526 million, that leaves a gaping hole of a whopping $124 million. No one in their right mind would call those cuts “excessive” as they clearly fall far short of the mark of what’s needed.

Then again, I guess if you’re a Governor living in “cloud-cuckoo land” you’re not really in your right mind.

Now That’s Interesting

Tuesday, October 20th, 2009

It’s like the legislature just woke from a seven year slumber, and decided to, well, decided to start acting like a legislature. For seven years, those controlling the legislature have rubber stamped every ridiculously large, bank-breaking budget proposed by the Richardson/Denish Administration.

Now, the piper wants to be paid, and it is becoming increasingly clear that the Richardson/Denish Administration have created, long-term structural problems for New Mexico. But hey, don’t take my word for it. Instead, read what Lt. Governor Diane Denish has to say about the failed policies of her administration:

We know temporary “band aids” applied to remedy our budget shortfalls are not the answer to long-term, structural problems with the state budget. We must craft solutions that work for future generations of New Mexicans.

In other words, what the Lt. Governor is trying to sell us is, “I got us into this mess, so I can get us out of this mess.” Of course, we know that’s not the way it works in the real world. In the real world, when people make bad decision after bad decision that results in the virtual collapse of their organization, they can expect to be fired.

Now in case you’re wondering what type of bad decisions have been made by Rchardson/Denish Administration, you have to look no further than some of the proposals that are being put forth by their Democratic peers in the legislature to fix the “long-term, structural problems”. For example, consider this press release received from Representative Cote:

Rep. Cote introduced HB24 on the floor of the House today. The proposed bill calls for the Governor to reduce the number of exempt employees in cabinet departments and state agencies with salaries over $50,000. According to the bill, cutting at least 180 of these positions would save $8.1 million for the rest of this year and $19 million in the next fiscal year.

“Under the current fiscal conditions, all state expenditures must be analyzed and none excluded. I’ve noticed significant growth in the number of exempt positions in the last several years and the incumbents of which could be placed into permanent classified positions. My bill is an attempt to reduce the size of the state’s payroll. I feel the state government has grown too large for the revenue available in the state of New Mexico,” Rep. Cote (D-Dona Ana, Otero-53) stated.

During the last regular session the Governor said he would trim salaries of 470 exempt employees but, in the past year alone, the number of Governor exempt employees has risen by 27 positions from 789 to 816, while the number of state classified employees has stayed the same. Over the past seven years the Governor’s exempt positions has risen by 281 positions.

That’s right, Lt. Governor Denish has stood silently by as her partner in crime, Governor Bill Richardson, has created and handed out new government jobs as payback for political favors. This practice, among many others has led to the long term, structural problems with our state budget, that now threatens the financial viability of education, social and infrastructure programs.

Of course, Lt. Governor Denish would rather we not point fingers and blame (read: personal animosity):

Legislators should act quickly, she said–putting “personal animosity aside”–because the state doesn’t have “time or money to waste”

Of course, she’s right. The state doesn’t have time or money to waste… Diane Denish and Bill Richardson have spent seven years wasting our money and our time, and the proverbial cupboard is now bare.

Can’t Miss the Parade

Monday, October 19th, 2009

Our elected officials are struggling with how to fix an astronomical and ever-growing budget deficit without cutting expenditures or raising revenue. I’d really like to see the former versus the latter occur, and even those who want to empty our wallets, are struggling with the lack of financial restraint being shown by state government agencies in this time of economic crisis:

“Knowing that, the administration has not put the brakes on spending,” said Ortiz y Pino, who is running for lieutenant governor. “There is no evidence in my mind that this administration in any way slowed down the spending in state government. Now, I’ve worked in administrations in the past, and as soon as there was any question that we were going to be in budget trouble, the word was out. Stop hiring, don’t fill vacancies, no out-of-state travel, no contracts, no printing. Nothing, nothing, nothing, just make sure we get through this OK. Has this administration done anything remotely like that?

In related news…

New Mexico plans to sponsor a float in the 2010 Tournament of Roses Parade in Pasadena, Calif.

New Mexico Tourism Secretary Michael Cerletti said the response from the southern Californian travel market to New Mexican floats in the 2006, 2008 and 2009 parades was tremendous, and a float is a good way to reach potential visitors.

Phew! It’s a good thing we have our spending priorities straight.

Shifting Costs is not a Budget Solution

Monday, May 18th, 2009

The Albuquerque City Council has a budget proposal from Mayor Chavez in front of them that makes absolutely no sense whatsoever in the current economic climate:

On the table now is the mayor’s $475 million proposal for basic city operations. It would shift money out of the construction budget and into the operating fund to help offset dwindling revenue from the tight economy. The measure would also cut about 200 vacant jobs from the city payroll.

“There’s not a lot of room to play around with,” said Councilor Ken Sanchez, chairman of the council budget committee.

In hearings this month, councilors have already made changes to provide enough money for regular city employees to get 3 percent raises, starting July 1.

Shifting costs from one time construction expenditures to cover recurring expenses accomplishes one thing and one thing only… a postponement of the inevitable. It just means that you are putting off the layoffs of city employees and cutting of services until after the election. Of course, we are going to have the same problem next budget year. Actually, the problems next budget year were originally reported to be even worse.

