Kansas could have avoided its economic tornado by learning from New Mexico’s mistakes

After Dorothy Gale is swept away to a magical land in The Wizard of Oz, she spends the rest of the iconic movie trying to get back to Kansas—the black-and-white Kansas of the Dust Bowl. One has to wonder, though, if she had been swept away from the Kansas of 2015 would she still be so keen to get back? While Kansas has recovered from the severe precipitation drought of the 1930s it is now in the grips of a very different kind of disaster—a dehydrated state budget that’s been drained of enough money to pay for vital services like education, public health, and first responders.

Kansas’ self-inflicted fiscal drought is due to extreme income tax cuts, which are bleeding the budget dry. The Kansas Legislature recently passed a $6.4 billion budget for the coming fiscal year—a budget, incidentally that’s not much bigger than New Mexico’s—but it’s now looking at an estimated shortfall of $765 million. More than 10 percent of the money the state has already planned to spend has simply vanished. While Auntie Em and Uncle Henry may have gotten an income tax cut, Dorothy might be heading back to a school of over-crowded classrooms, drastically reduced learning resources, and discontinued bus service.

Spending cuts alone are not going to cover the shortfall, so Governor Sam Brownback is now suggesting raising sales taxes. (This is a bad idea for a number of reasons, but that’s the subject for another blog.)

Back in 2012, shortly after Brownback had shepherded his pet tax package through the Kansas Legislature, he assured the people in an op ed that the plan would be “like a shot of adrenaline into the heart of the Kansas economy” because it would spur the creation of new jobs.

It’s been nearly three years and it might be time for Kansas to start CPR before its economic heart is bled completely dry. Brownback would have been wise to look for a more realistic prognosis among other states—such as New Mexico—that had cut their income taxes in recent years. He might have seen that a state can’t will new jobs into being simply by cutting income taxes.

New Mexico, as you might recall, passed a top-heavy income tax cut in the early 2000s. Like the other five states that also slashed their income taxes during that decade, the idea was sold on the promise of new jobs. Of course, no such thing happened. Our job growth share rose by a tiny 0.6 percent and a recent report by the Center on Budget and Policy Priorities points out that it was more likely due to the huge increase in oil and gas prices during that decade. Oil and gas prices also drove the job growth that Oklahoma saw after its big income tax cut. However, the other four states that cut taxes in the 2000s—Arizona, Louisiana, Ohio and Rhode Island—actually saw a decrease in their shares of job growth.

Likewise with states that cut their income tax rates in the 1990s and the 2010s. On average, their job growth has been weaker than for the nation as a whole. Kansas, despite its massive tax cut, has seen job growth of just 3.1 percent since its cuts went into effect while the nation’s job growth rate has been 4.5 percent.

Income tax cuts are a zero-sum game when it comes to state economies. States can’t spend money they don’t have, so they either must cut spending (which often means cutting jobs) or raise taxes on someone else to make up for the cut. Essentially, the same amount of money that’s allowed to flow into the economy by the tax cuts is taken back out of the economy somewhere else.

Although New Mexico’s personal income tax cuts didn’t bring the state any economic benefits, at least they didn’t break the bank like they have for Kansas. Again, that was due to high oil and gas prices and a strong economy. Of course, the economy and oil and gas prices have all taken a hit since then, but New Mexico policymakers are still trying to conjure up new jobs by way of magic tax cuts. In 2013, we slashed corporate income taxes. We have seen some job growth since then but it’s been almost entirely in the health care sector because more people have health coverage thanks to Obamacare. New Mexico’s policymakers need to keep in mind that neither of these tax cut schemes have created jobs before they start to overhaul our entire tax system. Meanwhile, just like Kansas, we’re collecting less and less money for critical services like education, public health, and first responders. No wonder people are leaving the state. Kansas has been losing people to other states, too. None of them are leaving by way of tornado, like Dorothy did, but most of them are probably glad they’re not in Kansas anymore.

Bill Jordan, MA, is Senior Policy Advisor/Governmental Relations for New Mexico Voices for Children.

