An expensive, unfair, and poorly targeted tax cut

When it comes to state and local taxes, middle- and low-income New Mexicans pay a tax rate double what the wealthiest pay (as discussed in this blog) and part of this inequity is due to an extremely generous tax cut enacted by the Legislature in 2003. Those who have capital gains income—that’s income from the sale of stocks, bonds, real estate, and the like—can deduct half of it from their personal income taxes.

As most capital gains income goes to people who already have the most money, those are the tax filers who receive the most benefit from the deduction. Almost 90 percent of the value of the deduction goes to taxpayers with an adjusted gross income of more than $100,000—which is more than double the state’s median household income. More than half is claimed by taxpayers with adjusted gross income over $1 million. Less than 1 percent of the state’s taxpayers earn this much money. Clearly, the benefits of the capital gains deduction are skewed to those who need it the least. The deduction also means that wage income is taxed at a higher rate than un-earned income. It also costs the state millions of dollars in lost revenue every year and we get no benefit in return.

capital gains graphicWhen the capital gains deduction was enacted—as part of a larger tax package that drastically cut marginal income tax rates for those at the top of the income scale—it was touted as a way to encourage corporations to move their headquarters to New Mexico. There is no evidence that this deduction has brought corporate headquarters to New Mexico or that the deduction has helped the state’s economic development. Recently, one of the few companies with corporate headquarters in New Mexico—EMCORE—was sold and is in the process of moving its headquarters to California.

The state’s employment pattern since the enactment of the deduction has followed the national trend; first a housing construction and price bubble between 2003 and 2007, then a collapse and a slow recovery since 2009. New Mexico’s recovery has been much weaker than it has been for the nation as a whole, as our job and personal income growth still struggle to reach national rates. Clearly, the capital gains deduction has not helped our economy.

In 2007, 140,000 New Mexico tax returns claimed capital gains income, worth more than $3.3 billion. Though that fell to a low of 103,000 returns during the recession (with capital gains income of less than $700,000), it is expected to be back to more than 140,000 by this tax year. It’s very unlikely that New Mexico’s economy will have regained all the jobs lost during the recession by the end of 2015.

The table below provides a timeline and forecast of capital gain income and the cost of the deduction to New Mexico. The cost of the deduction rose from an estimated $21.2 million in 2003 to $77.6 million in 2007, at the peak of the housing bubble. The cost of the deduction fell to its lowest point of $16.1 million in 2009 and is expected to rise to $63.8 million by 2017.

capital gains graphics
The capital gains deduction is ineffective, benefits those taxpayers who need the break the least, and is expensive—likely reducing general fund revenues by $64 million in 2017. This is funding needed for education, health care, public safety, and other vital services. The capital gains deduction should be repealed by the Legislature.

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

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Why the poor pay the highest tax rate in New Mexico—and one step toward a fix

It’s widely agreed that the poorest among us should not pay the highest tax rate, but in New Mexico (as in most states) they do. State and local taxes—particularly sales and property taxes (shown in the light blue and orange bars in the graphic below)—take up a higher percentage of incomes at the lowest end of the scale. That’s because the smaller your paycheck, the more of it you spend just on day-to-day living expenses—most of which are taxed.

Graphic showing that poor pay a higher rate on state and local taxes

The only place where the wealthier pay a higher rate than the poor is in the state income tax (the green bars). In fact, New Mexicans earning less than $29,000 pay no state income tax at all. But even with graduated income tax rates, middle- and low-income New Mexicans shoulder a greater share of the state’s tax responsibility. There is a very easy way for policy makers to address this inequity—simply make the state income tax more progressive.

Our state income tax system used to be more progressive. The top marginal personal income tax (PIT) rate used to be 7.2 percent, but it was cut by 40 percent to 4.9 percent in 2003, as a “job creation” scheme. The ‘marginal’ rate is the rate in statute. However, few people pay that rate because they can receive tax credits and take deductions. Those with the highest incomes tend to be able to claim the most deductions. For example, New Mexicans can deduct 50 percent of their capital gains income—most of which goes to the wealthy—from their taxable income. (More on this overly generous deduction in our next blog.)