Now, I realize there may be a handful of you, probably Mayor Chavez included, that believe that the worst is behind us, and that the picture for the future is brighter. Of course, this belief has no grounding in reality:

Loan servicers are overwhelmed by the flood of applications. Mortgage investors are angry about a congressional bill prohibiting them from suing servicers that modify loans. Foreclosures are rising as unemployment soars.

I don’t live in the City of Albuquerque, but I would urge those of you that do to avoid voting for anyone not up to the task of making the hard decisions of truly balancing the City budget.

Mayor Chavez Buys Votes for $1.3 Million

Thursday, April 23rd, 2009

I’ve long been an opponent of publicly funded campaigns, and it appears that the mayoral campaign currently underway is the perfect case study of why using our tax dollars to elect politicians is a lousy idea.

First, let’s consider how Albuquerque’s incumbent Mayor Marty Chavez was able to get on the ballot:

The confirmed city employees constitute 42 percent of the volunteer base used to collect the qualifying donations, making Fleisher correct in that respect. But those employees collected more than their share of the contributions. The review shows that 152 of the 295 books, or 52 percent, were used by city employees to qualify the mayor for public financing.

For example, the city’s employee relations manager, Lawrence Torres — who is the administration’s liaison with the city’s unionized workers — collected 10 books for the mayor, which was the largest group of books collected by one individual. Torres confirmed he collected the contributions, but declined to discuss how he did it, or why he participated in the drive.

Along with Torres, many of the city’s department directors — who are appointed by the mayor — collected contributions, as did many of their department managers plus the mayor’s own staff.

In other words, there is nothing grassroots about the whole taxpayer funded campaign program. The biggest beneficiaries are those already in office. Of course, getting your appointees to collect the signatures and money you need to get on the ballot and rake in the taxpayer money is only the beginning of the story.

Next comes the actual execution of the campaign. This is where you have to convince people to vote for you. Of course, once again, the incumbent in this case, Mayor Marty Chavez, has a great strategy. Try and buy the votes of a large voting block:

Mayor Martin Chávez says the city’s blue-collar, clerical, security and transit employees won’t have to wait an extra six months for their annual pay raises.

Chávez said his budget office had found about $1.3 million that isn’t needed in a workman’s compensation fund. That will allow the city to provide pay raises to more of its employees on July 1, the mayor said. The raises are expected to be about 3 percent.

That’s amazing! Mayor Chavez found $1.3 million to pass out as raises. Somebody please explain to me how that happens. Last I checked the City of Albuquerque was looking at huge budget shortfalls:

Albuquerque faces a $20 million budget shortfall because of the worsening economy, and city officials are trying bridge the budget gap without laying off city workers.

In fact, the $20 million budget shortfall is just the beginning. It has been estimated that this amount will grow even larger next year. Yet, the Mayor is handing out raises. There is only one motivation to do this – buying votes!

The Bottom Two Percent

Monday, April 13th, 2009

The bottom two percent is where the Public Employee Retiree Association (PERA) found itself when the dust settled at the end of the 2008. The investment strategy that was signed off on by the State Investment Council members (SIC) put it into the bottom two percent in the nation. Of course, it wasn’t just PERA funds that suffered under the State Investment Council guidance: [see update at the end of this post in red].

The PERA fund’s annual performance ranked in the 99th percentile of similar funds in the nation, meaning that 98 percent of funds performed better, according to the LFC. The land grant fund ranked in the 61st percentile, the severance tax fund in the 78th, and the ERB in the 85th.

A variety of problems affected each fund’s performance, since each fund’s asset mix and objectives are different. The State Investment Council manages the land grant and severance tax funds. ERB and PERA each have separate managements.

The LFC found PERA suffered from a “large exposure to international equity investments.” As of Dec. 31, 21 percent of PERA’s assets were in international equity. While that allocation proved “extremely advantageous throughout the middle part of the decade,” the sector has fallen more than 45 percent in the past year, LFC said.

ERB’s worst performing asset classes were fixed income and hedge funds, LFC found. The hedge fund assets under-performed benchmarks “by a staggering 1,920 basis points,” according to LFC. A basis point is one 100th of a percentage point.

Contributing to the severance tax fund’s decline were “economically targeted investments,” which the LFC said are “intended to stimulate the New Mexico economy despite having a lower than market rate return.”

That last point is really a sore point for me. This could have easily been prevented. Don’t get me wrong, we would have lost money like everyone else, but we didn’t have to be in the bottom two percent of the nation. Let’s roll back the clock two and half years to see how we landed on this worst in the nation list:

You read that correctly. An advisor to the state was terminated because, well, because they did their job. They advised the state against making an investment that would not yield the good financial returns New Mexicans should expect from an investment. If our advisors are supposed to be “on the same page” as the state, it kind of makes you wonder why we need advisors?

So, what was this unsound investment that “the state” wanted made? Well, you had to wait a few months to get the inside scoop:

Cincinnati-based Fort Washington Capital Partners resigned as the SIC’s investment advisor for the program last July, citing disagreements with the state over its role. The state had asked Fort Washington to render opinions on two large investments in space-related companies and Fort Washington refused, arguing that the proposals seemed more like economic development projects than private equity transactions.

