The perception that government in New Mexico has a high level of cronyism is one factor dampening private investment in the state, according to a report released Thursday.
“From day one, what business leaders tell us is that corruption and cronyism matter, and they have consequences to economic growth,” said Michael S. Rocca, an associate professor of political science at The University of New Mexico who led a team of researchers and graduate students to author the report “Crony Capitalism, Corruption and the Economy in the State of New Mexico.”
Rocca concludes that the perception in New Mexico that moneyed interests gain more advantage through lobbying and tax subsidies is a subtle but negative factor as businesses decide where to expand or relocate. “No question that education and infrastructure and things like broadband matter, but corruption and cronyism matter as well,” he said.
To curb cronyism in New Mexico, the report suggests three changes that are already under consideration — a statewide ethics commission; greater transparency in campaign financing and lobbying; and a more detailed review of tax breaks given to businesses. Rocca said the measures are fairly simple to enact and not as controversial as bigger changes that might meet more resistance, such as term limits for elected officials.
“These are simple and straightforward [measures] that would put us on the path right now,” Rocca said.
His project was undertaken in collaboration with the Committee for Economic Development, a business-led policy group now celebrating its 75th anniversary, and the Thornburg Foundation in Santa Fe, which is backing open government initiatives.
Michael Petro, the executive vice president of the Committee for Economic Development, said the effort in New Mexico is in conjunction with national efforts to bring more attention to policies that restore faith in democracy and capitalism. With the rise of the libertarian tea party movement, government distrust is high. It is also echoed with the GOP presidential candidacy of Donald Trump, Petro said.
“We’re concerned there has been some things that have occurred over these last few years that people’s trust in capitalism has been diminished. If you listen to this presidential campaign, you’re hearing a chorus of negativity, and a lot of that is being directed toward capitalism.”
Rocca said New Mexico has an unusual history that makes the state “the perfect storm” for cronyism.
For one, it is one of 16 states with a citizen Legislature, where lawmakers are more dependent on outside experts and staffers. New Mexico also is the only state that does not pay its lawmakers beyond a daily stipend for expenses.
“Because professional legislators generate more and better information on their own, there is far less demand for interest group expertise,” according to the study. “Because citizen legislatures lack the resources necessary to acquire political and policy information on their own, lobbying activity is higher.”
The other factor driving cronyism in New Mexico is the large amount of federal and state money as a percent of economic activity.
The largest and most robust employers in the state are all government or government-supported institutions, such as The University of New Mexico, Albuquerque Public Schools, and the Los Alamos and Sandia national research labs. Even private-sector businesses like hospitals receive a large dose of public money, as one-third of all New Mexico residents receive Medicaid.
“New Mexico state government is big, active and a vital participant in the state economy,” reads the report. “This opens the door to crony capitalistic behavior because firms have an incentive to enter the political process to gain government and bureaucratic favors. … Economic actors are drawn to interest-group politics, where groups are rewarded for political connections rather than economic productivity or merit.”
Some recent examples in New Mexico cited in the report include tax breaks given to the Union Pacific Railroad, Spaceport America and Eclipse Aviation, and the film industry.
Rocca said there is a body of literature on public corruption that looks at the number of legal corruption cases in a state — but those data are flawed and inconsistent. On that measure, New Mexico is about average.
But an academic survey based on what people think about the state ranked New Mexico as the fifth most corrupt.
“Perception matters when it comes to economic matters,” Rocca said. “If that trust is broken, then economic transactions simply do not take place.”
He said right now, New Mexico has a divided government, with a Republican governor, a Republican House of Representatives and a Democratic Senate. This often is the best time when reforms can move forward, he said.
The report says New Mexico is one of only eight states without an ethics commission — one of the recommended reforms.
“We believe establishing a commission would have a positive effect on confidence in the New Mexico political system,” the authors state.
With regards to transparency, the political scientists state that a disclosure law should require lobbyists to disclose the bills and issues on which they advocate and provide access to all possible information about campaign spending and lobbying on the Internet.
The report’s final recommendation calls for a more detailed study of tax legislation, not just a list of breaks and expenditures but an analysis of whether the measures are working as expected. Other states such as Alaska, Florida, Indiana, Louisiana and Maryland have such a requirement.
“New Mexico issued 860 subsidies between 2011 and 2013 for a total of $262.6 million. These programs need to be studied often enough to provide policymakers with up-to-date information,” the report states.
Rocca said the perception is that corporations are being given the breaks “based on personal relations. It would do a lot of good if we were able to evaluate these tax benefits.”
In addition to Rocca, students helping with the report were Sharif Amlani, an undergraduate, Julia Hellwege and Lisa Sanchez, both graduate Ph.D candidates.
Contact Bruce Krasnow at 986-3034 or [email protected].