On this week’s interview, Paul sits down with Michael Kare. Michael is the newest member of the Rio Grande Foundation’s board. He brings his unique perspective of being both the son of immigrants and of Palestinian decent to the Foundation’s board. Also, Michael personally sees the special opportunities that the United States and its freedom offer and we discuss that.
Michael is in the insurance business. He and Paul discuss the insurance business in New Mexico and some of the issues (like crime and careless/reckless motorists) have on both individuals and businesses and why those issues harm our economic prosperity.
On this week’s podcast, Paul and Wally discuss some new population data which the Census Bureau put out outlining state population shifts over the past decade. Unlike its neighbors which mostly saw double-digit growth, New Mexico’s population barely budged during the last decade.
Also, the annual United Van Lines moving study includes some rare GOOD news for New Mexico in terms of population growth as it made the moving company’s list of Top 10 inbound states during 2019.
Tri-State Generation and Transmission Association will shut down its 253-megawatt coal-fired generating station near Grants by the end of 2020 in an effort to comply with the Energy Transition Act. This is going to impact the Grants area, but also the customers of New Mexico’s rural co-ops. Paul and Wally discuss.
Of special note is that four of the top 5 states in terms of inequality (New York, Connecticut, California, and New Mexico) are “deep blue” states while a majority of the least unequal states (with the exceptions of Hawaii and Vermont) are red states.
The following appeared in the Ruidoso News on January 14, 2020.
Gov. Lujan Grisham recently released her budget to be considered by the Legislature in the upcoming 30 day session. As expected, there is a lot of new spending thanks to the continued growth of oil and gas production in the Permian Basin.
After a 12 percent boost in General Fund spending last year, the Gov. is requesting yet another big increase. This year she’s asking for 8.4 percent.
According to news reports, the nearly $7.7 billion spending plan includes a proposed 4% salary increase for New Mexico teachers and more money for school districts with a large number of “at risk” students.”
The budget would provide for “free” college and expand funding for child-care assistance and pre-Kindergarten programs statewide. “Another $320 million would be spent to set up a new early childhood endowment fund.”
All of this spending seems destined to please, but New Mexico is a poor state. Many of its social ills are the result of poverty. We at the Rio Grande Foundation believe that the best anti-poverty program is a job.
That’s why when it comes to government spending we look at Colorado as a model. That State which continues to see strong growth (albeit minus the “boom” in oil and gas) is giving taxpayers a break in 2020. As reported by Fox 31 Denver, Colorado’s income tax rate will be dropping from 4.63% to 4.5% this year (thanks to that State’s Taxpayers Bill of Rights which was recently affirmed at the ballot box).
With the passage of HB 6 last year in New Mexico, our top income tax rate will soon rise to 5.9 percent while Colorado’s drops to 4.5 percent. This may not seem to be a big difference but it is one of the big reasons that Colorado is one of the fastest growing states in the entire country.
In fact, over the last decade, according to Census data released at the end of 2019, Colorado was the 3rd-fastest growing state in terms of population at 12.7 percent. Only Utah and Texas which also neighbor New Mexico grew faster. And where did New Mexico rank in population growth between 2010 and 2019? The answer is 38th-fastest at 1.8 percent, a bit faster than Ohio, but not quite as fast as Kansas.
Colorado and New Mexico both have little in the way of rivers and surface water, they have good weather although New Mexico’s is much better, and New Mexico is in the midst of an unprecedented oil and gas boom. They also both happen to be “blue” states.
Colorado’s “secret sauce” is that it strictly limits spending growth and taxation. As a percentage of GDP (the overall state economy) Colorado state and local governments spend 14.8 percent. New Mexico spends 23.39 percent. Of the states surrounding New Mexico, “blue” Colorado has the smallest government while New Mexico has by far the largest.
What does this mean? Simply put it means that the tax hikes (HB 6) passed last year were totally uncalled for and unnecessary. It means that in the upcoming 30 day session, we the voters of New Mexico need to hold the Legislature accountable. Rather than growing the government even more, we need real reforms to the State’s broken and regressive gross receipts tax. We need to eliminate taxation of Social Security. And finally, the Legislature simply needs to stop the accumulation of new government spending programs that may not survive the next economic downturn or the next decline in oil and gas prices.
Colorado’s is not the only economic model worth following. People are moving in large numbers to Utah and Texas (the fastest and 2nd fastest growing states) as well as Arizona (the 7th). New Mexico can learn lessons from each of them, but the simple truth is that new government spending is not the way to make New Mexico (or any other state) more economically attractive.
Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility
Government Spending by State in Percent GDP (Fiscal Year 2019).
Paul talks with Peter Mandelstam, Chief Operating Officer, of Enchant Energy about the company’s plans to add carbon capture technology to San Juan Generating Station. Enchant Energy is working with the City of Farmington to acquire a 95% interest in the plant which is currently operated by PNM.
Paul visits with Peter about the progress Enchant Energy has made to date, as well as the challenges ahead that must be overcome if the project is to raise the capital to add the carbon capture technology that would allow San Juan Generating Station to continue to operate past the 2022 date that PNM is seeking for closure. Issues discussed include the jobs and tax revenue that would be maintained by keeping the plant open, the federal tax credits that will be used in financing the carbon capture technology, and how the retrofitted plant would comply with New Mexico’s Energy Transition Act.
At the end of 2019 the US Census Bureau published population change data for each state and the nation as a whole. The data are from April 2010 to July 2019, so just under a decade. As most demographers are well-aware, the US population continues to move south and west, but the shift is uneven.