Go back and read the entire original post and let me know if it doesn’t jut set your blood a boiling. And, if that doesn’t put you over the edge, maybe the SIC’s investment in Bahrain owned companies to supposedly “stimulate the local economy” will do the trick.

UPDATE: Looks like I may have misread that article Albuquerque Journal article this morning. PERA made it’s own investment decisions without any input or oversight from the SIC. Below is the email I received from the SIC’s Public Information Officer:

Mr. Burgos,

While I understand the your blog’s intention is primarily to offer opinion, it appears the core premise of your post today is based on a completely faulty assumption that Public Employees Retirement Association (PERA) investment strategy is signed off on by the State Investment Council (SIC).

For the record, SIC and PERA are two completely separate entities managing different Funds for the State of New Mexico. PERA has its own investments, managers and board of directors. SIC has ZERO input, influence and control over PERA Funds, and State Investment Council members have nothing to do with PERA performance.

The Education Retirement Board (ERB), likewise, is managed by different people, with a different board who oversee separate investments.

Unfortunately, there are similar factual problems with the rest of your post regarding a very old concern we had with Fort Washington, and a more current third-party criticism – which also has some significant factual problems. We would be glad to address these individually if presented in a meaningful way and I invite you to contact me on these issues if you like.

While SIC performance for the 4th quarter was definitely below par, this was primarily due to the historic market challenges and negative effects of a conservative hedging strategy that while well intentioned, hurt performance during December’s market rally. This same strategy in the first quarter of 2009 should easily put the SIC in the top 25% of peer funds around the country. Those performance numbers will be available in the coming weeks, and I will certainly make those available for your review.

While I am unable to post this response to your website, you may certainly do so if you believe it is appropriate. I do hope that you address the factual problems I address here as soon as practicable.

Regards,

Charles Wollmann
Public Information Officer
New Mexico State Investment Council
(505) 476-9540 office
(505) 231-3334 cell

I did leave Mr. Wollmann a voicemail, and am eager to hear more about the factual problems with the rest of [my] post regarding a very old concern [they] had with Fort Washington, and a more current third-party criticism.” Mr. Wollmann is correct that I formulate opinions – nothing more, nothing less – based on the information I have at hand. Sometimes, I misinterpret that information. Hey, I’m only human. But, like you, I’m always eager to hear the other side of the story.

Richardson’s Economic Abilities

Tuesday, January 6th, 2009

Ever since I read Governor Bill Richardson’s withdrawal statement, something has been gnawing at me. At first I couldn’t figure out what it was, but now I think I’ve isolated the culprit. It’s this statement by Governor Richardson (subscription):

“As you might expect, I am disappointed in this turn of events. There were a lot of ways in which I thought I could help the country in this time of financial crisis. Sometimes your own dreams and plans must take a back seat to what is best for the nation.

There are three sentences in the selection above, and only one of them has an iota of truth. The part about being disappointed about the turn of events. That’s completely believable. I’d be willing to believe that anyone who has had to retain legal counsel on the chance that they will be brought before a grand jury would be “disappointed in the turn of events.”

But, the second and third sentences are classic Bill Richardson. Statements with no basis in reality. Does anyone actually believe that Governor Bill Richardson is one of the guys who could help the country come up with a solution to a global financial crisis. Gosh, I hope not.

Let’s just look at the simple facts. Even President-elect Obama choose to announce his economic team separate from his selection of Bill Richardson as Commerce Secretary. Why? Well, there is nothing in Governor Richardson’s resume which indicates that he knows the first thing about managing an economy. Quite to the contrary, during a time of unbelievablely high tax revenue, Governor Richardson has spent us into a half a billion dollar budget shortfall.

Granted, he is in good company. There are 44 other Governors who have the same miserable economic track record.

The states’ fiscal problems are continuing into the next two years. At least 38 states have looked ahead and anticipate deficits for fiscal year 2010 and beyond.[1] These gaps total almost $80 billion — 17 percent of budgets — for the 30 states that have estimated the size of these gaps and are likely to grow as gaps are re-estimated in the next few months.

Figure 2 shows the size and duration of the deficits in the recession that occurred in the first part of this decade, and estimates of the likely deficits this time. This recession is more severe — deeper and longer — than the last recession, and thus state fiscal problems are likely to be worse.

The fiscal situation is going to get worse in New Mexico, and we have Governor Richardson to thank, along with some other elected officials, to thank for the pickle in which we currently find ourselves.

As to the Governor’s statement about the Secretary of Commerce job being his dream gig. Let’s get real. His dream gig was to become President. That didn’t happen. His next big hope was to be named Secretary of State, but that was a bust as well. Then, with an impending financial crisis in New Mexico and a threat of prosecution for rampant pay to play policies, his goal was simply just to get out of Dodge. But, I don’t think anyone would mistake that for his dream.

As to putting the nation first… Well, if there is one thing Governor Bill Richardson has proved over his tenure in office, it is that putting others ahead of himself has never been his priority.