TOO MANY PUBLIC SECTOR EMPLOYEES STIFLING NEW MEXICO ECONOMY

A consulting firm hired by Lt. Gov. Diane Denish advised her that New Mexico’s high ratio of public sector employees to the general population hurt economic growth and needed to be reversed to “modernize” state government.  Denish purchased the report with federal stimulus funds.  Denish did not release the report to the public.  It has come to light only through the ongoing investigation by New Mexico Watchdog into Denish’s use of federal stimulus funds.

The advice given Denish matches recommendations of The Rio Grande Foundation, which sponsors this site.  “Diane Denish’s consultants,” says Paul Gessing, president of The Rio Grande Foundation, “have done a rare,economically-productive task with federal stimulus money, that is, criticizing New Mexico’s bloated government work force. This is something we’ve been telling New Mexico’s political class for years.  Unfortunately, Denish’s office did not release this report publicly and she’s never acted on their advice.  Apparently she didn’t want to upset her public sector supporters.”

Modernizing State Government Means Fewer Public Employees

In 2007, Denish asked Public Works, LLC,  of Blue Bell, PA, according to the report the group produced,  “to help her develop a long-term vision for her office and recommendations about how to use her public policy platform and outreach and communications activities to support that vision.”  Records provided to New Mexico Watchdog show Denish paid Public Works $24,500 for its advice.  The payments were made from federal stimulus funds given to New Mexico to help small businesses and meet unfunded federal mandates.

Related story: Denish Used Federal Stimulus Funds to Fly in State Jet, Pay Out-of-State Consultant

“To enable its 21st century economy,” the consultant reported, “New Mexico must modernize state government.  At present New Mexico has more state and local employees per 100 residents than any states except Alaska, Washington, D.C., and Wyoming.  An over-reliance on state government employment affects New Mexico’s gross state product and limits the number of adults available for other employment.”  (Washington, D.C. is not a state, of course).

This conclusion matches a report released by the Rio Grande Foundation in December 2009:

The Government “Gravy Train”:  An Analysis of Public Versus Private Sector Employment and Compensation

The consultant advised that “with the impending retirement of New Mexico’s baby boomers in the next decade, the state is in a good position to make meaningful changes in the makeup and size of its government workforce.”

“A Practical Way to Plan for Mass Retirements in the State Workforce.”

Denish’s consultant made a specific proposal:

A first step the Governor and the Lieutenant Governor may want to consider in addressing this issue is to found the STEP Up (State Employee Professionalism and Upward Progress) program.  STEP UP would provide mentoring and job retraining for government employees seeking new positions and financial opportunities.  This system would help the state replace retiring experienced managers with skilled professionals, but also provide promotion opportunities for younger workers in the system.

Public Works described STEP Up as “a practical way to plan for mass retirements in the state workforce.”

We asked Denish’s chief of staff and spokesperson, Joshua Rosen, whether Denish concurred with the advice of Public Works that the state’s large public employee payroll was hurting New Mexico’s economy and needed to be reduced.  We received no response to our question.  But it seems that Denish once expressed support for this advice from her consultant.

The June 2007 Public Works report states:  “When Public Works discussed this proposal with the Lieutenant Governor in the fall of 2006, she indicated that she was interested in pursuing it in the future.  We are proposing this initiative for 2009-2010.”

We have found no record, however, of Denish acting on her consultant’s advice.

Governor Richardson’s Committee on Government Efficiency Gave Same Advice

In an effort to address New Mexico’s budget crisis, Governor Bill Richardson in December 2009 appointed a Committee on Government Efficiency. This committee was composed of past and present state cabinet members, and chaired by former Governor Garrey Carruthers. It was staffed by representatives from the Arrowhead Center at the New Mexico State University, state employees and a member of the Governor’s own staff.

The committees full report is available here, courtesy of Capitol Report, another project of The Rio Grande Foundation.

Analysis conducted by NMSU’s Arrowhead Center reached conclusions matching those of Public Works.  It found that New Mexico had a “substantially higher” number of public employees per population than any surrounding states, and a “much higher” ratio than the United States average.

To improve New Mexico government efficiency, the committee made recommendations focused on eliminating state payroll positions.  Their report concluded in words echoing those of Denish’s consultant:

This report, however, is just the beginning of what should be a more careful and analytical evaluation of “right sizing” New Mexico’s government to be affordable yet meet the needs of the citizens.  Governments tend to expand in both cost and programs in the “good times” and rarely reengineer the enterprise until financial exigencies require.  New Mexico is there!  The Committee recommends that the Governor’s Office and the Legislature cooperatively examine, over the next six months, with proper analysis, and professional advice the prospect of reengineering State Government to meet modern times and conditions.  It would seem imperative to better align our state employee per thousand population to the levels of peer states.

No such collaborative examination is in process.  Richardson on March 23, 2010, used his line-item veto to strike from the budget approved by the Legislature a provision requiring him to cut 1,900 vacant positions from state government.