New Mexico Should Stop Being So Miserly

2018-05-02T16:25:46+00:00 Kids Count News Coverage, News Coverage|

by Chris Erickson, Ph.D., KRWG
Jan. 26, 2018

Commentary: One of the favorite tropes of news articles and literature is the miser—an individual who hoards money even to the determent of their own well-being. These skinflints refuse to spend money even when doing so would improve their quality of life or that of their family.

Take, for example, Hetty Green who inherited $7.5 million dollars in 1864, a vast sum for the time. Turns out that Green was also a brilliant business woman, allowing her to amass even more wealth. She was also a famous miser. She was so cheap that she wore the same ragged black dress every day, refused to heat her house or use hot water. She once spent an entire night searching for a lost two-cent stamp. She was so worried about spending penny that she refused to pay for medical care for her child, resulting in the amputation of his leg.

Well New Mexico has become the Hetty Green of the 21st century. We are compulsively paying into the state permanent funds, refusing to spend to pay for needed goods and services, including refusing to spend for pre-K12 education.

Altogether, the state’s permanent funds amount to $23 billion, of which the Land Grant Permanent Fund and Severance Tax Permanent Fund account for about 95%. These two behemoths are funded primarily from gas and oil revenues. We continue to build up these funds.

Meanwhile, New Mexico perennially does dismally poor in child welfare indicators. According to the Annie E. Casey Foundation, we rank 50th in overall child welfare and 49th. This poor performance translates into low incomes; we rank 46th in median household income.

We need to fix this problem. Using the permanent funds for pre-K12 education is an obvious solution—one supported by a coalition 40 of child welfare organizations including Invest in Kids Now, and Voices for Children.

Opponents of using the permanent funds for education view such sending as profligate spending that depletes the state’s financial legacy for future generations. But making wise investments is exactly the opposite of being profligate. In fact, it is wise stewardship.

Education should be viewed the same as investment into a business. In both cases, we incur and expense to day in anticipation of creating future value. The decision between education and business investment should be based on which provides the highest return.

The state’s permanent funds are doing well right now, having achieved record levels this year. Not that this is surprising; in the current market environment, anyone who capable of falling off a log can should do well when the market is up 30%. But when you take a longer view, an average return of 8% is a reasonable assumption. The return on birth-to-five programs is estimated at 13%. The return is higher when the program target high risk children.

Right now, the balance in the state Legislature is controlled by conservative Democrats. Among the leaders of this group are two southern New Mexico legislators—John Arthur Smith and Mary Kay Papen. These are two legislators I’ve long admired, but who also have historically opposed using the permanent funds for education. Let’s hope they and their allies will let a proposed constitutional amendment to allow the use of the permanent fund for education go forward to the people for a vote.

Copyright 2018, KRWG (http://krwg.org/post/new-mexico-should-stop-being-so-miserly)