To better understand where New Mexico stacks up, check out the chart below. As you can see, neighboring Utah, Texas, and Colorado are the three fastest-growing states. Arizona is 7th-fastest growing. Even Oklahoma saw robust population growth over the past decade.
Where does New Mexico’s population growth stand? We grew just a bit slower than Kansas and a little faster than Ohio to put us in 38th place overall. It’s obviously not the weather or the sheer beauty of our State that holds us back, rather it is the bad public policy that comes out of Santa Fe and the Legislature. Can 2020 help move the needle in the right direction? We’ll see.
Click the picture below to see a larger version of the image.
On this week’s discussion show, Paul and Wally discuss a few of the big developments at the end of 2019 and early 2020 including the death of Albuquerque City Councilor Ken Sanchez. They move right into a discussion of Gov. Lujan Grisham’s budget and some of her top priorities as well as some things it is lacking. Paul and Wally then discuss the Rio Grande Foundation’s priorities in the 2020 session and whether any of those will actually be addressed or come to fruition.
Finally, Wally notes with some glee that the Foundation “won” not one but two “Cowchip Awards” from the Albuquerque Journal in their year-end edition.
Also, Paul was a guest on the ABQ Connect Radio show with Jim Williams. In that recent show which you can listen to below he discussed the upcoming legislative session.
As a non-profit ourselves and an organization that takes a fairly skeptical approach to much of what government does, we at the Rio Grande Foundation were admittedly intrigued by the launch of the “One Albuquerque Fund.” Although the link to the group’s website was not working as of this writing, the Fund is meant to provide private support to the City’s efforts in areas such as “police recruitment and housing vouchers for the homeless” (according to the Albuquerque Journal.
The idea seems to be that if the City does not have the resources for a particular project, then private sector funders will step up. As long as the process is transparent (and they say it will be), we at the Rio Grande Foundation have no problem with this approach, in fact we’d applaud it.
But, as usual, we have questions:
Albuquerque just passed a massive budget increase in 2019, why is that not enough? Might the issue be priorities, not a lack of money?
If this model proves successful, then perhaps more areas of government should be funded voluntarily rather than by force?
If the model fails to generate significant donations, then what does that say about the lack of interest in funding government when they won’t be put in jail for NOT funding it?
Gov. Lujan Grisham has released her budget to be considered by the Legislature in the upcoming 30 day session.
According to the Albuquerque Journal, “The nearly $7.7 billion spending plan includes a proposed 4% salary increase for New Mexico teachers and more money for school districts with a large number of “at risk” students.”
The budget would provide for “free” college and expand funding for child-care assistance and pre-Kindergarten programs statewide. “In addition, some of the state’s budgetary windfall would be spent on one-time expenditures, including $320 million to set up a new early childhood endowment fund.”
By contrast, in Colorado which continues to see strong economic growth (albeit minus the “boom” in oil and gas) taxpayers are getting a break in 2020. As reported by Fox 31 Denver, Colorado’s income tax rate will be dropping from 4.63% to 4.5% this year (thanks to that State’s Taxpayers Bill of Rights which was recently affirmed at the ballot box).
As seen below, Colorado has seen an influx of people since adopting TABOR. Perhaps New Mexico would see the same if, rather than massive spending growth, we saw restraint combined with tax relief?
The 2020 session is “only” 30 days long, but as we saw in 2019, a lot of damage can be done in a relatively short time. Considering the “progressive” makeup of the Legislature, there are issues (like Right to Work and Davis/Bacon reform) that simply will not be put forth, but there are plenty of opportunities for bi-partisan economic reform in 2020. We’ll be working to make them happen while also recognizing that there are plenty of bad ideas that could be adopted in 2020.
Below is a list of some of the top issues that RGF will be working on in 2020. Further data and background is available at the links:
1) GRT Reform: The gist of what may happen is for business to business contractors to have most taxes eliminated. This is especially important for service contractors (everything from bookkeepers to lawyers). Tax rates (which have risen dramatically in recent years) would also be reduced slightly.
2) Pension reform: New Mexico has two public employee pension systems: Education Retirement Board (ERB) and Public Employee Retirement Administration (PERA). Both are tremendously underfunded and in need of reform. Earlier this year Gov. Lujan Grisham named a task force to address PERA’s solvency by eliminating over $6 billion in unfunded liabilities over the next 25 years. The changes are significant and positive steps for PERA, but still leave some systemic challenges—namely actuarial methods and assumptions—unaddressed. We will push for further reform while acknowledging that doing something is better than doing nothing.
3) Calling “free” college into question: There so many issues with this concept including New Mexico’s “inadequate” K-12 system, the relative lack of jobs, and the likelihood of price inflation. This proposal has many problems.
5) Returning surplus money back to New Mexicans: Colorado (a “blue” state like New Mexico) is an economic juggernaut. The key to Colorado’s success is its Taxpayers Bill of Rights (TABOR) which strictly limits government spending and taxation. Colorado just reduced its income tax due to savings from TABOR while New Mexico is likely to spend its surplus. New Mexico politicians should consider returning a significant portion of the oil and gas surplus to the taxpayers.
6) Occupational licensing reform: SB 385 was a bipartisan effort to address occupational licensing problems for those convicted of certain crimes in New Mexico. It was vetoed by the Governor in 2019 after passing both houses. We will continue to support this and other needed (and broader) reforms to New Mexico’s occupational licensing laws in 2020.