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How closing economic disparities for racial/ethnic minorities will benefit all

Since the start of the Great Recession, the economic disparities between racial/ethnic minority families and white families have increased. More and more racial/ethnic minority families are falling behind in an economy that simply does not work for them. Their children—too many of whom are held back by the detrimental effects of poverty—are less likely to do any better when they grow up. This situation affects society as a whole because the population growth rate of racial/ethnic minorities is higher than that of whites, meaning minorities will soon make up a higher percentage of our children and, eventually, our nation’s workforce. Without equal opportunities to the support systems that help us all succeed in school, this growing sector of the workforce will be less able to gain the skills needed for a high-functioning, productive economy. With racial/ethnic minorities making up 60 percent of New Mexico’s adults and 74 percent of our children, the state is well ahead of the nation in terms of this demographic change. What we do as a high-poverty state to decrease these economic disparities may form a road map of sorts for the nation to follow.

A recent report by the Working Poor Families Project (WPFP) reveals the severity of these economic gaps:

  • While racial minorities make up just 40 percent of all working families in the United States, they represent 58 percent of low-income families;
  • While 24 million children live in low-income families, more than half—or 14 million—of them are racial minorities; and
  • The economic disparities between white families and African American families is at its highest since 1989.

There are several reasons for the income disparities between racial/ethnic minorities and white families, according to the report. One of the main causes is that racial minorities are more likely to have low-paying jobs, such as those in retail, food services, health care, and housekeeping, than are whites. Besides low wages, jobs such as these have little opportunity for career advancement and provide few if any benefits, such as health insurance, paid leave, and pensions. According to the WPFP, nearly 60 percent of job growth since 2010 has been in low-wage jobs and the number of low-income families increased from 10.1 million to 10.6 million between 2009 and 2013.

Disparities in education also contribute to major differences in income. For example, in 2013, 52 percent of low-income working Hispanic families had at least one parent without a high school diploma. Lower levels of education limit a person’s access to jobs with family-sustaining wages. The lifetime earnings of a college graduate are nearly double the earnings for someone who did not get any education beyond high school. Low-paying jobs are also less likely to include benefits, which can make a big difference for working families. For example, without guaranteed sick leave, parents may risk losing their jobs simply by staying home from work to take care of their sick children. If they are allowed to stay home with a sick child, they will lose that day’s wages.

How policies can make a difference

One solution is to provide racial minorities with more opportunities to earn the necessary education and job training needed for jobs with opportunities for advancement. The cost of attending a four-year university creates a significant financial barrier. States should increase the amount of need-based financial aid for minority and non-traditional students to reduce the financial burden of paying for education. States should also increase their minimum wages and index them so they automatically adjust to inflation. This would especially benefit African American and Hispanic workers, who are more likely to have lower-paying jobs. In addition, states must also enact policies that enforce equal pay to eliminate the income disparities that racial minorities and women experience. Hispanic women earn 56 cents for every dollar that men earn, for example.

Low-income working families also need affordable child care and assistance programs to help them provide for their basic living needs. Low-income families can spend as much as 30 percent of their income on child care expenses. Simplifying the application process for programs like child care assistance, Medicaid and SNAP, and expanding these services to underrepresented communities, would make these benefits more accessible to those who qualify.

Ultimately, closing the income gap between racial minorities and white families will not only benefit working parents, but it will help children who are living in poverty as well. Our economy will also benefit when racial minorities have equal opportunities to succeed, particularly as minorities continue to represent a larger share of our nation’s workforce.

Savanna Shay Duran is a senior at the University of New Mexico and an intern at New Mexico Voices for Children.

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The real “mommy wars” are playing out in the workplace

Take a glance at any contemporary parenting blog, website or social media group and you’ll see the “mommy wars” playing out. The battles range from helicopter parenting versus free-range kids to sling versus stroller, and cloth versus disposable diaper. While the battles (and the guilt that comes with them) are real, they are keeping our attention from the real mommy wars: the abysmal lack of national policies to protect new mothers in the workplace.

Almost three-quarters of mothers are in the labor force and they are the primary breadwinners in 40 percent of U.S. households. Still, the U.S. is one of the few nations on the globe that does not ensure that new moms have paid maternity leave. In fact, we have no federal policies on paid leave of any kind and our policy on unpaid leave does not protect enough working women. This Mother’s Day we need national policies that reflect our nation’s true family values.

