December 11, 2015

How federal spending in New Mexico grows state/local government

Print

Paul Gessing is the president of the Rio Grande Foundation, a libertarian think-tank based in New Mexico.

Elected officials of both parties have conspired over several decades to “bring home the bacon” in the form of federal dollars. For example, Senators Pete Domenici and Jeff Bingaman served in the United States Senate for decades and were known as effective “porkbarrel” politicians.

Rio Grande Foundation President Paul Gessing

Rio Grande Foundation President Paul Gessing

New Mexico’s poverty along with its willingness to aggressively pursue federal spending has made the State the third-greatest recipient of federal dollars relative to what it sends to Washington. A report by Key Policy Data recently found that New Mexico receives $1.69 for every dollar it sends to Washington.

More recently, the Republican Gov. Susana Martinez agreed to expand Medicaid under the federal “ObamaCare” program thanks in part to the generous federal match which is currently 100 percent of the costs of expansion and will remain at 90 percent from 2020 on. Prior to Medicaid expansion, Medicaid was often touted as “economic development” due to the fact that the federal government covered 70 percent of the program’s cost in the state.

Also, the Republican Mayor of Albuquerque has been pushing for a plan to put “bus rapid transit” along Central Avenue. That plan is contingent upon the federal government kicking in $80 million of the plan’s expected $100 million cost.

While federal funds are often seen as “free” and an “economic stimulus” by proponents, a new analysis by Dr. Eric Fruits, an adjunct scholar with the Rio Grande Foundation, each additional dollar of federal intergovernmental transfers to New Mexico is associated with $0.99 in additional taxes, charges, and other state and local own source revenue.

This new research further finds that New Mexico experiences a larger ratchet effect than states as a group. In 2012, New Mexico state and local governments received $5.9 billion in federal intergovernmental transfers and spent $13.1 billion raised from state and local sources. A hypothetical 10 percent increase in federal transfers to New Mexico would amount to about $590 million more federal money to the state.

Comments

comments