Increasing the top marginal PIT rate from 4.9 percent to 5.9 percent—which, incidentally, is the same rate as the New Mexico corporate income tax—would shift more of the tax responsibility to those more able to afford it. It would also increase PIT revenues by 11 percent, raising more than $140 million in revenue for New Mexico’s education, health care and public safety needs. Raising the top marginal rate to 5.9 percent would partially reverse the 2003 tax cut, which has proven ineffective in creating jobs or raising median income.

The table below, based on the 2012 tax year, shows the average rate of income taxes paid by income group both at the current PIT rates and if the top marginal rate were raised to 5.9 percent. The average tax rate for those with incomes over $1 million increases very slightly from 4.8 percent to 5.7 percent.

Personal income tax table

The next table shows the share of personal income taxes paid by the top four income groups would increase by as much as a full percentage point as a result of increasing the top marginal rate to 5.9 percent from 4.9 percent. The share paid by the income groups earning less than $100,000 would decrease, also by as much as a full percentage point. This would shift some of the responsibility for paying income taxes upward.

Personal income tax table

Raising the top marginal rate from 4.9 percent to 5.9 percent would improve the progressivity of the New Mexico personal income tax. This action would also raise revenues from the personal income tax by about 11 percent. Since revenues from the personal income tax are expected to be $1.3 billion in fiscal year 2015, according to the revenue estimates published by the New Mexico Board of Finance, this proposed increase in the marginal rate would result in additional revenues of about $144 million. In fiscal year 2016 the revenue increase would be $148 million. This would be especially important given the huge loss of corporate income tax revenue the state is seeing (read more about that in this blog).

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

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The lingering near-death experience of the New Mexico corporate income tax

While profitable corporations require roads, police protection, and other public infrastructure and services as much as the rest of us, New Mexico has ensured that they will be paying much less of the cost to maintain them. The tax cuts for corporations enacted by the state Legislature and signed by the Governor in 2013 are proving to be much more expensive than originally estimated. So much so that within the next few years we will lose 60 percent of our corporate income tax revenue.

These steep cuts reduced the top corporate income tax (CIT) rate from 7.2 percent to 5.9 percent and allowed manufacturers to apportion their profits in a way that is extremely advantageous for them—but costly for the state budget. Stunningly, the cuts were enacted by legislators in the waning minutes of the 2013 session without a fiscal impact report (FIR)—an estimate of the cost of legislation that is created for virtually every bill under consideration. They were told (erroneously) that the tax cuts would be “paid for” with new revenue and some savings. The generous tax cuts were partially paid for by a slight increase in revenues from a change in how large retailers could file their tax returns. But it will be nowhere near enough to cover the enormous loses.

In December 2012, before the CIT cuts were enacted, revenues from the corporate income tax had been expected to rise from $281 million in fiscal year 2012 (FY12) to $410 million in FY17 (shown in the green line in the figure below). After the legislation was passed and enacted, the Legislative Finance Committee did prepare a FIR (the dark orange line). That report showed the state would lose just $7.2 million in FY14, with the loss growing to $111.6 million in FY17 as the tax cuts were phased in. (The tax cuts will not be completely phased-in until FY18. However, FIRs only look at the next five years, so the FY18 loss was not estimated at that time.)

As subsequent revenue estimates were made, the revenue picture continued to get bleaker and bleaker. In August 2013 (shown in the light blue line), state officials further reduced the projected CIT revenues—to $260 million in FY13 and $278.4 million in FY17—without explanation. This showed the FY17 $111.6 million loss growing to a loss of $131.6 million.