Every country except the U.S., Suriname (in South America) and Papua New Guinea provides paid maternity leave according to the World Policy Forum. Even in countries with poor civil rights records, such as Somalia, Iran and North Korea, women get at least some paid maternity leave. Women receive 12 weeks in India, 16 weeks in the Netherlands, and almost 70 weeks in Sweden. In America, only 16 percent of U.S. companies offer paid maternity leave. In addition, there are no workforce protections in place for women who are pregnant and taking even unpaid maternity leave often means the loss of a job.

Only one in eight working women receives paid family leave, which allows employees to take time off from work to care for a new baby or a sick family member. Just three states—California, New Jersey and Rhode Island—offer paid family leave and they do it through a social-insurance system. These programs are set up much like unemployment insurance, with the cost passed along to employees (although the costs range from only pennies to a few dollars a month, depending on salary). President Obama’s fiscal year 2016 budget recommendation includes more than $2.2 billion to support the development of state paid family and medical leave programs like these. Grants would help up to five states create paid leave partnership initiatives by covering initial program set-up costs as well as state leave funds. If this funding is passed, New Mexico should apply for a grant.

The federal Family and Medical Leave Act (FMLA) does require private-sector employers with 50 or more employees and all public-sector employers to allow up to 12 weeks of unpaid leave to employees who meet certain criteria. Thanks to the many exclusions, only 60 percent of new mothers are covered under FMLA.

With no legal requirement to offer paid leave, employers generally only do so in order to attract and keep well-educated workers. Thus, low-income women—who make up more than half of the female workforce and are least likely to have paid leave—disproportionately suffer. Requiring employers to provide paid family leave would help ensure that low-income women not lose a day’s pay or become unemployed when they need to take care of themselves, a new baby or an ill family member. Paid time off allows both parents time to bond with their infants, and allows mothers time to initiate and continue breastfeeding. Women who take paid leave are significantly less likely to rely on public assistance and are more likely to be working in the nine to 12 months following a child’s birth.

On this Mother’s Day, let’s truly support mothers and caregivers. Let’s pledge to keep our elected officials accountable. Let’s end the mommy wars and instead wage war against antiquated family values that leave the needs of New Mexico families out.

Danila Crespin Zidovsky, MPA, is the Fund Development and Community Relations Officer at New Mexico Voices for Children and a new mother.

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Measuring the benefits of anti-poverty programs

Poverty isn’t just devastating to the children who experience it. Child poverty costs the United States an average of $500 billion a year in lost productivity and earnings, and also leads to higher health- and crime-related expenses in the long term. Sadly, children from lower-income families will very likely remain in poverty as adults because poverty limits a child’s access to opportunities that would help him or her achieve success in the future and make positive contributions to the community. This cyclical nature of poverty makes it important that federal, state, and local governments invest in effective intervention and assistance programs that ensure low-income children have access to the same opportunities that help their middle- and high-income peers become successful.

But how does the government determine which programs are effective? A decades-old formula is used for determining the official federal poverty level (FPL). While the purpose of the formula is to determine whether a family is eligible for various anti-poverty programs, it is also the metric used to determine the economic well-being of various populations. Unfortunately, the formula does not take into account the value of many anti-poverty programs. The Supplemental Poverty Measure (SPM) was created to better measure the effectiveness of anti-poverty programs. A policy brief from the Annie E. Casey Foundation looks at the SPM and its usefulness for determining which programs are making a difference in the lives of children living in poverty.

A tale of two poverty measures

The formula for the FPL dates back to the 1960s and is based on the minimum cost required to provide a family with a sufficient, yet nutritious diet. This amount is then multiplied by three since the cost of food in the 1960s was one-third of a family’s budget. However, food now accounts for less than 10 percent of a family’s budget, so the formula does not accurately reflect today’s living expenses. For example, a family of three can earn up to $19,790 to be considered living at or below the poverty level. Given much higher costs for housing, health care, child care, and other expenses, a family of three earning up to $39,580—or twice the poverty level—is still considered low income. The FPL is also deficient in that it does not take into account the cost-of-living variable, which differs greatly among the 50 states.

