REPORT FROM SANTA FE IS MADE POSSIBLE, IN PART, BY GRANTS FROM THE NEW MEXICO MUNICIPAL LEAGUE, A BETTER NEW MEXICO THROUGH BETTER CITIES AND FROM >>LORENE: HELLO AND WELCOME TO REPORT FROM SANTA FE .

I'M LORENE MILLS AND WE HAVE THE PRIVILEGE OF HAVING A VERY SPECIAL GUEST TODAY, SENATOR, FORMER SENATOR JOHN ARTHUR SMITH, DEMOCRAT FROM DISTRICT 35, REPRESENTING FOUR COUNTIES, LIVES IN DEMING.

FOR 32 YEARS, YOU WERE FIRST ELECTED TO THE SENATE IN 1989, I KNOW THERE'S A LIFE AFTER POLITICS, BUT YOU WERE MASTER OF OUR FINANCES AND AS HEAD OF SENATE FINANCE FOR SO MANY YEARS, YOU REALLY HAD YOUR FINGER ON THE PULSE OF THE FINANCES OF THE STATE AND THE TIDE WOULD COME IN AND THE TIDE WOULD GO OUT AND YOU MANAGED TO KEEP US ON AN EVEN KEEL.

I REALLY WANT TO THANK YOU FOR ALL YOUR YEARS OF WORK.

>>JOHN: THANK YOU, THANK YOU.

>>LORENE: WE ARE IN A VERY DIFFERENT SITUATION NOW AND I REALLY WANTED YOUR OPINION ON IT, FOR EXAMPLE, FROM 2008 TO 2018, NEW MEXICO DIDN'T HAVE ANY MONEY AND YOU AS HEAD OF SENATE FINANCE GOT THE UNUSUAL NICKNAME OF DR. NO, BECAUSE HOUSE APPROPRIATIONS WOULD SAY, OH, WE'LL DO THIS, WE'LL APPROPRIATE ALL THIS MONEY, THEN IT WOULD GET INTO SENATE FINANCE AND THEY KIND OF COUNTED ON YOU FOR THIS, AND YOU WOULD SAY, FOLKS, WE DON'T HAVE THE MONEY TO DO THIS, WE'RE NOT GOING TO DO IT.

I'M A PRUDENT MAN, THE PRUDENT MAN LAW AND SO I'M VERY GRATEFUL FOR YOUR YEARS OF DOING THAT.

BUT NOW THINGS ARE VERY DIFFERENT, NOW WE HAVE, WE MIGHT HAVE THREE AND A HALF BILLION DOLLARS IN NEW MONEY.

SO WOULD THIS MAKE YOU CHANGE YOUR MONIKER FROM DR. NO TO DR.

YES, WHAT IS YOUR ADVICE, THAT WE STILL MAINTAIN THE PRUDENT MAN RULES AND THAT WE USE THIS SURPLUS WISELY.

>>JOHN: WELL, LORENE, EACH FINANCIAL SITUATION IN THE STATE OF NEW MEXICO REQUIRES SOME EXTREMELY TOUGH DECISIONS THAT ARE NOT PARTICULARLY POPULAR WITH THE MAJORITY OF THE PEOPLE AND CERTAINLY THE MAJORITY OF THE LEGISLATIVE BODY.

IN 2008, ALONG WITH MAYBE ONE OR TWO OTHER MEMBERS, I WAS RAISING THE FLAG THAT OUR REVENUE FORECASTS WERE EVAPORATING OR CHANGING DRASTICALLY.

AND THE REQUIREMENT IS THAT WE HAVE A BALANCED BUDGET AND PEOPLE IN THE LEGISLATURE WERE STILL COMING IN WITH BRAND NEW INITIATIVES, WHICH REQUIRE MORE SPENDING.

BUT A BALANCED BUDGET, QUITE FRANKLY, GETS LOST IN THE FOG OF WHAT'S HAPPENING AT THE FEDERAL LEVEL.

PEOPLE OUT THERE JUST THINK THAT THERE'S MORE MONEY.

WHEN YOU HAVE A BALANCED BUDGET, IT'S A ZERO SUM GAME, SO IF YOU SPEND A MILLION OVER HERE, YOU'VE GOT TO SUBTRACT A MILLION SOMEWHERE ELSE, ON THAT.

AND CONSTITUTIONALLY WE HAVE TO HAVE THAT BALANCED BUDGET AND A LOT OF THE PUBLIC DOESN'T FULLY UNDERSTAND THAT.