By August 2014 the revenue picture for the CIT had deteriorated even further (darkest blue line). The expected revenue from the CIT had fallen drastically to $200 million in FY17, $160 million in FY18 and $150 million in FY19. That was a drop of $80 million more than had been expected in the post-session FIR—meaning CIT revenues for FY17 are expected to fall by half.

When revenues for FY18 were first estimated (in August 2013), it was expected to be $258.5 million. By the December 2013 estimates, it had fallen to $206 million, then to $175 in the testimony given to the Legislature earlier this month. State officials have not been able or willing to explain the drop. The December 2014 testimony also projected CIT revenue falling by another $12 million to $163 million in FY19. If $410 million, the original estimate of FY17, is taken as a baseline, the estimated yield of the CIT will drop by $247 million, or 60 percent, between FY17 and FY19.

What accounted for the steep falloff in corporate tax revenues in FY17 and FY18? So far, state officials have been unable or unwilling to address the steep decline. However, corporate profits, the base for the CIT, have been steadily increasing, and there is no indication that this trend will end soon. That would mean, logically, that the effects of the 2013 tax cuts were more drastic than originally thought.

The obvious question is: Do the ever-dwindling estimates of CIT revenue mean that the cost of the 2013 corporate tax cuts were grossly underestimated? It certainly would seem so. It looks as though the CIT was decimated by stealth by the 2013 corporate tax cuts. In FY12, corporations paid 20 percent or one-fifth of total state income taxes. In FY19, corporations will pay just 9 percent of total income taxes.

In FY12 corporations paid 5 percent of total state taxes. In FY19 corporations will pay just 2 percent of total state taxes. If corporations pay less, and they clearly will, then more of the responsibility for funding state services will be picked up by taxes on people, through the gross receipts tax, other consumption-based taxes, and the personal income tax.

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

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What would you do with the state’s $4.5 billion fund?

Our nation and our state must have the public infrastructure our businesses need in order to deliver their goods and services. This infrastructure includes a transportation network—from roads to railways to airports—a telecommunications network, and public works such as water and sewer systems and an electrical grid. All of these systems are vital for our modern economy and our quality of life. Building and maintaining them has the added advantage of creating jobs. Government has an important role in ensuring that this infrastructure is in place, and that it is safe, effective and accessible to everyone.

In 2015, state lawmakers will likely face a choice over how to best invest one of the state’s permanent funds that is used to create and maintain this critical infrastructure. You probably recall that there has been an on-going debate over whether to invest 1 percent of the $14 billion Land Grant Permanent Fund in high-quality early childhood education or to leave it invested in stocks and bonds. (My preference would be to invest in children and the 18 percent return such investments provide, but that is a matter for another day.) While the $14 billion school fund has been getting much of the attention lately, it’s not the state’s only permanent fund.

But before we get any farther into how to best invest permanent funds, let’s briefly review how New Mexico’s labor market is faring. Our state’s employment growth is an anemic .8 percent—the lowest in the region and far below the U.S. average of 2 percent. More than 60,000 New Mexicans can’t find a job. In fact, we still have 17,000 fewer construction jobs than we did in 2007.

Arguably one of the best short- and long-term strategies for putting people to work and improving the economy is to build public infrastructure. The new jobs are the short-term benefit. The resulting infrastructure, which is the foundation for business investment, is the long-term benefit. In a capital-poor state like New Mexico, these investments become even more important as we seek to diversify our economy.

At the state level, there are a handful of sources of money for these projects—surplus general fund dollars, general obligation bonds, road funds, and severance tax bonds. There are others, but these are the main sources. Severance tax bonds may be the most important source of all.

Severance tax revenues come from taxes imposed on the ‘severing’ of oil, natural gas, and other resources from the ground. These tax revenues are first used to pay for the kinds of infrastructure projects cited above. Any revenues not used for these projects are deposited in the Severance Tax Permanent Fund. This fund was created by New Mexico voters in 1976 as a way of trying to ensure that future generations would reap the benefit from the extraction of oil, natural gas and minerals long after those resources were depleted. The Severance Tax Permanent Fund is invested in stocks and bonds, and any earnings are rolled back into the fund. A distribution from the fund is made to the state general fund to benefit the people of New Mexico.

