The New Mexico state Legislature this week passed a $6.23 billion budget (HB 2) that increases funding for education, job training and other programs. It also includes a tenfold increase in the Local Economic Development Act fund, one of the rare proposals this session that were supported by Democrats as well as Gov. Susana Martinez.
Many states have what are known as deal-closing funds (or enterprise funds) that are created to help lure new businesses or expand existing businesses and create jobs.
New Mexico’s Local Economic Development Act fund, created in 1994, was allocated $3 million for 2014, while other states have been creating bigger and bigger pools of money. Texas, California and Florida have funds in the hundreds of millions. The just-passed budget would put $37.5 million toward LEDA.
Supporters say deal-closing funds are a vital tool for economic development, giving local governments the ability to offer job-creators buildings, infrastructure or land. During the session Senate Majority Leader Michael Sanchez, D-Belen, and House Majority Leader Nate Gentry, R-Albuquerque, both sang the praises of increasing the size of the state’s investment.
The fund has had successes—it was used to bring Lowe’s to Albuquerque and HP to Rio Rancho—but also stumbles such as Schott Solar and Eclipse Aviation.
Critics such as Paul Gessing of the free-market Rio Grande Foundation, don’t like the way such closing or enterprise funds treat politicians like highly-skilled venture capitalists.
“Politicians really have no idea what the next big thing is going to be,” Gessing told the People, Power and Democracy Project. “Even in the best circumstances, there’s always the potential for a pot of money to become used for political purposes, and [for] corruption to spring up.”
Critic of the Texas Enterprise Fund labeld it a “slush fund” and a 2014 audit found they weren’t far off the mark. According to the Houston Chronicle:
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.
Still, the promise of bringing more jobs to their communities has made the program, well, 10 times more popular lately.
The budget is on its way to Governor Martinez’s desk for signature.
To listen to an audio version of this story that ran on NMID’s media partner, KUNM, click here.