IN THIS DAY AND AGE NOW WITH THE WINDFALLS FROM OIL AND GAS, IT'S A DIFFERENT REQUIREMENT OF THE FINANCE COMMITTEES AND HOUSE APPROPRIATION AND SENATE FINANCE, WHEN ALL YOUR MEMBERS KNOW ABOUT THE THREE AND A HALF BILLION DOLLAR WINDFALL, THEY BECOME MUCH MORE AGGRESSIVE IN THEIR REQUEST FROM THAT.

AND WHAT IS NOT RECOGNIZED BY MOST OF THE PUBLIC, WHEN I SEE SOME OF THE REMARKS THAT HAVE BEEN MADE IN THE PAPER THAT WE NEED TO GIVE MORE SALARY INCREASES TO LAW ENFORCEMENT, MORE SALARY INCREASES TO TEACHERS, IT'S NOT THAT YOU'RE AGAINST THAT, BUT IF YOU'D USED ALL THAT THREE AND A HALF BILLION DOLLARS OF ADDITIONAL MONEY IN RECURRING AND IT DOESN'T HAPPEN NEXT YEAR, YOU'RE NOT GOING TO BE ABLE TO SUSTAIN THAT EFFORT.

SO THE COMMITTEES NOW ARE GOING TO HAVE TO BE EXTREMELY CAREFUL WITH UNREAL PRESSURE BEING PUT ON THEM NOT TO BE SO CAREFUL ON THAT, THAT WHAT REALLY PUT NEW MEXICO BETWEEN BEHIND ANOTHER ROCK AND A HARD SPOT, SO TO SPEAK ON THAT.

I WAS EXTREMELY FORTUNATE AS CHAIR OF SENATE FINANCE TO HAVE MEMBERS THAT WERE VERY, VERY SUPPORTIVE OF ME, BUT YOU CAN GO BACK IN TIME AND I GUESS ONE OF THE BIG RAPS WAS THAT I HAD SEVERAL HUNDRED BILLS THAT WERE IN SENATE FINANCE THAT I JUST FLAT WOULD NOT HEAR BECAUSE THEY WERE ALL SPENDING INITIATIVES AND I WOULD TURN TO MY MEMBERS THERE, DO YOU WANT TO HEAR THOSE AND TAKE A VOTE ON THOSE, ON WHY WE CAN'T MOVE THOSE INITIATIVES FORWARD.

SO EACH AND EVERY ONE OF THOSE ELECTED OFFICIALS WILL BE FACED WITH THAT VOTING RECORD AT THE NEXT ELECTION WHEN IT WAS IMPOSSIBLE FOR THEM TO ACCOMMODATE THE WISHES OF PEOPLE THAT DON'T UNDERSTAND PUBLIC FINANCE.

>>LORENE: SO THE OLD SAW, I THINK I HEARD THIS FIRST FROM JOHN MERSHON, THAT IT'S MUCH HARDER TO GOVERN WHEN THERE'S TOO MUCH MONEY THAN WHEN THERE'S TOO LITTLE.

WHAT ARE YOUR THOUGHTS ON THAT?

>>JOHN: WELL, I THINK THERE'S A LOT OF WISDOM IN THAT REMARK.

WHEN THERE'S TOO MUCH MONEY, I'M NOT WORRIED ABOUT PEOPLE UP THERE TRYING TO HELP THEM HOW TO SPEND MONEY, THEY'RE GOING TO BE OVERWHELMED BY ALL THOSE GOOD CITIZENS THAT WANT THEM TO SPEND MORE MONEY FROM THAT.

SO WHEN THERE'S LOTS OF MONEY THE PRESSURE TO SPEND ADDITIONAL DOLLARS IS CERTAINLY GOING TO BE VERY, VERY HIGH.

AND SO I'M INCLINED TO BELIEVE THAT MERSHON WAS PROBABLY RIGHT, IT'S MORE DIFFICULT WHEN THERE'S LOTS OF MONEY.

>>LORENE: YOU CHAIRED THE SENATE FINANCE COMMITTEE SO LONG AND SO WELL AND WHEN YOU LEFT AS PART OF YOUR FAREWELL ANNOUNCEMENT YOU JUST TALKED ABOUT THAT NEW MEXICO WAS IN REALLY GOOD SHAPE, THAT WE HAD REALLY STRONG RESERVES, BUT WHAT WE REALLY NEEDED WAS TO DIVERSIFY OUR SOURCES OF INCOME BECAUSE 40%, 40 CENTS ON THE DOLLAR OF OUR STATE'S INCOME CAME FROM OIL AND GAS.

HAS THERE BEEN ANY MOVEMENT IN THAT DIRECTION, ENOUGH TO MAKE A SIGNIFICANT DIFFERENCE.

