This legislative session, Gov. Susana Martinez will look to boost her economic development track record and buoy New Mexico jobs numbers that could be further impacted by federal cuts.
Expanded spaceflight informed consent legislation is one in a package of bills Martinez is proposing to try to spur business and reduce the state’s reliance on government funding. The proposals include lowering the corporate income tax rate and pumping almost $5 million into a job-training program.
Economic Development Secretary Jon Barela said the legislation is necessary to counter an “oncoming tsunami” driven by reduced federal spending that could lead to additional job losses.
Martinez acknowledged the state is lagging economically compared to its neighbors. She described job creation as her “No. 1 priority.”
“Now, more than ever, New Mexico needs to be able to compete for jobs, for investment,” Martinez told a group of business leaders recently in Las Cruces.
Martinez’s work to boost international trade on the state’s southern border is paying off, she and others say. In 2011, New Mexico climbed to third in the nation in export growth.
That’s largely due to the booming business at industrial parks in Santa Teresa. The unincorporated community boasts infrastructure and proximity to the region’s largest population base. People have long seen the area as having potential for long-term growth and economic activity.
A $400 million private investment — a massive Union Pacific Railroad shipping facility — was spurred on by a locomotive fuel tax exemption Martinez signed into law in 2011. The rail project started during the era of former Gov. Bill Richardson, but Union Pacific put it on hold when the recession hit. The facility is being built on Martinez’s watch.
Also, Martinez signed a bill allowing trucks from Mexico that are defined as overweight – carrying cargo that weighs more than 80,000 pounds – to travel six miles into the state from the Santa Teresa port. The regulatory change, which makes cross-border trucking more efficient since trucks can carry up to 96,000 pounds in Mexico, resulted in five companies and 150 jobs locating to the industrial park, said Jerry Pacheco, vice president of the Border Industrial Association business group in Santa Teresa. Another six companies have located to the area since Martinez took office.
“The spaceport can be a big economic driver, but so are other things, such as what has happened at Santa Teresa — how we’ve been able to put companies into warehouses when before they were empty,” Martinez said.
The growth is notable, said Pacheco, who has more than two decades of experience in southern New Mexico economic development. He said the state hasn’t seen before “the wave of interest and the new companies coming in that we’ve seen there now.”
Though she may oppose further public spending on Spaceport America, Martinez said she supports capital outlay spending for regionally important economic development projects.
The governor allocated $1.9 million from a discretionary fund to expand water and wastewater capacity in Santa Teresa’s industrial area. The move persuaded one company, TE Connectivity, to keep from leaving the park in late 2011 and instead expand operations.
Residents in other parts of the state often don’t understand the untapped economic possibility that has existed for years along the southern border, Pacheco said. But growth in Santa Teresa could turn the region around, making it a “net giver” into the state’s coffers and decreasing the tax burden for all New Mexicans, he said.
Another bright spot has been the Martinez administration’s use of job-training incentive dollars. Companies were awarded $5.8 million in the first 11 months of 2012 to train workers for nearly 1,300 new jobs, according to news releases. Martinez is asking the Legislature to replenish the fund with $4.75 million this year.
Some onlookers also credited Martinez with making government more responsive to its customers, especially small businesses. Oilman Harvey Yates, a former state GOP chairman, said the administration’s focus on more reasonable regulation has “resulted in increased drilling and production activities, which, in turn, have increased the flow of revenue into state coffers.”
But since Martinez took office, New Mexico’s economic growth has been slower than the national average, according to state and federal data.
Also, while the unemployment rate has dropped, the total number of jobs in the state has declined. That’s a sign that workers have either left the state or stopped looking for employment, said Christopher Erickson, a New Mexico State University economics professor.
Erickson acknowledged that Martinez inherited a tough economic situation in 2011. But the state is losing jobs, he said, and a stellar performance on the governor’s part would have stemmed that somewhat.
“She’s had a tough hand dealt to her, but it’s not clear that she’s played it well,” he said.
A recent state employment report attributes the trend to disappearing government jobs. Barela, too, pointed to curtailed federal spending as the cause, an impact that ripples through the private sector.
Business may be booming down south, but Rep. Lucky Varela, D-Santa Fe, said he’s concerned the Martinez administration is overlooking northern New Mexico.
“I’m supposed to meet with the secretary and take a trip up north to see what we can activate there,” said Varela, vice chair of the Legislative Finance Committee, the Legislature’s budget arm.
Tax cuts proposed
Barela said the proposals Martinez will push this session to reduce the corporate tax rate and, separately, allow some companies to shrink their tax liability are needed to convince businesses to locate here. A 2011 Ernst & Young study ranked New Mexico worst in the nation for corporate investment.
The study didn’t factor in advantages companies get through tax credits, which New Mexico relies upon heavily.
Sen. Joseph Cervantes, D-Las Cruces, pointed out that tax cuts leave less money for state services.
“If your plan is to reduce revenue, it’s essential to show where the cuts where will be made at the same time,” he said.
Martinez is also asking lawmakers to add $10 million to a capital outlay fund used by local governments to improve infrastructure for industry projects, and to boost to $2 million the New Mexico MainStreet program fund, which exists to help revitalize downtown districts.