The FPL is based on a family’s size and income. This includes wages, child support payments, and any governmental cash assistance, such as social security. However, most anti-poverty programs do not increase a family’s income because the money goes directly to those who provide the services—such as doctors, child care providers, landlords, supermarkets, and the like. While it makes sense to measure income in order to determine a family’s eligibility for anti-poverty assistance programs, this approach dose not measure the impact of non-monetary assistance programs, such as Medicaid, child care assistance, housing subsidies, SNAP or tax credits.

In other words, while the FPL can tell us how many low-income families and children are eligible for anti-poverty programs, it cannot tell us how many are lifted out of poverty by those same programs. The SPM, however, takes the value of these programs into account—along with a more accurate accounting of a typical family’s bare-bones budget and the cost-of-living differences among the states—to give us a more accurate measurement of poverty.

What the Supplemental Poverty Measure shows us

The SPM enables us to see how effective government programs are at reducing child poverty. New Mexico’s child poverty rate in 2011-2013 was 36 percent—meaning 36 percent of New Mexico’s children lived in families with incomes at or below the federal poverty level. But when the value of non-cash programs like Medicaid, SNAP and others, are taken into account, just 16 percent of our children are living at or below the FPL. This tells us that these programs lift more than 100,000 New Mexico children out of poverty. While these kids still live in low-income families, they have access to many of the supports and opportunities that will help them find success in school and later in life.

The Casey Foundation’s report also shows us that:

  • Tax credits available to low-income families lift 4.8 million children out of poverty;
  • SNAP lifts 2.1 million children out of poverty;
  • Housing subsidies help 1 million children; and
  • Using the SPM, the poverty rate among both Hispanic and Black children is 29 percent, and among Native American children it’s 26 percent, but it’s just 10 percent among white children.

We must continue to use the Supplemental Poverty Measure because it allows policymakers to assess the progress being made in the fight against child poverty. It is important that government officials at all levels have an accurate, efficient means of determining which programs are helping lift children out of poverty. Continued investments in the most effective programs will help ensure that all children have the opportunities that lead them to success.

Savanna Shay Duran is a senior at the University of New Mexico and an intern at New Mexico Voices for Children.

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How Corporate Tax Loopholes Compromise Our Future

The notion of “paying it forward” is a popular one, and while we may not think about our income taxes as a form of paying it forward, that’s exactly what we’re doing. The public works that we all depend upon today—roads and highways, schools and parks, telecommunications and electrical grids, even courts and prisons—were made possible in part by taxes paid by past generations. And the taxes we pay today won’t just go toward keeping these systems and infrastructure in good repair, they will also be needed to plan for our future and address unexpected issues and opportunities. This kind of long-term vision is the foundation upon which the United States was built.

Our public works and infrastructure don’t just improve our quality of life, they also make our modern economy possible. Savvy American corporations understand that they depend on this infrastructure and that they bear responsibility for helping to pay for it. As the new report Burning Our Bridges (Center for Effective Government) shows, much of our nation’s infrastructure needs could be covered simply by collecting income tax on the profits that several corporations have retained overseas.

Over the last several decades, U.S. corporations have been paying a much smaller share of the nation’s taxes. In the 1950s, corporate income taxes made up more than 25 percent of the tax money collected by the federal government. It has now shriveled to just over 10 percent. Here in New Mexico, corporate income tax revenue is expected to decline by 60 percent.

While their tax bills are down, corporate profits are at record highs. Tax breaks, loopholes, and creative accounting practices are at record highs, as well. The Burning Our Bridges report looks at the loophole that allows U.S. corporations to transfer their profits to other countries that have low tax rates (or no taxes at all). The report juxtaposes the rapid rise of the offshoring of American corporate profits with the plunge in federal funding for infrastructure.

Among some of the report’s disturbing findings:

  • Corporate offshoring tax abuse costs the U.S. Treasury an estimated $90 billion annually.
  • Bringing our nation’s aging infrastructure up to 21st century standards will cost $3.6 trillion over the next five years.
  • Our failure to make these investments will cost us $1.8 trillion a year in travel delays, water leaks and power outages.

Individuals and American businesses must bear the $1.8 trillion cost of inaction together if we allow our infrastructure to continue crumbling and failing. No business wants to lose money because of failing transportation or undependable power, but that is what will happen. Businesses understand it takes investment to ensure future profits and that includes investment in infrastructure. Infrastructure projects are appreciated by economists on the left as well as the right. The question remains: how do we pay for infrastructure, particularly when we’re collecting fewer dollars in income taxes?

