“Public services are never performed better than when their reward comes only in consequence of their being performed, and is proportional to the diligence in performing them.”
Adam Smith
The public sector in New Mexico is broken. As a percentage of income our combined state and local taxes are highest in the region (Texas, Oklahoma, Colorado, Arizona and Utah), ranging from 35 percent higher than Colorado to 20 percent higher than Utah. Yet we get far less in government services than do those states. For example, our spending per pupil is highest in the region, and our test scores for proficiency in reading and math (as measured by the National Assessment of Education Progress) are lowest. As a consequence of high taxes and low public sector productivity, ordinary New Mexicans are much poorer than citizens in surrounding states (of the states mentioned above per capita income ranges from 32 percent higher than ours in Colorado to 2 percent higher than ours in Utah). Our bloated public sector stifles private economic activity, and it is the private sector that must eventually generate prosperity in this state.
While the blame for our dismal economic performance relative to other states can be attributed to bad public policy (e.g. higher taxes, regulation, litigation and less public sector output than other states), the fundamental problem in New Mexico is a political process that generates bad policy. It is difficult for the voter to understand or act on the cronyism that leads to our bad policies. As a result there is practically no connection between public sector compensation and public sector output. The main problem is that entrenched legislators control the policy agenda. They use their agenda power to broker wealth transfers from the general public to special interests.
One of the most powerful of those special interests is public employee unions. In the past they have had a cozy relationship with our entrenched legislators, and that relationship deters potential reform of our broken public sector. They are the ones (along with the entrenched legislators and lobbyists) who benefit directly from government spending. Since they have a stake in seeing that government revenue and spending grow (at the expense of the rest of us), they have tended to campaign strongly against fiscal reform. One stark example has been teachers’ unions’ absolute opposition to school choice. At the same time they insist on restricting entry only to those who have “education” qualifications based on their failed establishment. If they are so confident about their schools and their methods, why are they so afraid of school choice?
There is some bad news: the right for public employees in New Mexico to bargain as a unit with their employers is about to reappear in proposed legislation. Governor Johnson should veto this legislation, just as he allowed the existing law to expire two years ago. A veto will mean one of the main hurdles to process reform will stay lowered. As is evident from the past two years this interest group will not disappear along with their right to bargain, but much of their state-sponsored credibility and power will be diminished. The costs of achieving fundamental reforms will be decreased. Governor Johnson should take advantage of these decreased costs to initiate reform of the political process in New Mexico.
Incredibly, economist Lawrence Waldman of UNM’s Bureau of Business and Economic Research argued recently for reinstating the right of public sector employees to bargain as a unit. He asserted that “we all” will be “worse off” without the law. Are we making footprints on the same enchanted land? Given existing incentives, I would predict just the opposite. And not surprisingly, he ducked the issue of productivity gains in the public sector. There is a reason for that: Arguing that public employees’ collective bargaining has led to productivity gains in New Mexico would be like arguing that water flows uphill.
Mr. Waldman went on to argue that collective bargaining is “fair” because it will lead to higher wages for public sector employees such as himself. At whose expense? You guessed it, private sector businesses and employees who pay taxes that are too high and who receive government services less productive than in neighboring states. Even Mr. Waldman points out that in New Mexico “the average wage… is continually falling further behind” the national average. If we want to see New Mexico’s wages gain on the national average, the public sector must become more efficient and so enable the private sector to grow the economy. That means lower taxes and greater public sector output. It means curtailing the power of special interest groups such as public employee unions.
That is not to say that reemergence of collective bargaining should not be a part of reforming the process. But, it seems to me, collective bargaining agreements must tie compensation of public employees to meaningful measures of public sector output. If you don’t produce, you don’t get paid. We need public servants who are responsive to the voter/taxpayer who pays their salary. Maybe then our political process will generate more output and lower taxes.
Other potential process reforms are term limits, super-majority votes to raise taxes, and constitutional limits on spending to name just a few. Obviously, there are high hurdles to overcome; our entrenched legislators (who have a vested interest in the status quo) will fight process reform tooth and nail. But we must try. The demise of public employee unions may be the opportune time to begin reform of our big-government biased political process. So far that process has not worked; we are one of the poorest states in the union.