New Mexico’s budget surplus offers opportunity to jumpstart economic development

Comment: The past decade has been difficult for New Mexico. While our neighboring states have been successful in attracting new industries paying higher wages, New Mexico has stagnated. But now New Mexico is enjoying a record surplus, thanks to the boom in the energy patch. Add to that the recently passed $ 1.2 trillion federal bipartisan infrastructure bill, with funding for roads, bridges and, especially important to us, high-speed internet.

All of this can be a game-changer for New Mexico if our political leaders can take advantage of this once-in-a-generation opportunity. But while we have had an opportunity offered by oil and gas, there are obstacles. The Department of Economic Development recently commissioned a study from the Center for Innovation Strategy & Policy to develop a strategy for moving forward.

As tax revenues flow, there also remain considerable obstacles. Some of the issues identified are familiar: New Mexico is too dependent on oil and gas production for state revenue and must diversify into other industries. Other obstacles are less obvious; for example, our state is home to two national laboratories and a branch of the Air Force Research Lab. The latter’s research prowess is legendary. And they bring significant federal resources to New Mexico and help attract highly skilled knowledge and technology workers.

But all is not milk and honey. The labs have considerable resources, and they use those resources to complement New Mexico’s private sector for employees. In particular, companies in the technology and information sector find it difficult to attract laboratory workers.

The labs’ ability to attract talent has crowded out private sector innovation in New Mexico. Rather than a private sector engaging in the creation, production and distribution of new products, companies rely on laboratories to innovate. Nationally, about 10% of R&D spending is funded by the federal government; in New Mexico, 40% is federal.

The lack of business innovation has crippled New Mexico’s private sector. A managerial talent who understands market dynamics and is able to adapt to a changing environment is essential to the development of an entrepreneurial ecosystem. We didn’t develop that in New Mexico.

So how do you solve this problem? When you talk to business people, they identify two issues that are holding back entrepreneurship in New Mexico. The first is the lack of basic business and financial knowledge among small businesses and start-ups. The Center for Innovation Strategy & Policy report recommends micro-grants to improve websites, expansion of business incubators, accelerators, and support for nonprofits specializing in business education that can provide training for entrepreneurs. Many thanks to my colleagues at the Arrowhead Center.

The second obstacle to entrepreneurship is the lack of access to financial capital. The report recommends using New Mexico’s two multi-billion dollar permanent funds, which together are among the largest funds of their kind in the world, to fund New Mexico startups and provide matching funds. up to 49% for investments in targeted industries. .

Another suggestion in the report is that universities in New Mexico provide university researchers with the funds to take technologies from the lab to the factory.

The hope is that the legislature, in a year when there is a lot of funds, will take advantage of the opportunity to invest in economic development.

Christopher A. Erickson is Professor of Economics at NMSU. He currently holds the Garrey E. and Catherine T. Carruthers Chair in Economic Development. The views expressed herein may not be shared by the regents and administration of NMSU.