New Mexico is facing this same conundrum. Despite the fact that New Mexico has granted hundreds of millions of dollars in corporate tax cuts over the last few years, special interests continue to lobby for more. In fact, in the just-concluded legislative session, a bill that would have cut business taxes passed the House, but not the Senate. The special interests want the Governor to call the Legislature back into a special session to pass those tax cuts. But that’s not all. They also want a capital outlay bill to fund public works projects passed as well.

We can’t have it both ways. If business groups want a state with reliable public works and infrastructure, they must be willing to make investments in it. We all have a duty to pay it forward for future generations. Forward thinking, profit-seeking businesses know they must pay their fair share to help keep our state’s and nation’s infrastructure sound.

Don Simonson is treasurer for the Board of Directors of New Mexico Voices for Children and an emeritus professor of finance at UNM.

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Tax cuts, a special session, and the budgetary storm that’s brewing

Since the legislative session concluded without the passage of a capital outlay bill—money for public works projects like building community centers—there have been rumblings about the need for a special session. Amid this din, the Executive Office has indicated that it would also want tax cuts to be considered. A special session should be called, but the Legislature should limit their agenda to passing the public works projects and not even consider handing out more tax breaks.

How much more evidence do we need that tax cuts are a failed economic development strategy? After more than a decade of handing out billions of dollars in tax giveaways to corporations and the rich, New Mexico is last in the region in job growth. What we did get from that failed strategy is a lot less money for the things that really matter: education, health care and public safety—all of which improve our quality-of-life and build up our economy by making New Mexico a more attractive destination for businesses and families alike.

Over the last several years we’ve made deep spending cuts in K-12 and higher education—which will certainly not improve our dismal educational outcomes. We’ve also seen the devastating effects of having insufficient funding for public safety, courts, child abuse prevention, behavioral health needs, and substance abuse treatment. The loss of services in these areas has reached crisis levels and led to national media attention that was focused on New Mexico’s ills.

Despite these pressing needs—and the lack of revenue due to falling oil and gas prices—the Legislature nearly passed yet another tax giveaway in the just-concluded session. It’s this tax-cut package that the Executive Office wants lawmakers to revive. Legislators should not enact more tax cuts. But, if a tax cut is really worth enacting, it should at least be paid for with the repeal of some other tax break that is failing to create jobs or help our economy. There are plenty of those to choose from.

There is an even more pressing reason not to cut taxes at this time. A perfect storm of budgetary events is brewing on the near horizon:

  • A massive corporate income tax cut that was passed in 2013 is still being phased in. It gave away more than half of our corporate tax revenue and is costing much more than originally projected. That tax cut alone will eat up about $50 million of existing revenue next year.

  • The percentage of money the state budget receives every year from the Land Grant Permanent Fund will drop from 5.5 percent this year to 5 percent next year, meaning we’ll be getting about $60 million less in funding, most of which would go to education. That’s money that either needs to be made up elsewhere or must be cut from our education budget.

  • In 2017, New Mexico will have to start paying 5 percent of the cost to cover low-income adults on Medicaid under the Affordable Care Act. While the ACA brought in much-needed revenue, we’ve already spent that money to fill other budget needs. Next year, we’ll need to come up with more than $50 million for our share of the Medicaid costs.

  • And finally, if gas and oil prices don’t rebound in the next couple of years, we are not likely to have money to expand services beyond their current levels.

Lawmakers should pass the capital outlay bill in a special session to create jobs, give a little boost to our economy, and get these much-needed projects underway. But they should hold off on more tax cuts. The state’s budget is facing at least a $150 million hole next year and it would be irresponsible to dig that hole even deeper by handing out more tax cuts.

Bill Jordan is Senior Policy Advisor/Governmental Relations for NM Voices for Children. Reach him at bjordan@nmvoices.org.

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Preying on the poor: Why the state needs to curb payday lending abuse

Imagine taking out $200 for a short-term loan but paying back $2160.40 in interest and finance charges. No one with access to a bank or credit card would consider such a bad deal, but for hundreds of New Mexicans, a loan of this type might be their only option when they’re short on cash.