>>JOHN: YOU KNOW, UP THERE INITIALLY WHEN I WAS FIRST ELECTED, I ALWAYS HELD OUT HOPE THAT WE WOULD BE PROACTIVE, WHEN IN FACT OF THE MATTER, LEGISLATIVE BODIES AND EXECUTIVE BRANCHES ARE REACTIVE.

THIS 40% FIGURE REALLY CAME HOME TO ME WHEN I WAS AT A FINANCE MEETING IN UTAH AND THERE WAS AN ECONOMIST THERE FROM THE UNIVERSITY OF UTAH WHO MADE THE REMARK THAT NOT ONE SINGLE REVENUE STREAM FOR THE STATE OF UTAH EXCEEDED 7% TO THE GENERAL FUND.

AND SO THEY WERE ABLE TO NAVIGATE THEIR BUDGET TO AVOID THE HILLS AND VALLEYS THAT NEW MEXICO HAS.

NEW MEXICO, WHEN YOU HAVE A 40% RELIANCE, YOU EITHER HAVE A HONEYMOON OR YOU HAVE A DIVORCE, ON THAT.

AND SO I WAS FLAGGING YEARS AGO AND I'M READING IN THE NEWSPAPER WHERE NEWER MEMBERS THAT DON'T HAVE THE EXPERIENCE ARE TALKING, THAT HEY, WE NEED TO DIVERSIFY OUR RESOURCES, ON THAT, AS IF THAT'S A NEW THOUGHT.

BUT WE WERE NEVER REALLY SUCCESSFUL IN BEING ABLE TO ACCOMMODATE THAT BECAUSE ONCE AGAIN, THE LEGISLATIVE BODY WAS REACTIVE RATHER THAN PROACTIVE.

BUT IT AFFORDS THE LATITUDE OF DOING WHAT I BELIEVE IS RESPONSIBLE POLICY WHEN YOU DO HAVE A LOT OF DOLLARS AND I ENCOURAGE THE LEGISLATURE AND THE GOVERNOR TO MOVE IN THAT DIRECTION.

UNFORTUNATELY, THE DIVISION DOWN THE ROAD FROM MOST LEGISLATIVE MEMBERS IS EITHER TWO YEARS OR FOUR YEARS AND IT'S EITHER FOUR YEARS OR EIGHT YEARS WITH THE EXECUTIVE BRANCH AND WE NEED SOMEBODY WITH LONG-TERM VISION TO MOVE US OFF TOTAL AND COMPLETE RELIANCE AT 40% ON OIL AND GAS FROM THAT STANDPOINT.

BUT THAT IS GOING TO HAVE TO BE A LONG RANGE GOAL AND THEY'RE GOING TO HAVE TO MOVE IN A RESPONSIBLE FASHION TO ACHIEVE THAT WITH A DEADLINE THAT EXCEEDS TWO AND FOUR YEARS, ON THAT.

EVERYBODY'S GOT TO BUY IN ON THAT AND UNFORTUNATELY, WHEN THERE'S LOTS OF DOLLARS, YOU'VE GOT LEGISLATIVE MEMBERS THAT ARE NOT IN TUNE WITH THE BUDGET PROCESS, THAT ARE ADVOCATING FOR MORE SPENDING AND EXHIBIT A HIGH DEGREE OF FRUSTRATION WITH THE FINANCE PROCESS.

>>LORENE: WELL, YOU, WITH YOUR 32 YEARS, HAD THE LONG VIEW AND ALSO YOU HAD THE COMMON SENSE AND THE MENTAL ACUITY TO KNOW TO NOT GET INTOXICATED WHEN ALL THE OIL AND GAS MONEY WAS COMING IN, BECAUSE I'VE SEEN LAWMAKERS GET ACTUALLY GIDDY WHEN THEY THINK ABOUT, THEY ARE GIDDY TO THINK OF THREE AND A HALF BILLION DOLLARS, YOU KNOW.

LET'S TALK ABOUT THE DIFFERENCE BETWEEN RECURRING AND NON-RECURRING EXPENDITURES BECAUSE INCREASING SALARIES FOR VARIOUS SERVICE GROUPS IS DIFFERENT FROM FIXING ALL THE BRIDGES AND ROADS, I MEAN, ULTIMATELY YOU'LL HAVE TO COME BACK TO THEM, BUT IT'LL LAST YOU MAYBE 10, 20 YEARS.

SO, AND YOU WANT PEOPLE TO REALLY BE AWARE THAT IF ALL THIS MONEY GOES INTO RECURRING SALARIES AND THINGS LIKE THAT, AND THEN WE HIT THE VALLEY AGAIN, THERE'S GOING TO BE NO MONEY THERE.

>>JOHN: AND THAT'S VERY, VERY TRUE, BUT ONCE AGAIN, IF YOUR VISION IS TWO YEARS OR FOUR YEARS, THERE'S FEWER PEOPLE THAT REALLY CARE, ON THAT.

