Top economic development experts told lawmakers Tuesday that the secret elixirs to create jobs and set New Mexico’s economy on a path of long-term growth are not tax incentives, but education and workforce development.

In a post-smokestack era of American manufacturing, talent and skill-building of graduates and workers will sustain growth, said Christopher Erickson, a New Mexico State University economics professor. Officials need to do a better job of investing in education to build a smarter, more talented state, he said.

Erickson read off a list of measures in which New Mexico lags the rest of the United States: 51st in fourth-grade reading; 48th in eighth-grade math; 40th for eighth-grade science; 48th in graduating high-schoolers ; 44th for college enrollment of 18- to 24-years-olds. (Another report released Tuesday places New Mexico last in graduation rates during the 2013-14 academic year.)

“New Mexico is not doing well, to say the least,” he said. “This should be the top priority for long-term economic development.”

The hearing before the Legislative Finance Committee is part of an effort by lawmakers to assess ways the state can diversify its economy and grow beyond its dependence on government and energy jobs. It coincides with decisions by several large corporations such as Intel, Verizon and Caterpillar to scale back operations in the state, while smaller technology companies such as Skorpios Technologies in Albuquerque and Descartes Labs in Los Alamos are growing and hiring.

Kathy Keith, director of community programs at Los Alamos National Laboratory, said the United States has lost almost 12 million manufacturing jobs to worldwide outsourcing. An economic policy that chases smokestack industries no longer will succeed, she said.

Most of the nation’s recent job growth has come from companies that no one had even heard of 10 years ago, such as Facebook, Google and Tesla. “Fortune 500 companies are not contributing any new jobs,” she said.

Building the next generation of employers might mean finding ways to support a few people who start businesses in a garage or small workspace. The startup might fail, but then come back and try again. She said officials may have to accept not just taking on more risk but not being invited to a ribbon-cutting at a new manufacturing plant.

In the end, Keith said, the “two guys in a garage” might take five years to create 50 jobs. “It doesn’t happen overnight,” she said. “It’s a long, slow development process.”

But there are things the state can do to nurture those companies, from simplifying its tax code to finding ways to pay for public infrastructure and cultivating human capital. “Startups pay attention to high school and college completion rates,” she said.

All the experts on the panel said the state’s tax code is too complicated. They said business owners don’t mind paying their fair share, but resent having to pay consultants and accountants to figure out what that is.

Jeff Mitchell, director of the Bureau of Business and Economic Research at The University of New Mexico, said the biggest sector that helped grow the state’s workforce — government — will not come charging back like it has before. Likewise, the population that drove the state’s expansion is now going to regions of the country that have a deeper concentration of skilled labor and business networks.

There is often no way to know which startups might ultimately succeed, he said, suggesting the state needs to identify specialized technology and approach investment more like a baseball organization.

“You have to support development of lots of players,” Mitchell said. “You don’t know which will succeed.”

Bob Walton, a former business executive now with Albuquerque Economic Development, said the state actually has good incentives — especially in the area of job training — but many firms just don’t know about them.

“We can go into almost any company and they don’t know about these programs,” he said.

No specific policy initiatives came from Tuesday’s testimony, but one theme was that lawmakers should tread slowly in expanding any tax cuts or incentives until they can fashion a long-term economic development policy that quantifies return on investment.

“Oftentimes in the Legislature our thinking process is two and four years when in fact we should be looking 10, 15, 20 years,” said Sen. John Arthur Smith, a Democrat from Deming who chairs the committee. “We have not been willing to make the long-term investments. That has to change.”

Contact Bruce Krasnow at 505-986-3034 or brucek@sfnewmexican.com

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