It started in 2008, when Gov. Bill Richardson imposed a wage and hiring freeze on state employees. Two years later, Richardson eliminated more than 1,000 vacant positions across the state. Because the vacant jobs were unfunded, the move didn’t save the state any money. It did, however, shrink government at a time when New Mexico was facing a $450 million deficit.
“These were vacancies many agencies were relying on to be filled,” Singdahlsen tells SFR.
During the recession, much of the budget balancing came directly from the state’s payrolls—to the tune of $175 million—on which New Mexico’s more than 80,000 state employees rely. In 2009, state employees were asked to begin contributing an extra 1.5 percent of their paychecks to their pensions. That move reduced their take-home pay, but it helped balance the state’s budget deficit by allowing the state to pay less. Last year, when the 1.5 percent pension increase was due to expire, Gov. Susana Martinez proposed to make it permanent. Eventually, lawmakers compromised and extended the payment until 2013. They also added a separate 1.75 percent pension increase, which is set to expire this year.
Singdahlsen, who is also a union representative with the Communications Workers of America, says he makes close to $40,000 a year and estimates that he paid an extra $1,300 into his pension last year. He says most state employees he knows took on second jobs to make ends meet; Singdahlsen himself earns extra income by providing freelance art services on the side.
But things could be looking up for state employees this legislative session. Economists are forecasting a $254 million budget surplus in the state budget—and instead of arguing over where to cut, lawmakers are now scrambling to allocate the extra money.
“When you have a lot of money, it becomes real hard to prioritize because there’s millions of uses for it,” House Minority Leader Tom Taylor, R-San Juan, tells SFR. “The building’s loaded with people trying to get money for this and that.”
State employees are at the center of this conflict, with some lawmakers advocating for reduced pension contributions while others fight for private sector perks.
In its budget recommendations for 2012, the Legislative Finance Committee, chaired by state Sen. John Arthur Smith, D-Hidalgo, proposed a 0.5 percent pay raise for state employees. Martinez rejected the plan in her budget, which proposes increased funding for education and Medicaid and tax breaks for small businesses [news, Jan. 18: “Making the Law”].
Some lawmakers question the validity of the projection. Since the state depends on natural gas for a portion of its income, and natural gas prices dropped to a 10-year low in January, they warn against depending too heavily on the surplus.
“We have to be really cautious,” state Sen. Howie Morales, D-Catron, tells SFR. “Even though we were projected at $255 million in revenues, we may be much less than that.”
But a recent Department of Finance and Administration report finds that state revenue projections remain constant regardless of the natural gas prices, and Jeff Mitchell, a senior research economist with the University of New Mexico’s Bureau of Business and Economic Research, notes that the state’s general fund relies on a variety of revenue sources.
“To single out gas prices as being overestimated and to not look at oil prices, which are underestimated, could be very misleading,” Mitchell tells SFR. “You have to look at the whole picture.”
Despite his skepticism, though, Morales also has plans for spending the stimulus. With help from organized labor, he’s sponsoring a bill that would end the “pension swap,” in which state employees pay extra into their pensions and the state pays less, one year ahead of time.
“We’re lobbying to get those pay cuts back a year early, now that there’s a surplus,” Josh Anderson, a political advisor with the American Federation of State, Municipal and County Employees, tells SFR.
With a $42 million price tag, Morales says, it’s a relatively cheap way to pump money back into the economy. “We need to invest a big part of [the surplus] right back into people’s pockets, which will help small businesses and local communities,” Morales says.
State Reps. Brian Egolf, D-Santa Fe, and Lucky Varela, D-Santa Fe, are sponsoring the House versions of Morales’ bill.
Opponents, however, argue that the pension swap is relatively minimal and that the surplus would be better invested in the private sector.
“Taxpayers should not be paying more money for [state employees],” Paul Gessing, executive director of the nonprofit Rio Grande Foundation, tells SFR. “Anything that eliminates these minor cuts is a step in the wrong direction.”
Others contend that the spike in employee pension pay prevented greater cuts.
“We’ve had to make some sacrifices,” state Sen. Sue Wilson Beffort, R-Bernalillo, tells SFR. “But also, the private industry is suffering greatly.”
Beffort is carrying a bill that would end the pension swap payments for employees making under $50,000, but gradually increase pension payments for higher-income earners. Currently, state employees who make $20,000 or less are exempt from the swap. Clerical workers, blue-collar workers and teachers would benefit under Beffort’s bill, she says.
She adds that the state can’t afford to restart payments into employees’ pension funds.
“Until we get a solid economy, I thought it was reasonable to say that, for another finite period, the higher income people would continue to pay the swap,” Beffort says. “What we’re trying to do is not get into a situation where we possibly have to do some draconian cuts.”
But Egolf and Morales portray their bills as modest ends to years-long pay cuts. Egolf says ending tax loopholes for corporations, which a few legislators are attempting to do, are better ways to generate revenue for the state.
Still, they’re likely to have an uphill battle in convincing Martinez that reducing state employee pension contributions is a good idea.
“If we can get [the bill] to her, I doubt she would sign it, but hope springs eternal,” Egolf says.