AND THIS STATE HAS GOT TO GET AWAY FROM TOTAL AND COMPLETE RELIANCE ON OIL AND GAS, FROM THAT STANDPOINT AND IT'S GOT TO BE RESPONSIBLE SUGGESTIONS, THERE'S GOT TO BE TAX REFORM, AND THERE'S SOME VERY, VERY BRIGHT MINDS WHEN IT COMES TO TAX REFORM, BUT THE BOTTOM LINE IS THAT IT'S GOING TO BE ABSOLUTELY NECESSARY THAT WE MOVE IN THAT DIRECTION.

YOU KNOW, I HAD THE GOOD BENEFIT, EVEN WHEN I WAS SAYING NO, BY HAVING A STAFF AT THE LEGISLATIVE FINANCE COMMITTEE THAT WAS UNBELIEVABLE.

AND PEOPLE HAVE A LOT OF FRUSTRATION BECAUSE I'M NOT CERTAIN HOW YOU CAN QUANTIFY THE VOLATILITY OF OIL AND GAS.

WE HAD EDUCATION ADVOCATES THAT WANTED TO SAY, WELL, OIL AND GAS HAD BEEN GOING UP EVERY YEAR, SO IT ALL HAD TO GO INTO REOCCURRING.

WELL, THOSE MEMBERS, SOME OF THEM ARE GONE AND THEY WEREN'T HERE WHEN OIL HIT A NEGATIVE PRICE.

BUT THE BOTTOM LINE IS THAT WITH THE LEGISLATIVE FINANCE COMMITTEE STAFF WORKING WITH THE EXECUTIVE BRANCH, ALSO WORKING WITH THE KNOWLEDGEABLE PEOPLE ON THE TAX SIDE, I THINK WE CERTAINLY HAVE THE RESOURCES TO DO WHAT IS RESPONSIBLE AND WE'LL CERTAINLY EVEN OUT SOME OF OUR REVENUE STREAMS, RATHER THAN GO THROUGH THIS CONVOLUTION OF ROLLERCOASTER FUNDING BASED ON GOOD YEAR VERSUS BAD YEAR.

>>LORENE: WELL, IT'S IN ONE OF THOSE VALLEYS WHEN WE HAD TO SCRAMBLE THAT I LEARNED THE WORD "CLAWBACK" BECAUSE YOU KNOW, THE LEGISLATIVE FINANCIAL MEMBERS, EVERYONE, WAS TRYING TO CLAW BACK ANY EXTRA MONEY THAT WAS IN AN AGENCY'S SLUSH FUND OR CONTINGENCY FUND AND THEY HAD TO JUST CLAW IT BACK BECAUSE OF THE WAY LIFE IS.

WE'RE SPEAKING TODAY WITH SENATOR, FORMER SENATOR JOHN ARTHUR SMITH, DEMOCRAT FROM DISTRICT 35, 4 COUNTIES, LIVES IN DEMING.

I AM SO GRATEFUL THAT YOU'RE COMING TO SHARE YOUR WISE AND LONG PERSPECTIVE ON WHAT'S HAPPENING WITH OUR SURPLUS OF FINANCES AND HOW IT FITS IN THE WHOLE GENERAL PICTURE OF NEW MEXICO FINANCES.

A COUPLE OF THINGS YOU WERE TALKING ABOUT, THE TAX STRUCTURE AND WE'VE ACTUALLY MADE SOME PROGRESS.

THE TAX ON SOCIAL SECURITY, YOU KNOW, WE GOT RID OF THAT AND THAT WAS A REALLY IMPORTANT THING, IT TOOK MANY YEARS TO DO IT.

I REMEMBER YOU SPEAKING TO THE SENATE AND SAYING YOU WERE CONCERNED ABOUT THE RETIREMENT FUNDS AND YOU WERE TELLING THE MEMBERS OF THE BODY AND THE PUBLIC IT'S NOT YOUR GRANDPARENTS' RETIREMENT FUND, IT IS YOUR RETIREMENT FUNDS AND YOU NEED TO PAY ATTENTION TO IT.

HAS THERE BEEN MUCH REFORM IN THE WHOLE RETIREMENT PICTURE?

>>JOHN: WELL, WHAT I'VE OBSERVED RECENTLY, AND I STAND TO BE CORRECTED ON THAT, IS THAT YOU HAVE THE DIRECTORS OF THE RETIREMENT FUNDS, THEY'RE ALWAYS TALKING ABOUT HOW SECURE THEIR FUND IS AND THERE'S ABSOLUTELY NO PROBLEM INTO THE FUTURE.