Recently, the State Investment Council—the state agency charged with overseeing the investment of the Severance Tax Permanent Fund—called for a change in the spending policy of severance tax revenues so that more money would flow into the Severance Tax Permanent Fund, making less money available for public infrastructure. That’s right, they want to see less money spent on public school improvements, water projects, wastewater projects, parks and so on. Why? They say they want to protect the principle of the fund so that it will continue to grow. To what size? Well, the fund is currently about $4.5 billion—yes, that is in billions. While protecting the fund is very important, growth for the sake of growth doesn’t serve New Mexicans well.

So what would you do with the state’s $4.5 billion? Should we help put people back to work? Should we invest in our schools and infrastructure? Should we continue to invest in a strong foundation for economic development and quality of life? Or should we take the advice of the State Investment Council and “grow the fund” by sending more money to Wall Street? New Mexico’s poor economic performance indicates we need more economic development investments not fewer!

James Jimenez is Director of Research, Policy and Advocacy Integration at NM Voices for Children. Reach him at jjimenez@nmvoices.org.

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New Mexico’s two-billion-dollar gender pay gap

The gender wage gap has been a topic of interest for some time, so while you may not be surprised that women still earn 78 percent of what their white male counterparts earn, here’s something you may not know: New Mexican women who work full time lose a combined total of almost $2 billion every year due to the wage gap. That’s $2 billion—with a ‘B’—and it doesn’t even include what women who work part time are losing. If New Mexico’s working women had $2 billion more to spend every year not only would fewer of the state’s children live in poverty, but the state’s economy would improve. That’s money that goes towards rent, food and gas for families that are barely making it. This should concern policymakers in a state where 106,993 households are headed by women, 37% of those households have incomes that fall below the poverty line, and 29% of our children are born into poverty.

As a working Hispanic woman and new mother, I find these statistics appalling. There are no children’s books to break this news to my 5-month-old daughter, and hopefully I won’t ever have to. Like most new parents, I hope my daughter grows up to be happy, healthy and fulfilled. But I also expect that if she chooses to go into the workforce that she will be compensated based on her skills, knowledge and capabilities, not on her gender. I expect that if she chooses to become a parent, that her employer will be supportive, not punitive. I also know that if today’s working women and mothers don’t fight for our daughters, we can’t expect them to live in a better world.

While the gender wage gap has been narrowing since the 1960s, there has been no real movement since 2007. African American women earn just 64 cents for every dollar a white non-Hispanic man earns. Hispanic women are most affected by the gender wage gap, earning only 54 percent of what non-Hispanic white men earn. The pay gap actually worsens as women age and their careers progress.

wage gap graphic

Skeptics of the gender wage gap claim wage differences can be explained by several factors. They say women are more likely to go into lower-wage professions such as teaching and social work (although that points to the problem that these important jobs are lower-wage to begin with because they have historically been filled by women); are less likely to pursue college degrees in higher paying professions; have more obligations outside the workplace (like caring for a sick child, spouse or parent); and have lower levels of education.

However, a report by the American Association of University Women shows that even when comparing workers one year out of college—when men and women are virtually equal in age, education, and family responsibility—there is still an unexplained 7 percent gender wage gap. Women earn an average of just over $35,000, while men earn an average of nearly $43,000 their first year out of college.

When women leave the workforce because they cannot afford child care or their employer is not supportive they dramatically alter their potential lifetime earnings and career trajectories. When women work less or earn less, they pay less into Social Security, which is one of the reasons retired women are more likely to live in poverty than retired men. While women make up nearly 50 percent of the workforce, they are underrepresented in leadership positions, making up only 5.2 percent of the CEOs of Fortune 500 companies.

