It's Arithmetic: Governor's plan to create four times the jobs with half the budget revealed predictable results

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It’s Arithmetic: Governor’s plan to create four times the jobs with half the budget revealed predictable results

Two years into the term of Governor Susana Martinez, New Mexico holds the dubious distinction of being one of only six states in the country still hemorrhaging jobs and the second worst in the country when it comes to job growth.  Martinez announced her economic recovery policy in her first State of the State address in 2011:  “I’ve long said that government doesn’t create jobs. Government creates the environment where small businesses can create those jobs. We must recognize that in a global economy, businesses will choose to locate and expand in areas that encourage — not impede — job growth…. That’s why we’ll cut wasteful programs that do little for job creation.”

Conservatives continue to push Martinez to cut more government spending, decrease corporate tax rates (which less than 10% of state corporations pay anyway) and eliminate regulations.  This formula, they say, is sure to grow jobs. 

Two years later, those jobs have yet to emerge and we wanted to know why.

Most recently, the conservative Rio Grande Foundation began publishing lists of public protections it says Martinez should eliminate as a part of her grand economic development package.  Before endorsing the idea of more of the same, we decided to look -with the benefit of two years of Martinez policy – at the impact her first economic development proposals had on job creation in the state. 

What follows is the first of an occasional series reviewing the impact of Governor Martinez’s first two years of economic policy.

Martinez Math: If You Cut It in Half, It Is Four Times As Big

In terms of jobs, perhaps no program was more important than the New Mexico Partnership.  On paper, Martinez said her plans would create 2,200 jobs through this program in 2012 alone – four times the number of jobs it created the previous year.

The New Mexico Partnership identifies itself as “a private non-profit organizationmartinezmath.jpg created in 2003 at the behest of local leaders and industry across New Mexico to be the official business recruiting arm for the state to attract business and create jobs in New Mexico.”   Funded almost entirely from the state’s Economic Development Department, it is the only organization authorized to act on behalf of the state to recruit new businesses and create jobs.

In the four years from FY2008 – FY2011, the Partnership reports creating 6,591 at an average cost of $799 per job.  This successful public-private partnership for recruiting businesses to relocate to New Mexico has been a key component of the state’s economic development plan for years.

So, Martinez announced that her budget would cut programs that had little to do with job creation, then slashed the Partnership’s budget in half while quadrupled the agency’s job creation goal.  Predictably, slashing the budget of the only agency responsible for and empowered to do business recruitment did not produce four times the job creation or business relocations Martinez set as her goal in her first full year on the job.  Instead, job creation under Martinez has continued to fall while neighboring Western states are attracting and growing new business.

IRS filings show that the Partnership received government funds of $1,279,800 and $1,100,000 in Fiscal Years 10 and FY11 respectively.  Purchasing Order records available from the state’s Sunshine Portal Website confirm these expenditures (PO10-419-P526-10116 and PO11-419-P256-11001).

But under the Martinez administration, the Partnership’s budget was slashed.  They received only $600,000 in FY12 and $630,000 in FY13 – just 54% of their previous allocation. (PO 12-419-P526-12010 and PO13-419-P526-13016).  In its new 2014 budget report, the  LFC reports  “the Partnership is now receiving less funding through its contract with the EDD – resulting in fewer dollars for recruiting activities.” 

Despite cutting the agency’s budget in half, the Governor expanded the agency’s job creation goal by more than four times, to 2,200 jobs in FY12 despite the fact that the partnership had reported only creating 499 jobs in FY11 with twice the budget. None the less, Martinez expected – either naively or misleadingly – that the state’s investment would cost $500 per job created.   

The NMEDD’s own publications show conflicting data on the actual jobs created by the partnership.  In its FY12 annual report, the agency reports in two places that the Partnership created 657 jobs, while in another place and again in its FY12Q4 report states that it created just 572.  Either way the agency fell far short of its goal of creating 2,200 jobs on a limited budget. The LFC’s budget and report cites 657 jobs but notes that record keeping in the agency may be an issue.

Similarly, the Partnership was tasked with doubling the number of business locations in the state and maintain almost exactly the number of new business leads it created.  Predictably, the agency failed to meet these goals as well. 

The agency does consistently report a cost per job created of $913, almost twice the state’s estimate and goal.  Conveniently, to avoid this problem in the future, the agency proposes to “discontinue the cost per job created” in the future.

By contrast, other Western states have invested in additional economic development funding for similar programs and saw job growth as a result.  In FY2012, Colorado appropriated an additional $5,000,000 to its office of Economic Development and International Trade for job creation.  Colora
do posted job growth in 2012. 

The State of Nevada’s job losses have tracked and even exceeded those in other Western states, including New Mexico, since 2008.  However, for FY2012, Nevada almost doubled its state investment in economic development adding almost $14.9 million to its $18 million budget.  They also funded “$10 million in General Fund appropriations to establish a Nevada Business Development Fund and to provide funding and incentives for businesses looking to relocate to Nevada.”  Unlike New Mexico which posted a 0.6% job year-over-year job loss in November 2012, Nevada posted a 1.2% job growth over the same period.  Every other Western state posted YOY job growth as well.

Bottom Line

The Santa Fe New Mexican recently editorialized on Martinez’s economic plan, adding this: The New York Times quoted an Economic Policy Institute study in a recent editorial, “If not for state and local budget austerity, the report found, the economy would have 2.3 million more jobs today, half of which would be in the private sector.” 

This administration has adopted a fatalistic approach to job creation.  They claim that government can’t grow jobs and business doesn’t want to move here.  Then they slash the funding of any agency looking to prove otherwise but put up smokescreens like wildly unrealistic expecations for job growth and hope it happens. It makes no sense, but it’s our reality.

The bottom line for New Mexico:  this arithmetic doesn’t add up.   Adding investing in economic development programs, especially in tough times, creates jobs. Cutting those programs loses them.  No matter how many jobs Governor Martinez says on paper or in speech her plans will create, the numbers don’t lie.  The lesson of job creation and the Partnership should also teach New Mexicans, and especially legislators, to be skeptical of the administration’s predicted job creation outcomes.

Despite her insistence that government does not create jobs, the facts tell us otherwise.  And whether she likes it or not, she was elected to run our government and use it to create jobs.  The sooner the governor accepts this, the sooner we can get back to work.