WHERE THE FINANCE PEOPLE IN THE BOND MARKET HAVE DOWNGRADED OUR BOND RATING BECAUSE OF OUR DEFICIENCIES IN OUR RETIREMENT FUNDS, BUT YET THE RHETORIC THAT'S PICKED UP BY PERA MEMBERS AND ERB MEMBERS IS THAT OUR DIRECTOR SAID OUR FUND IS IN GREAT SHAPE, WHEN THE FINANCIAL WORLD IS SAYING, WAIT A MINUTE, YOU BETTER TAKE ANOTHER LOOK AT THAT.

YOU KNOW, IT'S PRETTY PAINFUL TO DO THAT, BUT THE LAST THING THAT WE WANT TO GET RID OF, QUITE FRANKLY, IS A RETIREMENT FUND.

BUT WE'RE ON A COURSE THAT IF WE DON'T DO MAJOR CHANGES TO IT THEN WE COULD BE LOOKING AT THE SAME SITUATION THAT I BELIEVE DETROIT, MICHIGAN WENT THROUGH, WHERE RETIREMENT RETIREES HAD THEIR BENEFIT REDUCED IN ALMOST HALF.

THAT'S SEVERAL YEARS AGO, AND THAT'S THE LAST THING ANY LEGISLATIVE MEMBER WOULD HAVE TO BE FACED WITH IN THE STATE OF NEW MEXICO OR ANY OTHER STATE.

>>LORENE: WELL, ESPECIALLY BECAUSE RETIREES VOTE AND RETIREES WATCH THE NEWS AND THEY WOULD REACT VERY BADLY TO THAT.

IS THERE ANY HOPE, YOU THINK, OF OUR TAX STRUCTURE AND THE GROSS RECEIPTS TAX STRUCTURE, IS THERE ANY WAY THAT THERE'S A WAY WE COULD REFORM THAT.

DID YOU SENSE MUCH IMPETUS FOR CHANGE IN A WAY WHERE, YOU KNOW, RIGHT NOW WE TAX BOTH GOODS AND SERVICES, IS THERE A WAY THAT WE COULD MOVE TO A DIFFERENT TAX STRUCTURE DO YOU THINK?

>>JOHN: WELL, YOU'VE GOT THE SENATOR FROM FARMINGTON WHO WANTS A 2% TAX OR SOMETHING LIKE THAT ACROSS THE BOARD AND ELIMINATE ALL THE OTHERS.

THE DEBATE THAT IS MISSING AND WHEN WE TALK ABOUT TAX REFORM AND I COME BACK TO MY COFFEE CLUB, IT TAKES EIGHT OR 10 OF US TO HAVE A COLLECTIVE IQ OF A HUNDRED, BUT THE DEBATE THAT TAKES PLACE ON IT, IT ALWAYS PERTAINS TO THE STATE.

IF YOU LOOK AT GROSS RECEIPTS, ABOUT 40% OF THE GROSS RECEIPTS GOES TO LOCAL GOVERNMENT.

I HAVE YET TO HEAR A PLAN TO REPLACE LOCAL GOVERNMENT'S PORTION, LOCAL GOVERNMENT, WHEN WE'RE TALKING ABOUT THAT, I'M NOT TALKING ABOUT COUNTY GOVERNMENT, I'M TALKING ABOUT MUNICIPALITIES.

THAT'S THE WAY THEY PAY FOR EMERGENCY SERVICES, THAT'S THE WAY THEY PAY FOR LAW ENFORCEMENT AND TAKE CARE OF PARKS AND THAT SORT OF THING.

SO LOCAL GOVERNMENTS HAVE TO BE INVOLVED IN THAT DEBATE AND THAT DISCUSSION.

NOW, THE PEOPLE THAT WANT TO GET RID OF...AND I FLEW A BILL WHEN PEOPLE WERE TALKING ABOUT THE PYRAMIDING, HOW BAD IT WAS, I SAID I'VE GOT A BILL THAT ELIMINATES THAT COMPLETELY.

AND SO I WENT TO THE CHAIR OF THE TAX COMMITTEE AND SAID, YOU'VE GOT TO HEAR THIS BILL AND YOU NEED TO LET IT OUT, IT'S GOING TO BE STOPPED IN FINANCE, WHICH I CHAIRED, I HAD CONTROL OVER THAT, BUT I WANTED TO SEND A MESSAGE OUT.

THE NATURE OF MY BILL WAS TO ELIMINATE GROSS RECEIPTS.

WELL, I HAD LOCAL GOVERNMENTS COMING UNGLUED LIKE YOU WOULDN'T BELIEVE AND THE CHAIR OF THE TAX COMMITTEE WAS CONDEMNED FOR LETTING THAT BILL OUT BECAUSE IT WASN'T RESPONSIBLE.