More than 50 years after the passage of the Equal Pay Act of 1963, women continue to earn less than men in nearly every occupation. We must pass legislation that protects women, encourages their participation in the workforce, and defends the New Mexican families that rely on their paycheck.

Danila Crespin Zidovsky, MPA, is the Fund Development and Community Relations Officer with New Mexico Voices for Children

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Poverty update: Good news for the U.S., bad news for New Mexico

The recent Census data releases on poverty delivered some reasonably good news for the nation, but bad news for New Mexico. The Census gives us an annual look at how families are faring across the nation. While the rest of the nation is recovering—albeit very slowly—from the recession, New Mexico is still stuck in economic limbo, and a lot of our families are still struggling. This is important because in order for New Mexico’s economy to thrive, its people have to have the opportunities to do so as well; and New Mexico’s economy can’t get better when so many of its families are barely getting by.  But it doesn’t have to be this way—there are common sense solutions that can address poverty and help make families and the economy stronger. Before looking at some of the solutions though, let’s take a quick look at what the Census data shows.

While poverty rates fell very slightly nationwide, New Mexico’s poverty rate actually increased during that same time. This makes New Mexico one of only three states to see poverty go up, means 22,000 more New Mexicans are in poverty, and ranks our state next to worst in the nation for overall poverty.

Census data also showed that the U.S. poverty rate among Hispanics fell, while at the same time, New Mexico’s Hispanic poverty rate grew. This means 15,000 more Hispanics dropped below the poverty line in 2013.

The data told the same story about kids living in poverty. Nationwide, the percent of kids in poverty improved, while in New Mexico, the already terrible rate of child poverty got worse. Only one other state has a worse childhood poverty rate.

Like the rest of the nation, median income in New Mexico remained relatively flat with both the state and the nation seeing less than $500 in median income growth. While these tiny increases represent (very small) steps in the right direction, median incomes are still 8 percent below what they were before the recession.

The slight improvements in nationwide statistics reflect wage gains for low-income earners (minimum wages increased in 10 states during the reporting period) and improved job markets in most areas. In other words, fewer people are in poverty because workers on the edge of poverty are making more money and because most areas have more jobs to offer. It is not surprising then that while the rest of the nation creeps forward towards economic recovery, New Mexico continues to lag behind. The state hasn’t increased its minimum wage since 2009 and has lost more than 45,000 jobs since the recession hit. And despite a bevy of big corporate tax cuts (paid for by regular New Mexicans) that slashed taxes for big businesses, new jobs just aren’t materializing.

To compound our inability to recover from the recession, New Mexico has one of the highest rates of income inequality. Only five other states and the District of Columbia are worse. According to the Census, income inequality nationwide increased in 2013 and is at near-record levels. This is problematic because economic recoveries happen more quickly when the rises in income and employment are more broadly shared and spread across all income levels. However, in contrast with historical economic recoveries, the recovery of the last recession has taken longer to reach low- and middle-income earners. As the gap between the wealthiest and the poorest gets bigger, income gains—including recession recovery gains—are going very disproportionately to the richest.

Things are bad, and they are obviously not getting better. It is time for action, and policy makers in our state have no excuses for not pursuing some obvious and already-proven solutions. Other states are increasing their minimum wages—it is time for New Mexico to do the same.  As shown in a recent report by NM Voices, increasing the minimum wage by one dollar, to just $8.50 per hour, would benefit 540,000 New Mexicans and generate approximately $50 million in wages for the lowest wage earners.  Because minimum wage workers tend to spend much of their money quickly and locally, this money would go right back into local economies.

The same goes for tax benefits for low- and middle-income New Mexicans. Policy makers should consider bolstering these tax policies—like the Working Families Tax Credit (our state’s version of the Earned Income Tax Credit) and the Low Income Comprehensive Tax Rebate—that combat inequality and help poor families meet their most basic needs. In fact, according to a recent report by the Center on Budget and Policy Priorities, a particularly effective way states can help working families move and stay out of poverty is to increase their minimum wage while at the same time strengthening their EITC.