Some state lawmakers have tried during the current session to stop payday lenders from exploiting New Mexicans by floating legislation requiring a 36 percent cap on interest rates and fees. But those measures are most likely dead for the year.

In New Mexico, individuals who borrow money from payday lenders often take out a short-term payday loan for a relatively small amount of money (several hundred dollars) to tide them over until their next payday. Yet, the average cost of fees and interest rates are over 300 percent and consequently exceed the amount of the original loan by an extortionate amount. When repayment time comes, borrowers are encouraged to renew or “rollover” their loans—essentially taking out a new loan to pay off the original loan. According to one report by the Consumer Financial Protection Bureau, four out of five borrowers renew their loans within fourteen days of taking the original loan. The new loan comes with new fees and the amount owed quickly grows beyond what the borrower could ever repay.

What makes payday lending an especially abusive practice is the fact that these lenders prey on individuals in lower income brackets, and this traps them in a vicious cycle of debt. According to the New Mexico Fair Lending Coalition, single mothers, low-income families, veterans, and people of color are most likely to use payday lenders.

For many low-income borrowers, taking out a payday loan often seems like a plausible solution when they’re short on cash and need to pay their living expenses. According to one report, individuals are more likely to borrow money from payday lenders to pay for everyday living expenses than for unexpected expenses and emergencies. Those who borrow from a payday lender are less likely to have a bank account or able to borrow from a bank, so a payday loan might be their only option.

Payday loans are not only harmful for individuals, but they are also harmful for the economy. According to one independent study, for every dollar spent on costly payday loans, the economy loses $.24 because borrowers lose purchasing power as a result of these loans. This means less money is spent in New Mexico’s economy. What’s more, five out of six payday lenders in New Mexico are owned by out-of-state corporations, so the loan money—including fees and interest—are removed from the state and its economy.

Legislation to end these abuses has been enacted in the past, but payday lenders simply modify their loans to get around them—changing their payday loans to “installment” loans, for example. The only real solution is to cap interest rates and fees on all loan products. Twenty states have already capped interest rates between 17 percent and 36 percent and the federal government has capped rates at 36 percent for active military members.

The 36 percent cap is a much-needed provision that will prevent people who are already struggling financially from experiencing even more financial difficulties. The sad reality is that these predatory lenders prey on those who can least afford it. Once borrowers are lured in, they are easily trapped in an endless cycle of growing debt by rollovers and renewals. These lenders’ practices are harmful not only to individuals, but also to the economy. That makes it everyone’s business to ensure that these safeguards are put in place.

Savanna Shay Duran is a senior at the University of New Mexico and an intern at New Mexico Voices for Children.

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How New Mexico’s unemployment insurance system fails everyone

Legislation that would have cut unemployment insurance (UI) benefits for workers who have been laid off was struck down in the state House of Representatives this week. Hopefully that means the issue is dead for this session. Further cutting UI benefits would have made a system that is already failing even worse.

New Mexico’s UI system is failing both the workers—who desperately need it to stay afloat between jobs—and the state—which also needs it to keep the already weak economy from a further downward spiral. UI payments have been slowed, and benefits were even cut in previous years, in part to keep insurance premiums on businesses low. While businesses are enjoying lower premiums, they are not enjoying having fewer customers with money to spend on their goods and services. Fewer customers ultimately lead businesses to lay off employees, who then have less money to spend—thus the downward spiral. Further cutting benefits would have led to even less money circulating in the economy and helping families put food on their tables and a roof over their heads.

Unemployment insurance has both a moral and an economic dimension. From a moral point of view, the intent of UI is to keep people who are unemployed through no fault of their own from falling into financial ruin. The economic rationale for the program is that UI, along with food stamps (now known as SNAP), is a so-called automatic stabilizer that keeps the demand side of the economy from collapsing during a recession.

The moral rationale for the UI program is strong: people who lose their jobs or who are laid off in the course of a recession are victims of the workings of the business cycle that always afflicts the capitalist economic system. The Great Recession that began at the end of 2007 was the most severe downturn since the Great Depression in terms of output and employment lost.