SO THE DEBATE ABOUT TAX RELIEF, GROSS RECEIPTS, IT'S EASIER TO TALK ABOUT THAN TO ACTUALLY FIX.

NOW THE MAGIC FORMULA, IF THERE IS ONE ON GROSS RECEIPTS, YOU'VE GOT TO HAVE A VERY, VERY BROAD BASE AND A VERY, VERY LOW RATE.

AND THE LEGISLATURE HAS BEEN VERY SUCCESSFUL, ALONG WITH HELP FROM GOVERNORS.

NARROWING THAT BASE.

NOW WHAT WE DID WITH THAT, LET'S GO BACK TO THE FOOD TAX, AND THAT'S A CONTROVERSIAL TAX, BUT THE WAY WE DID THAT IS THAT NATURAL GAS PRICES WERE SO HIGH THAT WE PAID LOCAL GOVERNMENTS NOT TO IMPOSE THE GROSS RECEIPTS ON FOOD.

THAT'S FINE AND DANDY ONCE GAS AND OIL ARE GENERATING LOTS OF DOLLARS, BUT WHEN THEY'RE NOT GENERATING DOLLARS, THE STATE CAN'T AFFORD TO MAKE THAT PAYMENT.

THAT WENT FROM AN ESTIMATED COST OF ABOUT 45 MILLION DOLLARS WHEN IT WAS INSTITUTED TO OVER A 15-YEAR PERIOD IT'S GOING TO CLIMB TO ABOUT A BILLION DOLLARS.

AND SO IT WAS NECESSARY TO PHASE THAT OUT OVER A 15-YEAR PERIOD.

BUT IT'S GOING TO CREEP ITS WAY BACK INTO THE SYSTEM AND THAT DEBATE IS GOING TO BE THERE.

YOU'VE GOT ON THE HOUSE SIDE, REPRESENTATIVE HARPER, KNOWS AN AWFUL LOT ABOUT THE TAX SYSTEM, AND I'M SURE HE'D BE WILLING TO BE INVOLVED IN TRYING TO HELP FIX THE SITUATION.

BUT THE DEVIL IS ALWAYS IN THE DETAIL AND SO THERE'S HUGE CHALLENGES ON THAT.

>>LORENE: WELL, I REMEMBER WHEN FORMER LAWMAKER, LUCKY VARELA WAS AT HOUSE APPROPRIATIONS AND FINANCE AND HE KEPT SAYING WHEN PEOPLE WOULD PROTEST ABOUT RAISING TAXES, HE SAYS, IF YOU'RE GOING TO KEEP MILKING THAT COW, YOU'RE GOING TO HAVE TO FEED IT.

BUT RIGHT NOW, WITH THIS LARGESSE, I DON'T THINK ANYBODY'S TALKING ABOUT RAISING TAXES.

I'M HOPING, I'M HOPING EVEN THOUGH THAT, EVEN THAT MIGHT LOOK LIKE A SHORT TERM SOLUTION.

>>JOHN: I DON'T THINK RAISING TAXES IS THE ISSUE, I THINK THERE'S A BETTER WAY TO DO THAT WITH TAX REFORM.

AND TAX REFORM DOESN'T ALWAYS MEAN THAT YOU'RE GOING TO BE PAYING MORE TAXES, IT MEANS THAT YOU'RE GOING TO BE A LITTLE BIT MORE EVEN HANDED WITH THAT RATHER THAN ONE TAX SYSTEM CARRYING MOST OF THE LOAD.

>>LORENE: WELL, I WOULD LIKE YOU TO LOOK BACK AT YOUR 32 YEARS FOR WHICH WE ARE VERY, VERY GRATEFUL AND SO THE NEW GUARD IS TAKING OVER OUR FINANCES, DO YOU HAVE ADVICE FOR THEM BASED ON YOUR YEARS OF EXPERIENCE, WHAT THEY SHOULD KEEP IN MIND AS THEY LOOK AT THIS MOUNTAIN OF MONEY IN FRONT OF THEM.

>>JOHN: WELL, I GUESS MY ADVICE TO THEM IS NUMBER ONE, I THINK THE PUBLIC, WHEN IT'S ALL SAID AND DONE, IS GOING TO ASK THE MEMBERS TO BE EFFICIENT WITH THEIR WINDFALL AND ECONOMICAL WITH THEIR WINDFALL.

AND I'M NOT TALKING ABOUT PENNY PINCHING, BY ANY MEANS, BUT BEING EXTREMELY RESPONSIBLE WITH WHAT THEY DO.