As far as long-term solutions go, we know that investments in early childhood have big payouts for kids, parents, communities, and state economies. We know that kids in poverty show worse health and educational outcomes and that these outcomes have negative, lasting effects on kids and their communities. We’ve heard policy makers, advocates, and others say again and again how important the early years are. And we have many evidence-based and proven policy solutions already in place—including home visiting, pre-kindergarten, high-quality child care, and child care assistance—that can bolster outcomes for the kids and families who receive them, and improve the quality of life for all. It is time to fully fund early childhood care and education.

As recent Census data have shown, New Mexico is in the throes of a crisis. Our whole state is suffering from a stagnant economy. There has never been a greater need for investments in New Mexico’s greatest resource—our people!

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

 

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“Mom, how can people be poor if they are working?”

My 6-year-old daughter recently asked me a very astute question: how it was possible that people who are working can still be poor? That’s a good question! The answer can be complicated. For example, since it’s not adjusted for inflation, the minimum wage has lost about 10 percent of its purchasing power since it was last raised in 2009. Also, having an education pays off now more than ever in this 21st century economy. Adults with college degrees or industry-recognized certificates usually earn family-sustaining wages, which means they make greater contributions to our economy. 

Unfortunately in New Mexico, almost 70 percent of all working-age adults (ages 18-64) do not have a college degree or industry certificate. These 890,000 adults have few options when it comes to finding decent-paying jobs that can meet their families’ basic needs. It’s not surprising then that almost 43 percent of New Mexico’s working families are low-income. The state ranks 49th in that indicator—only Mississippi fares worst. These families are working hard but they can’t make ends meet with their low-wage jobs.

What’s bad for working families is bad for their children and the state’s economy. Almost half of New Mexico children live in working families that are low income. Our state ranks 49th in that indicator as well. And when children grow up in poverty or low-income households, they are much less likely to succeed in school, graduate from high school, and become contributing members of society.

graphic

With its poorly educated and trained workforce, New Mexico has a hard time attracting new businesses and high-wage jobs to the state. This stymies our economy and continues the cycle of New Mexicans stuck in low-wage jobs. The quality of our workforce can be changed, though, by investing in career pathways programs that have helped large numbers of low-skilled and low-income adults in other states gain industry-recognized certificates and degrees in high-growth sectors.

Career pathways programs help non-traditional adult students effectively transition into college and earn high-demand credentials. Career pathways work by weaving together and aligning adult basic education programs (focused on improving literacy, math, and English proficiency skills), workforce training programs (focused on building occupational skills), and college courses (with accompanying case management and mentoring), while offering comprehensive student support services (including need-based financial aid, child care assistance, and transportation vouchers) to promote college access and success.

New Mexico has a very small career pathways program called I-BEST (Integrated Basic Education and Skills Training), which has been successfully implemented and scaled up in twenty states across the nation and is showing very promising completion and certificate attainment rates here in New Mexico. New Mexico has an estimated 400,000 adults who need to improve their basic skills, earn high school equivalency certificates, and gain workforce skills and credentials. Our current adult education programs, however, only serve a tiny portion—less than 20,000. And of those, only a small number—a few hundred—can enroll in I-BEST.

graphic

We know what works and how beneficial a career pathways program can be for adults looking to improve their employability and economic security. To help our struggling economy, New Mexico must ramp up the I-BEST program, fully integrate it into our adult education system, and provide much-needed student support services. We also need to make sure that stronger partnerships are forged between adult education providers, community colleges, workforce development boards, state agencies, and employers to maximize student outcomes and positive returns on investments.

Investing in career pathways programs like I-BEST is a win-win for New Mexico: reliance on social services would be reduced; we would be more likely to lure businesses here that need a well-educated workforce; the state’s economy would grow; and the economic security of these families improve, which would, in turn improve the academic and well-being outcomes of their children.

