Jason Gibbs

Las Cruces Sun-News

LAS CRUCES – New Mexico’s dependence on federal funding can be seen in every corner of the state.

The state is home to four military bases — Holloman, Cannon and Kirtland Air Force Bases and the Army’s White Sands Missile Range. We host two national laboratories — Sandia and Los Alamos. Add in our research universities and you can see why the state’s economy hinges on federal purse strings.

Traditionally, New Mexico has been the single most dependent on federal spending among all U.S. states. But a recent study by WalletHub has knocked the state off the top of the list into third place when it comes to reliance on federal dollars.

The study, which compared all 50 states measured both residents' and the state government's dependency on money from Washington, D.C., ranked New Mexico third, below Kentucky and Mississippi. The least federally-dependent state was Deleware.

Another WalletHub study shows New Mexico taxpayers are 26th in the nation when it comes to paying our share to Uncle Sam. So paying less to the federal government than half the U.S. states while receiving more than the rest of the nation in federal spending means one thing.

“Federal expenditures are very, very important to this state,” said NMSU economy professor Jim Peach. “We’ve got national labs, research universities, military bases and those are huge things.”

Out of the roughly 825,000 people employed in the state, some 200,000 or so are government employees, Peach said. But almost all of that employment is state government employees.

Roughly 30,000 of those workers are listed as federal employees, Peach said. But that does not necessarily reflect a true picture. Contract workers and private sector employees at the laboratories, bases and universities are not counted among the 30,000.

And, beyond direct employees, you have to include federal programs such as Medicare, Medicaid and other programs for the support for an aging population and for the poor in the state ranked worst in the nation for people living below the poverty level, roughly 20 percent of the state’s population in 2015.

In all, Peach estimates the state receives between $4.50 and $5 for every dollar paid in federal taxes.

“We should not complain about that,” Peach said. “I don’t know of any other expenditure we make where we could get so much back. But we sit here in New Mexico and say ‘Let’s cut federal government. Let’s cut an important industry in the state.’”

So should poor states like New Mexico benefit from more prosperous states like New York, which comes in at 34th most federally dependent on the WalletHub list? Yes, says Kevin Bronner, a public service professor at University of Albany – State University of New York.

Since the 1970’s studies have shown that the State of New York receives about 80 cents on the dollar from money that it sends to Washington, D.C. Bronner notes that voters in New York State regularly support big government programs at the polls and it is only fitting that state should subsidize those programs in poorer states. Another example Bronner notes is that of Connecticut and Mississippi.

“Rich states should subsidize poor states,” Bronner said. “For instance, the State of Connecticut is a rich state in terms of per capita income while the State of Mississippi is a poor state. Also, the majority of voter in Connecticut support large government programs. It is appropriate for states like Connecticut to subsidize a state like Mississippi that scores low on wealth indices.”

With New Mexico having spent the last two years cutting the size of government due to lean budgets, and with potential reductions in federal funding under cutbacks proposed by the Trump administration, it remains to be seen how the state will fare.

“I don’t know what will come out of the federal budget this year, but there will be substantial cuts,” NMSU’s Peach said. “They’ve proposed large cuts to the Department of Energy, Sandia and Los Alamos, and the universities for research money. They are proposing cutting all kinds of stuff. From support to the Corporation for Public Broadcasting to the National Endowment for the Arts, all of these cuts are going to hurt New Mexico.”

The state could see some benefit from increases in military spending, but placing faith on large construction projects due to the proposed wall along the U.S./Mexico border are risky at best. Even if a proposal passes Congress, construction is “one time stuff,” Peach said. And other proposals to place a tarrif on imported goods or to alter existing international trade agreements stand to harm the already lackluster economic growth in the state.

“If they have a massive infrastructure bill that lasts for several years, that might be positive for this state,” Peach said. “If they do the border adjustment tax or renegotiate NAFTA you can just kiss off the growth in Santa Teresa, which is the biggest thing going in southern New Mexico right now.”

Jason Gibbs may be reached at 575-541-5451, jgibbs@lcsun-news.com or @fjgwriter on Twitter.