AND IF THEY DEVIATE FROM THAT AND FIND THAT THEY'VE PUT THEMSELVES INTO A BOX THAT'S GOING TO REQUIRE A MAJOR OVERHAUL DUE TO A COLLAPSE OF REVENUES, THEN THEY'RE PROBABLY NOT GOING TO BE IN OFFICE VERY LONG FROM THAT STANDPOINT, BECAUSE THAT'S GOING TO BE EXTREMELY PAINFUL IF THEY DO NOT OPERATE IN AN EFFICIENT AND ECONOMICAL FASHION THIS LEGISLATIVE SESSION.

>>LORENE: BUT HOW THEN, THAT'S VERY SOPHISTICATED BEHIND THE SCENES KNOWLEDGE, BUT HOW DO YOU TELL THE TSUNAMI OF PEOPLE THAT ARE COMING TO THE LEGISLATURE TO TRY TO GET FUNDING FOR EVERY GOOD, WONDERFUL, THERE ARE MANY WONDERFUL PROJECTS, BUT WE CAN'T DO THEM ALL.

>>JOHN: YOU KNOW, THE ELECTED OFFICIALS HAVE A TOUGH JOB.

A BRAND-NEW LEGISLATIVE MEMBER GOT ELECTED ON WHAT THEY'RE GOING TO DO.

AND OFTENTIMES ONCE THEY GET UP THERE THEY FIND THEY'RE NOT ABLE TO DO THAT, FROM THAT STANDPOINT, BUT THAT DOESN'T MEAN THEY'RE NOT GOING TO TRY AND DO IT FOR A LITTLE WHILE UNTIL THEY GET SOME SEASONS BEHIND THEM.

I OFTEN SAID THAT IT TOOK A MINIMUM OF FIVE YEARS TO REALLY HAVE A BETTER UNDERSTANDING OF THE PROCESS.

BUT WHEN YOU'RE RUNNING FOR OFFICE, OFTENTIMES YOU FORGET ABOUT THE FIVE YEARS AND MAKE PROMISES TO THE PUBLIC THAT ONE CANNOT KEEP ON THAT.

SO I'M SAYING, AS MY PREDECESSOR WAS IKE SMALLEY, MADE THE REMARK TO ME AND YOU REMEMBER HIM, MADE THE REMARK TO ME, HE SAID, YOU KNOW, WHEN YOU GO UP THERE, THE FIRST THREE OR FOUR YEARS, BE A GOOD LISTENER AND SAY DARN FEW WORDS AND THAT WAS PRETTY GOOD ADVICE.

THE SECOND TIME I WAS UP THERE, ELECTED, HE GAVE ME A CALL AND HE SAID, CAN I COME AND SEE YOU AND I SAID, WELL, SURE, SENATOR.

AND HE SAID, CAN I GIVE YOU ANOTHER PIECE OF ADVICE AND I SAID, WELL, SURE, YOU CAN GIVE ME A PIECE OF ADVICE AND HE SAID, WELL, I WAS NEVER ABLE TO LEARN TO DO IT.

AND I SAID, WELL, WHAT'S THAT?

HE SAID, LEARNED TO TELL PEOPLE TO GO TO HELL POLITELY.

AND I DON'T THINK I EVER LEARNED THAT.

>>LORENE: WELL, I HAVE TO TELL YOU, WHEN I WAS NEW HERE AND YOU KNOW, OUR OFFICE WAS IN THE SENATE RADIO ROOM AND I WOULD WATCH, AND I REMEMBER IKE SMALLEY, THIS IS BEFORE THEY HAD ALL THE COPIES OF THE BILL, YOU WERE PROBABLY IN THE SENATE WHEN THIS HAPPENED.

HE HELD UP THE ONLY COPY OF A BILL AND SAID, DO I HEAR A "DO NOT PASS" AND TOOK OUT A LIGHTER AND LIT THE THING ON FIRE AND I THOUGHT, OH, THIS IS EXCITING, THESE PEOPLE ARE EXCITING.

THAT'S WHY I'VE ALWAYS LOVED THE SENATE BECAUSE THINGS LIKE THAT HAPPEN.

BUT THERE ARE LEGENDARY FIGURES, WE COULD ACTUALLY DO A WHOLE SHOW ABOUT STORIES ABOUT SOME OF THE ICONIC FIGURES IN POLITICS, ACTUALLY, THAT WOULD BE A LOT OF FUN.

BUT WE ARE DOING THE STATE'S FINANCES, ESPECIALLY FROM YOUR LONG, LONG VIEW OF 32 YEARS.

MY GOODNESS, I THINK YOUR ADVICE ABOUT TELLING PEOPLE HOW TO GO TO HELL POLITELY IS SOMETHING WE ALL NEED TO WORK ON.

AND WHAT OTHER ADVICE DO YOU HAVE FOR US?

