• Alan Hall

A Barbaric Approach to Capital Outlay Reform

The New Mexico capital outlay system is unique among the 50 states. It may be imagined as a haughty medieval lord riding his horse through a crowd of peasants, tossing a few coins towards the loudest voices. Whether the coins fall into the most deserving palms, and whether the coins are adequate for the recipients’ needs, are of little concern. The attached article presents only one possible alternative, but the truth is that almost any reform would be an improvement.

All observers of New Mexico’s capital outlay process agree that it is deplorable. The pattern varies somewhat from year to year, but typically one third of the pot, more or less, goes to the Governor, one third goes to the House, and one third goes to the Senate. The House and Senate shares are divided equally between the members of each branch. The procedure is not materially different from, or substantially more sophisticated than, the division of booty by an Elizabethan privateer: one share to the crown, one share to the captain, and one share to the crew.

Once the individual allocations have been decided, each legislator-recipient has almost total control of how the money is to be spent. There are, nevertheless, two significant restraints. First, the amount of money is limited. Each legislator’s share is frequently less than the amount needed to totally fund even modest projects. Second, it’s a use it or lose it system. Capital outlay monies that are not spent in the fiscal year for which they are appropriated are subject to reappropriation in subsequent years.

Sophisticated critics of the process frequently contrast it with the procedures used in states such as Iowa. There, state-funded capital improvements are actually planned. A state agency prioritizes various proposed projects, investigates how much money each will realistically require, and prepares a yearly capital budget, which the legislature frequently adopts without substantial changes. Implementing such a system in New Mexico would mean going from a political culture in which self-interest is paramount to one in which the individual ego is subsumed to the interest of the whole.

The biggest problem with the New Mexico capital outlay process, however, is not that it caters to self-interest. The biggest problem is that it is uncivilized.

The savage is a savage because he cannot or will not make provision for the future. In contrast, saving resources for contingencies allows one to think ahead, and to consider doing things differently. Saving is a fundamental requirement for human progress.

The capital outlay system, by forcing the expenditure of relatively small amounts every year, not only severely limits the economic purposes to which such moneys may be put; it also cramps the very decision-making that determines such purposes. Clearly, some mechanism is needed that allows the capital outlay funds allocated to an individual legislator to be accumulated from year to year. Something like a bank.

If a legislator knew that he could save part of his appropriation for purposes to be determined later, then, no longer under the press of time to decide what to do with leftover funds, he wouldn’t surprise his constituents with little gifts that they didn’t ask for and, in many cases, didn’t particularly want. Instead, the surplus would be saved. If the legislator could save all of his appropriation for future years, then the opportunities for planning would expand enormously. Instead of competing for amounts that are frequently barely sufficient to get a project started, much less completed, constituents could negotiate an orderly queue. When an amount adequate to completely fund Project A was accumulated, the project would be funded. Then, when an amount adequate to completely fund Project B was available, it would be funded in turn.

To encourage cooperation between legislators, a capital outlay bank should permit, and enforce the repayment of, loans from one legislator to another. Thus, Legislator X, whose project is not ready for funding, could loan some or all of her current appropriation to Legislator Y, confident that the loan would be repaid in a designated future year.

To ensure the soundness of the bank, draws on saved amounts would receive priority over current appropriations. Thus, even if the total amount of capital outlay in a given year was less, and even much less, than the amount in previous years, the bank could still honor its deposits. The amount in each deposit account would accrue, of course, not to the individual legislator, but rather to the district that he represents. The defeat or retirement of a legislator would in no way endanger the funds credited to his district.

The tendency to spend is strong, and it is likely that at first legislators would tend to save only minor amounts. But as time went on, and the advantages of saving became more apparent to both the legislators and their constituents, the use of the bank would increase. The bank would also gradually reduce excessive anxiety about success or failure in obtaining a particular amount of funds in any given year, and this calming effect, hopefully, would encourage more logical divisions of capital outlay funds generally.

Just as the current capital outlay system has no statutory or other authorization, and instead relies upon what is essentially a gentlemen’s agreement, the bank’s soundness would be based on the honor of the legislative leadership. Leaders who wished to maintain their positions would lose no opportunity to affirm their readiness to uphold the integrity of the bank. Nevertheless, the bank could be dissolved at any time, but only after all deposits had been disbursed.

Some may object that the capital outlay bank would merely facilitate the excessively individualistic nature of the current system, whereas the appropriate goal should be the fully civilized system of Iowa. But the bank, by promoting planning and cooperation, could be an intermediate step, moving New Mexico, if not directly to civilization, then at least from savagery to the level of barbarism.

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© 2020 | Paid for by Hall for Senate District 10.