In New Mexico the unemployment rate rose to 8 percent during the recession, and was very slow to fall from its peak. During the early course of the recession the UI program was performing its dual functions well: unemployed people were being helped and the UI program was making a contribution to restoring the health of the economy by shoring up demand for the goods and services provided by the state’s businesses.

In 2009, an average 72 percent of the unemployed received payments under the UI program—this is called the ‘recipiency ratio.’ Of those beneficiaries, 46 percent were covered by the New Mexico UI program and an additional 36 percent were covered by emergency federal programs. The picture began to deteriorate in 2010, though, when 66 percent of the unemployed were receiving UI payments (with 34 percent covered by the state program and another 32 percent covered by the federal add-ons). The situation continued to worsen slightly in 2011, with an overall recipiency ratio of 63 percent (32 percent state and 31 percent federal). By 2012 just 55 percent of the unemployed were receiving benefits (32 percent state and 23 percent federal).

During this time, the shifting political balance of forces on the national level was leading to declining availability of UI, even though the recession in the labor market was clearly not over. In 2013 only 36 percent of the state’s unemployed were receiving UI (26 percent state and 10 percent federal). By the first quarter of 2014, which brought the expiration of all emergency federal programs, only 25 percent of the state’s unemployed were receiving UI. By the third quarter of 2014 (the latest quarter available) the UI recipiency rate was stagnant at 26 percent (23 percent state and 3 percent federal). That is, only a quarter of the unemployed were receiving UI benefits.

The severity of the recession had led the balance in the New Mexico UI Trust Fund—the fund from which UI benefits are paid—to fall from almost $600 million before the recession, to below $50 million in 2014. This should have been corrected by raising employer taxes substantially to replenish the fund, but that is not the approach the state took. Instead, in 2011 the Legislature cut the number of dependents who could receive the dependent allowance of $25 per week per dependent to two, down from the four, dealing a blow to large families. The Legislature also restricted the availability of UI payments for students. An employer rate increase was approved by the Legislature in 2011, but vetoed by the Governor. Another slight UI rate increase was approved by the 2012 Legislature and approved by the Governor.

By the third quarter of 2014 the UI Trust Fund balance had grown to $83.3 million, but this was due to the improvement in employment growth not the modest rate increase, which did not take effect until January 2015. It is still far too small. An adequate UI Trust Fund balance is probably in the $800 million to $1 billion range, judging from how rapidly the trust fund was depleted during the recession that began in 2008.

The recovery from the national recession has been glacially slow in New Mexico, as the state ranks 45th in the nation for its labor force participation rate. By December 2014, the unemployment rate in New Mexico was 6.1 percent, 18th highest among the states, and a half point above the national rate.

The failure of the New Mexico’s policy toward the unemployed, as shown by our state’s abysmal UI recipiency rate, is both moral and economic. It is unconscionable for the state to leave its unemployed residents with no options but to spend all of their savings and end up destitute. The failure is also economic, as UI cannot fulfill its function of ‘automatic stabilizer’ to maintain demand for the goods and services of the state’s businesses. Proposals to further cut unemployment benefits should be defeated.

Gerry Bradley is Senior Researcher and Policy Analyst for NM Voices for Children. Reach him at gbradley@nmvoices.org.

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The minimum wage has to be raised the right way

Increasing the minimum wage, which would positively affect many workers, continues to be discussed during the current legislative session. Raising the minimum wage benefits workers and the economy because low-wage workers will spend their extra income. Raising the wage will allow workers to purchase necessities like food, diapers and gas—most of which will be purchased at local businesses. This circulates money back into the economy, creating jobs. Several bills that would raise the wage are under consideration, but for the increase in the minimum wage to be successful, it must be done correctly.

The minimum wage for the state—$7.50 an hour—has not been raised since 2009. A bill to raise the minimum wage to $8.50 was passed in 2013 but was vetoed by Governor Martinez. The Governor has since stated that she would be willing to raise the minimum wage by a much smaller increment. Several bills are being considered during the current legislative session.

It is impossible to live off of a minimum wage income—this is especially true for families. At the state minimum wage of $7.50 an hour, an individual working full time earns just $15,600. That is lower than the federal poverty level for a family of two. What’s more, when it is raised so rarely, the minimum wage simply cannot keep up with inflation. One of the steps that must be taken to prevent wages from decreasing in value is to ensure that they rise with inflation. This is called indexing, which automatically adjusts the wage to the Consumer Price Index. By doing so, it will prevent inflation from decreasing the purchasing power of workers’ wages. House Bills 20 and 138 would raise the wage to $10.10 and $8.40, respectively, and include indexing. Senate Bill 432 would raise the wage to $10.10 in steps over the next few years and then begin indexing.