>>JOHN: WELL, I'M NOT CERTAIN IT'S ADVICE, BUT THE BOTTOM LINE IS THERE'S A REMARKABLE YOUNG STAFF UP THERE ON THE LEGISLATIVE FINANCE COMMITTEE, THAT WOULD STEER US, THE STAFF OVER AT THE COUNCIL WOULD STEER US IN THE RIGHT DIRECTION.

IT WASN'T THAT WE MAGICALLY CAME UP WITH A SOLUTION BY ANY MEANS, BUT THOSE BRIGHT YOUNG MINDS ARE GOING TO ASSURE THAT NEW MEXICO HAS A BETTER AND STRONGER FUTURE ON THAT.

AND I THINK WE OUGHT TO SHOW A LOT OF GRATITUDE TO THAT AND OBVIOUSLY I'VE ALWAYS BEEN VERY, VERY CLOSE TO THE DIRECTOR AND THE DEPUTY DIRECTOR OF THE FINANCE COMMITTEE, DAVID ABBEY AND CHARLES SALLEE.

>>LORENE: OH, YES.

>>JOHN: OVER THERE, EXTREMELY BRIGHT PEOPLE, BUT I ALSO HAD THE GOOD FORTUNE ON SENATE FINANCE TO WORK IN A BIPARTISAN FASHION WITH BOTH RS AND DS.

WE WORKED COLLECTIVELY TOGETHER AND WE WERE NOT AT EACH OTHER'S THROATS AND WHEN YOU COME BACK TO YOUR RESPECTIVE DISTRICTS, PEOPLE WILL SAY, BOY, IT MUST HAVE BEEN MISERABLE UP THERE.

I DID NOT ENCOUNTER THAT ON THE SENATE FINANCE COMMITTEE.

WE WERE A BIPARTISAN COMMITTEE, AND THE PUBLIC HAS A HARD TIME BELIEVING THAT BECAUSE THEY DON'T SEE MUCH ACTIVITY IN THE BIPARTISAN VEIN ANYMORE.

>>LORENE: NO, BUT THAT IS SOMETHING THAT I HAVE TO SAY FOR THE SENATE, IN GENERAL, AT THAT TIME AND SENATE FINANCE, WAS THAT THEY WORKED NONPARTISAN, UNIFIED FOR THE BETTERMENT OF THE STATE, THERE WAS JUST NO QUESTION OF IT AND THE TOXIC PARTISANSHIP THAT WE HAVE NOW COULDN'T EVEN GET ITS FOOT IN THE DOOR.

YOU KNOW, IT WOULD BE DISCUSS A BILL ON THE FLOOR, MAYBE ARGUE, BUT THEN GO OUT TO DINNER TOGETHER.

AND SO TRYING TO EVOKE THAT SPIRIT OF WORKING TOGETHER FOR THE GOOD OF THE STATE BECAUSE THERE'S SO MUCH THAT NEEDS TO BE DONE.

WELL, I'D LIKE TO THANK YOU, SENATOR SMITH, FOR ALL THAT YOU'VE DONE, 32 YEARS OF SERVICE IN THE STATE AND NOW TO EVEN SHARE THIS PERSPECTIVE FROM A COUPLE OF STEPS BACK.

I'M JUST VERY GRATEFUL FOR ALL YOU'VE GIVEN, NEW MEXICO OWES YOU A LOT.

THANK YOU.

>>JOHN: WELL, THANK YOU VERY MUCH, LORENE, APPRECIATE, YOU ALWAYS GAVE US A WELCOME TO AT LEAST COMMUNICATE TO THE PUBLIC.

AND I WORKED DILIGENTLY WITH SENATOR STU INGLE OUT OF PORTALES AND FORTUNATELY HE'S STILL THERE.

A VERY RESPONSIBLE NEW MEXICO STATE SENATOR FROM PORTALES.

>>LORENE: WELL, WE'LL WRAP IT UP THERE, BUT I'D LIKE TO THANK OUR GUEST, SENATOR JOHN ARTHUR SMITH, FORMER SENATOR DEMOCRAT FROM DEMING, WHO SERVED OUR STATE FOR 32 YEARS.

THANK YOU SO MUCH FOR BEING WITH US.

>>JOHN: THANK YOU.

>>LORENE: AND I'M LORENE MILLS, I'D LIKE TO THANK YOU, OUR AUDIENCE, FOR BEING WITH US TODAY ON REPORT FROM SANTA FE.

REPORT FROM SANTA FE IS MADE POSSIBLE, IN PART, BY GRANTS FROM THE NEW MEXICO MUNICIPAL LEAGUE, A BETTER NEW MEXICO THROUGH BETTER CITIES AND FROM