Capital outlay projects often controversial

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Mora County's new two-story courthouse sits unfinished behind a chainlink fence. It's often cited as an example of the flaws in the state's capital funding process. Sandra Fish/New Mexico In Depth

Sandra Fish/New Mexico In Depth

Mora County's new two-story courthouse sits unfinished behind a chainlink fence. It's often cited as an example of the flaws in the state's capital funding process. Sandra Fish/New Mexico In Depth

Editor’s Note: New Mexico’s 2015 legislative session ended with lawmakers failing to compromise on a bill to fund capital projects. Yet earlier in the session, a bipartisan group of senators rejected a measure that attempted to take politics out of the process. 

Before the session began, New Mexico In Depth offered an examination about New Mexico’s system and how different it is from those in other states for its legislative guide. 

That story is below; click here  for a video explanation and here  for a searchable database of the 2014 capital projects funded by the Legislature.

New blinds for an Albuquerque library. Renovations to the dam that supplies water to Las Vegas. Vehicles for a Farmington senior center. A movie backlot in Las Cruces.

Those are just a few of the more than 1,100 projects that made the cut when New Mexico lawmakers pared a $4 billion wishlist to more than $398 million in capital outlay spending in 2014.

But some question whether the state is making the best use of money when lawmakers divvy up money for small local projects instead of focusing on long-term building goals.

“We’re diluting our efforts when it comes to the long-term priorities,” said Sen. Pete Campos, a Las Vegas Democrat who has repeatedly – and unsuccessfully – tried to reform the process.

New Mexico appears to be the only state that allows lawmakers to divide a set amount of money in a method often known as “pork-barrel politics,” said several experts New Mexico In Depth talked with.

Defenders say the process ensures the needs of small cities and counties aren’t overlooked in the capital budgeting process and results in more equitable distribution of bond money across New Mexico’s population.

But opponents criticize the process for failing to fully fund projects, some of which are left unfinished for years. Critics say some projects end up in the budget that aren’t part of local governments’ long-range plans.

“It ends up costing more in the long run,” said Tom Clifford, cabinet secretary for the Department of Finance and Administration (DFA). “And it undercuts confidence in the program.”

Campos will be back with a reform bill when the Legislature meets Jan. 20 for its 60-day session. With Republicans – presumably allies of Martinez – in control of the House, his chances might be better, though it’s difficult to say.

“We don’t anticipate any changes to the capital outlay process, but we certainly welcome the discussion,” House Speaker-elect Don Tripp of Socorro said in a statement.

Setting standards

New Mexico’s processes for capital projects meet many of the standards set forth in a report earlier this year from the National Association of State Budget Officers:

• Defining capital expenditures: New Mexico defines a capital project as one that costs $5,000 and will have a life cycle of at least 10 years, which is the typical term of bonds issued to pay for such projects.

• Established planning processes: New Mexico state agencies are required to submit and update longterm plans for capital needs. The process is optional for cities and counties, but many participate.

• A system to prioritize projects: The Department of Finance and Administration and legislative staff prioritize projects based on health and safety concerns, urgent need and other factors.

• Clear policies on debt financing: New Mexico is one of 19 states that require voter approval for general obligation bond issues to fund projects.

Yet while the state’s process meets nationally accepted standards on paper, the way state lawmakers divvy up money for projects is unusual.

Each year many priority projects identified by the executive and legislative branch are funded. But a significant amount of capital outlay cash – $100 million in 2014 – is divided among individual lawmakers. So last spring, each House member received a bit more than $714,000 and each senator received $1.25 million to allocate to projects they wanted in a process that many consider highly political.

“Communities come to a legislator. One wants a senior center project, another wants roads,” Campos said, adding, “We all want to help at all levels.”

Tim Keller, a former Albuquerque Democratic senator who is now state auditor, sees both sides of the capital outlay conundrum.

“It’s an antiquated procedure held over from a time when there was very little central administration,” he said.

On the other hand, Keller said, “It is equitable. It is the most equitable distribution of pork in the entire country. It is a bill. It’s as transparent or as opaque as any other bill. We vote on it.”

Such divvying up of cash by individual lawmakers isn’t standard procedure, said Michael Pagano, dean of the College of Urban Planning and Public Affairs at the University of Illinois at Chicago, who has studied state capital spending processes.

“It certainly wouldn’t be in the textbooks about how to do capital improvement planning,” Pagano said. “In fact, it would be the illustration about how not to do capital improvement planning.”

That’s because New Mexico’s state lawmakers sometimes choose projects that aren’t part of a prioritized list and that don’t meet guidelines for minimum cost and lifespan.

For instance, 453 projects totaling more than $43.6 million were included in the 2014 capital outlay bills but weren’t in any long-range plans filed with the state, according to DFA records. Another 35 projects in the 2014 list fall below the $5,000 threshold for capital projects.

Clifford said that’s a problem for Republican Gov. Susana Martinez, who vetoed $30 million in capital projects from 2012 to 2014, often citing concerns about projects that appeared to be pork rather than essentials.

“She’s very uncomfortable signing off on projects that haven’t been through some kind of vetting process,” Clifford said.

And often, projects aren’t ready to build, so the money isn’t spent immediately.

“We probably have $450 million sitting there that can’t be used,” Campos said.

How others do it

Pagano pointed to Utah as one state with a textbook system for funding capital projects. There, a board appointed by the governor holds hearings and prioritizes projects, sending a list to the governor. The governor’s office uses that list to create its own priorities and both lists are sent to the legislature.

“They debate it out from there,” said Marilee Richins, a spokeswoman for Utah’s Department of Administrative Services, which oversees the process.

And Campos likes Oklahoma’s process. That state has a planning commission with citizens appointed by the governor, the state House and the state Senate that prioritizes capital projects. The commission submits the list to the legislature, which has 45 days to remove projects from the list. But none can be added.

“The legislature still has some oversight over what happens, but they are not directly choosing the projects,” said John Estus, spokesman for the Oklahoma Office of Management and Enterprise Services.

Estus said that state’s system is “the complete opposite of New Mexico’s.”

“The system we have is designed to keep politics out of it as much as possible.”

Efforts at reform

For years, Campos has tried to get politics out of New Mexico’s system. He writes frequent op-eds advocating reform. He even wrote his 2004 University of New Mexico dissertation on the state’s capital outlay process.

Campos’ proposals sometimes pass one house or another. And while other lawmakers rarely speak out against the reforms, they have yet to see the governor’s desk.

“It’s a very touchy subject,” he said. “They won’t speak against it. They quietly, sometimes collectively, work to make sure it’s not heard or that it’s killed in the other house.”

Sen. Carlos Cisneros, D-Questa, also has sponsored capital outlay reform bills that met similar failure.

Martinez supports such reform efforts, Clifford said.

“We were generally supportive of both bills, Sen. Campos’ and Sen. Cisneros’ bills, from the last couple of sessions,” he said.

But almost two years ago, Martinez took matters into her own hands. She issued an executive order requiring local governments to have up-to-date general audits before capital outlay money is released and giving the DFA greater regulatory authority over distributing capital outlay money.

At the time, 61 local governments didn’t meet the audit requirement. Today, only 16 haven’t completed audits, Clifford said.

“The system truly needs reform, and we’re making it administratively,” Campos said.

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