In order for the minimum wage to benefit all workers and the economy, the bill must be free from loopholes that prevent certain workers from benefitting. Some lawmakers want to allow businesses to pay workers less than the minimum wage while they are in the early months of the job. This so-called “training wage” gives unscrupulous businesses an incentive to fire workers once they have completed the training period to avoid paying the increased minimum wage. Senate Bill 10 would raise the minimum wage to $8.30 an hour but allow employers to pay a $7.50 an hour training wage for six months.

Another potential provision of the increase in minimum wage that would be detrimental would be to preempt the right of cities and counties to raise the minimum wage above that of the state. This would prevent local governments—and in some cases their voters—from adjusting the minimum wage to the local cost of living as needed. While House Bill 498 would preempt local minimum wages laws, it has the added disadvantage of not raising the minimum wage.

The simple truth is that it is impossible and impractical to live off of a minimum wage income. The benefits of raising the minimum wage will ultimately help individuals and families who are earning low wages as well as help the state’s economy. But it must be done correctly.

Savanna Duran is a senior at the University of New Mexico and an intern at New Mexico Voices for Children.

 

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Increasing one proven and effective way to give New Mexico workers a hand up

Note: These remarks were given as expert witness testimony to NM Legislature’s House Ways and Means Committee on HB 293: Increasing the Working Families Tax Credit, February 16, 2015

New Mexico’s Working Families Tax Credit is based directly on the federal Earned Income Tax Credit (EITC), which was enacted in 1975. New Mexico’s credit was enacted in 2007 at 8 percent of the value of the federal EITC and raised the following year to its current value of 10 percent of the EITC. Both credits are refundable income tax credits available to low- and lower-middle-income workers. Each year the EITC injects about $500 million into New Mexico’s economy, and the Working Families Tax Credit provides an additional $50 million in benefits to New Mexico families.

These credits are widely supported as bipartisan, common-sense, anti-poverty, and pro-business measures that have a high return on investment because they are good for families and kids, and they are good for businesses and the economy.

First, we know that these credits are great for New Mexico’s kids and families. Every year, 200,000 New Mexico workers and the 300,000 New Mexico kids they are raising benefit from the credits, and 97 percent of the value of the credit goes to working families with kids.

The families use these credits in different ways. For some, the credits are lifelines; and each year, these two credits alone lift more than 40,000 New Mexicans—half of them children—above the poverty line. Other families use them for support during tough, but temporary, economic times (things like the birth of a child or the loss of a job), and three out of five workers claim the credits for only one to two years. The credits are used to help families afford basic necessities as well as, research shows, big expenditures that they otherwise couldn’t afford such as, and most commonly, major car repairs. Other recent research shows that in the two months following when they receive these credits, workers are much more likely to purchase fresh produce and fresh fruits and vegetables, and so we know that the credits help families eat healthier as well.

In addition to being good for New Mexico families, we also know that these credits are good for New Mexico’s businesses and economy. Part of this is because extensive research shows that these credits encourage work and help keep people in the workforce. They also help low-wage workers keep more of their income, and that income, as well as the credits themselves, are very likely to be spent quickly and locally.

Business owners strongly support these credits not only because they help keep cash circulating and being spent, but also because workers who are better able to afford things like reliable transportation and reliable child care are more likely to be reliable employees.

But as great as we know that these credits are, we also know that New Mexicans face some big challenges. The most recent Census data show that New Mexico is ranked next to worst on overall poverty; we’re also next to worst on child poverty. KIDS COUNT ranks New Mexico 49th out of 50 on overall child well-being; and New Mexico has more working poor families per capita than any other state in the nation. New Mexico workers are facing an uphill battle. Increasing New Mexico’s Working Families Tax Credit is one proven and effective way to give these workers a hand up, while also still continuing to support our kids and our businesses.

Amber Wallin is a Research and Policy Analyst with NM Voices for Children.

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