January 7, 2015

Could a “Closing Fund” Consensus Come to the NM Capital?

While Democrats and Republicans in D.C. and New Mexico seem to be growing farther and farther apart on many issues, there is at least one economic proposal on the table in our state that may become a beacon of compromise.

Closing funds are pools of discretionary public money that help provide incentives for new or existing businesses to re-locate to a state, make infrastructure investments, or expand operations. Late last year, the Legislature’s bi-partisan Interim Jobs Council recommended tripling the amount of money in New Mexico’s closing fund. Governor Susana Martinez also supports increasing the amount of money in the state’s closing fund, calling the fund “a critical tool in helping diversify our economy, grow the private sector and better compete for jobs.”

You read that correctly. There’s true bi-partisan support in New Mexico for an economic development initiative. Senate Majority Leader Michael Sanchez and Governor Susana Martinez both agree on a tactic to improve our jobs picture. I’ll let that sink in.

The Jobs Council recommendation calls for appropriating $5o million into the fund in 2015. That’s up from the $15 million appropriated last year. (Though the $50 million mark might be overly optimistic now that oil prices have plummeted and state revenue estimates have been slashed.)

The president of Albuquerque Economic Development, Inc., Gary Tonjes, has said the diminutive amount currently appropriated to the fund has “cost [New Mexico] dearly” and has contributed to our state’s current economic idling.

It would be foolish of our public officials not to leverage this bi-partisanship into concrete actions that will attract businesses and create jobs. However, careful oversight of how the funds are spent (and what options taxpayers have to recoup funds when businesses fail to live up to their promises) must be a priority. Thankfully, a 2013 bill created some claw back provisions for companies who receive money but don’t comply with certain conditions. However, we only need to look to our neighbor to see the consequences of lax oversight.

Gov. Rick Perry’s version of a closing fund – the Texas Enterprise Fund – came under harsh scrutiny last year because the funds were misused. The Houston Chronicle reported that

The 107-page State Auditor’s report raised concerns over nearly every aspect of the “deal-closing” fund, from initial oversight of how grants are awarded to the mechanisms by which the state recoups taxpayer money when an investment fails. Faulty monitoring and reporting meant the office of the governor often failed to live up to its own policies, as well as requirements for the fund laid out in state law, auditors said.

We can’t let that happen in New Mexico. We simply can’t afford it. Businesses that receive funds in our state must be held accountable for creating jobs and complying with the parameters they agree to. Those parameters should be strict and clear and achievable.

It’s wonderful to see a glimmer of consensus in Santa Fe. Our closing fund can’t simply be another way our government gives away public money to private enterprises, however. We need our leaders to ensure our taxpayer dollars are spent on healthy investments with reasonable returns. With proper protections in place, a more robust closing fund seems a wise way to go.