The federal government, adult education state agencies and community colleges, workforce stakeholders and employers, and family security advocates from across the nation are all on board for career pathways. It’s time for the state of New Mexico to get on board too.

Read more about this issue in our report, Strengthening New Mexico’s Workforce and Economy by Developing Career Pathways.

Armelle Casau is a Research and Policy Analyst with NM Voices for Children. Reach her at acasau@nmvoices.org.

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NM might consider social impact bonds for expanding early childhood services

Dr. Arthur Rolnick—the keynote speaker at our 2014 NM KIDS COUNT Conference—made a compelling case for higher levels of investment in early childhood care and learning services. Many people in New Mexico agree that these kind of investments will help us improve the well-being of our children. Unfortunately, there has not been a consensus in Santa Fe on how to pay for these programs.

Other states and countries are using a new financing tool—social impact bonds—to pay for preventive high quality early childhood programs like home visitation, childcare and early learning, and pre-K, which have a clear pay-off. The term “social impact bonds” is really a misnomer in that the government does not issue bonds to pay for the programs. Social impact bond financing programs are also referred to as “results-based financing” and “pay-for-success” programs. As these names imply, they are based on the premise that pay is made only when results have been delivered.

So what is results-based financing? Under results-based financing programs, private investors or philanthropists, sometimes jointly, pay for programs that will save taxpayer dollars in the future. In essence, they pay for prevention rather than remediation. Here’s how it works: in the case of early childhood education, non-public dollars are used to pay for high-quality, multi-year programs that are expected to reduce (not necessarily eliminate) the need for expensive special education services and other remediation programs. The investors—private and philanthropic—are then repaid with government dollars, with interest, as the programs demonstrate success in obviating the need for other already-funded programs. Clearly, a critical element of this funding structure is agreement between all parties upon what constitutes success and how that success is measured.

An exciting potential of such financing tools is that they increase the pool of funding for critically needed preventive programs using non-governmental sources. In the U.S., use of this new financing tool has been relatively small in scope and not mature enough to demonstrate whether or not it will be successful. A downside of this financing tool is that the money provided by the private or nonprofit funders must be re-paid with an agreed-upon profit—to cover principal risk and fees—built into the payments, which means that the programs may end up costing more than if they were funded directly by the government. If properly structured, investors are only repaid if the savings are realized, which requires a high level of diligence on the part of government officials.

If such programs prove to be highly successful they may be worth the extra cost. Dr. Rolnick indicated that the return on high-quality early childhood care and learning services has been shown to be 16 percent or higher. It may be worth diverting some of this return to expand these programs with social impact bonds if there seems to be no other way to pay for them. We also need to ensure that we will not end up taking money from other already under-funded programs to re-pay the private investors.

To learn more about social impact bonds go to the Harvard Kennedy School’s Social Impact Bond Technical Assistance Lab at www.hks-siblab.org.

James Jimenez is Director of Research, Policy and Advocacy Integration at NM Voices for Children. Reach him at jjimenez@nmvoices.org.

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Most SNAP recipients would work for food – if they could find a job

The proposal by Governor Martinez’s Human Services Department (HSD) to reinstate work requirements on recipients of food benefits is ill-considered and reflects an upside-down set of values, particularly in the face of an ongoing weak economy that is not producing jobs.

The HSD plan to limit SNAP benefits unless the unemployed comply with job search and work requirements could cause families with children to lose benefits for up to a year. Childless adults who fail to complete 20 hours of work a week could lose SNAP for up to three years.

New Mexico has had and continues to be eligible for a federal waiver of SNAP time limits for jobless adults due to our high unemployment. That HSD wants to reject that waiver and federally funded food assistance for tens of thousands of jobless New Mexicans is absurd. What is the rationale for such proposal? It won’t save the state any money, as SNAP is a federally funded program. The whole point of SNAP is to help people feed their families in times of high unemployment. Denying food assistance to people when they are unemployed because they can’t find a job is like telling the passengers on the Titanic it’s their own fault there are not enough lifeboats. In what world do these public servants live?

