Overspending Puts New Mexico in a Commuter Rail-Induced Budget Crisis

Editor’s note: The following article appeared in the January, 2007 edition of Budget & Tax News which is published by the Heartland Institute www.heartland.org. The publication is distributed to state legislators and policymakers in all 50 states.

When New Mexico legislators return to Santa Fe in early 2008 they will face a transportation crisis, the possibility of tax hikes, and the suspension of certain road construction projects pending adequate funding.

Tax hikes are nothing new in the state, but the current crisis is occurring less than one year after state General Fund spending increased 11 percent.

Fiscal conservatives have warned of a coming budget crisis for some time. Since Gov. Bill Richardson (D) took over from fiscal hawk Gary Johnson (R) in 2003, just as oil and gas prices were on the rise, General Fund spending has increased $1.5 billion, or 37 percent. While cutting taxes, Richardson has used volatile oil and gas revenue to expand state government.

Because oil and gas revenues constitute a greater part of the overall budget in New Mexico than in any state but Alaska and Wyoming, conservatives believed budget problems would be postponed until oil and gas prices dropped. They were wrong.
Train Derails Budget

One big problem, according to budget watchers, is the more than $400 million the state has spent on the Rail Runner commuter train. Richardson made this 100-mile train line from Santa Fe to the southern suburbs of Albuquerque one of his top projects.

Upon signing the contract with Burlington Northern Railroad to begin the project, Richardson said, “We have made considerable progress toward turning the dream of commuter rail into reality.” He added, “Getting people out of their vehicles and onto commuter rail makes sense. It’s also about safety, and putting more money back in the pockets of our citizens.”

State Sen. Kent Cravens (R-Albuquerque), an opponent of the Rail Runner and critic of Richardson’s spending, takes an opposing view.

“The Rail Runner will prove to be the biggest budget-buster New Mexicans have ever faced, mostly done by Bill Richardson without much true representation by legislators on behalf of their constituents,” Cravens said in an interview for this article.

The cost of building the railroad and rising prices for many of the materials used in road construction have caused the state to fall $500 million short of the amount needed for previously approved highway and transportation projects.
Additional Spending Hikes

The cost of the commuter train line, the currently finished portion of which runs 50 miles from the northern suburbs to the southern suburbs of Albuquerque, will soon rise. Currently, the system costs $10 million a year to operate, with $8 million of that coming from the federal government. The latter subsidy will end in 2009.

So just as the second half of the system is built to Santa Fe, operating costs will rise to $20 million a year and the entire cost will be borne by New Mexico taxpayers.

House Minority Leader Tom Taylor (R-Farmington) wrote in the Albuquerque Journal, “We’re now stuck with a $400 million train, growing expenses piling up on other road projects around the state, and no end in sight to the expanding mess that our roads face today. I imagine we can afford to go on as we have been for a couple of years before we hit the proverbial financial wall that will affect virtually every budget in state government, including education and health care.”

Hikes in the gross receipts tax (New Mexico’s sales tax) and gas tax are already on the table in the effort to bridge the transportation budget gap.
Governor Departs

Richardson’s transportation department has clung to the Rail Runner as an integral component of the state’s transportation system. In response to critics, S.U. Mahesh, a spokesman for the department, told the Albuquerque Journal, “These individuals (Rail Runner critics) are out of touch with reality. It’s time for these legislators to move away from the horse-and-buggy mentality and embrace the ideals of moving New Mexico forward.”

Cravens responded with harsh words of his own for Richardson.

“It’s easy to pay bills on a credit card when you’re not going to be around when the bill comes in,” Cravens said. “Lame duck Governor Bill Richardson has mortgaged the future of New Mexico and is off to satisfy some other personal whim. The idea that he is prepared to be President of the United States is laughable.”