In the real world, one in five New Mexico adults and one in three kids is already unsure where their next meal is coming from. That’s the worst rate of food insecurity in the nation. While some people in the administration don’t like to admit it, hunger is a serious problem in New Mexico with major consequences. Hungry kids have worse health outcomes, perform worse in school, and are less prepared to enter the workforce. Cutting SNAP benefits for struggling New Mexicans will mean families can’t put enough food on the table, and New Mexico kids should not be made to go hungry because their parents aren’t able to find jobs.

This proposal comes on the heels of a 2013 corporate income tax cut that will cost state services more than $70 million by 2017. What sort of accountability did we insist upon for this windfall? Absolutely nothing! Has this tax break changed the economic landscape for New Mexico? The employment data certainly has yet to indicate that is has. In fact, the latest jobs numbers show that work is getting harder and harder to find in New Mexico. Unemployment is up across the state, we’ve seen no real job growth, and still haven’t fully recovered from the recession. There could not a worse time to punish those who already cannot find a job by putting a work requirement on SNAP.

So just to review: we’re the worst-performing state in the region for jobs, the worst hunger, and are at the bottom of the list on poverty and child well-being, yet we are willing to give away $70 million in state dollars to big business with no accountability while also cutting off federally funded basic food assistance from people struggling to find work. What does this say about our values as reflected by our public policies? It says to us that our values are up-side down!

This blog was co-authored by Amber Wallin, a Research and Policy Analyst with NM Voices for Children. Reach her at awallin@nmvoices.org.

James Jimenez, Director of Research, Policy and Advocacy Integration can be reached at jjimenez@nmvoices.org.

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This is OBSCENE!


A recent report from the State Investment Council shows that New Mexico’s Land Grant Permanent Fund (LGPF) is growing at a robust pace and now exceeds $13.8 billion. It’s the second largest fund of its kind in the nation and we spend a small portion of it every year on education and other important services.

Meanwhile, New Mexico remains the worst state in which to raise a child. Only a small fraction of our youngest children have access to the high-quality early childhood care and learning services that are shown to improve their outcomes all the way into adulthood.

That we have the resources—through our multi-billion-dollar permanent fund—to turn things around for our kids and the state but we won’t use them is obscene.

Even with record-breaking returns from the stock market and projections of long-term windfalls from oil and natural gas production, all the evidence suggests that our own children would be a better investment for the state. The payoff would be a stronger state economy and better quality of life for all. High-quality child development services have been proven to yield between a 10 and 16 percent return. This return accrues not just to the child, in the form of better outcomes, but to everyone. These services save money on special education and other remediation programs, cut down on costs associated with juvenile justice, teen pregnancy, drug and alcohol abuse, and much more. They ensure that more kids go to—and finish—college. They prepare children for future success, and since today’s kids are tomorrow’s workforce, we would all benefit from their success. New Mexico would finally have what it takes to draw high-wage jobs to our state—an exceptional workforce and people with plenty of money to buy goods and services.

New Mexico has some very effective home visiting, child care, and pre-K programs, but they reach just a fraction of the children who could most benefit. The Legislature has increased funding over the last few years, but at this pace a full roll-out will take decades. By then it will be too late for most of today’s kids. Still, our lawmakers have refused to allow the people to vote on whether to invest just 1 percent of our nearly $14 billion permanent fund on improving child well-being. If the initial 2011 proposal to invest 1.5 percent of the LGPF had passed and the voters had approved it in 2012, the LGPF balance would have grown to about $13.4 billion instead of $13.8 billion. But we would have invested in tens of thousands of our most vulnerable young kids. We’d be putting them—and the whole state—on a course for success. We invested it in Wall Street instead.

Anyone who cares about improving outcomes for our children must find that offensive to their sense of morality or decency.

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

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