New Mexico’s economic development community is desperate. We get it. With the state mired in high unemployment, facing massive deficits, and few “easy” opportunities for economic growth, the idea of having a marquee company like Facebook place a data center in Los Lunas is very attractive. It certainly makes for some much-needed good press.

Unfortunately, according to a New York Times piece which analyzed these data centers, massive data center projects to rural areas, receiving millions of dollars in tax cuts and rebates but only bringing a few dozen new jobs — and most are not even local hires.

Also on the subject of Facebook’s data center, the Salt Lake Tribune quoted Iowa State University economic development expert Robert Swenson as saying, “You’re not just overbidding, you’re just outrageously overbidding. I don’t know how to say it any other way other than: What’s wrong with you folks?.”

Swenson also is said it’s not uncommon for a company like Facebook to get two cities to fight over each other to get a sweeter deal.

The incentives being offered to Facebook to come to Los Lunas are nothing short of astonishing and (again) call into question the necessity and economic impact of economic development subsidy programs. A Local Economic Development Act (LEDA) grant of up to $10 million is being offered. That’s in addition to a sales-and-use tax rebate worth up to $1.6 million annually along with billions of dollars in industrial revenue bonds which essentially eliminate property tax payments although Facebook has offered to make some direct payments in lieu of taxes of $50,000 to $100,000.

And this doesn’t even include the water being used or the unsteady “renewable” electricity being put on the power grid in exchange for Facebook having steady electricity service from traditional sources.

The fact is that as nice as it would be to have Facebook located in our community, New Mexico policymakers are desperate for good news. That is a dangerous position to be in whenever you’re negotiating.

Last week’s release of the “consensus revenue estimate” by the state’s financial officials included several documents with some very revealing information about where New Mexico finds itself eight months into 2016. Here are some stats worth noting:

* As the above chart indicates, fiscal 2016 revenue for the general fund was down 8.4 percent, and fiscal 2017 is predicted to experience only 0.6 percent growth.

* Weak employment bears much of the blame for poor revenue-creation. Total jobs grew by just 1.2 percent in 2016, with increases in employment in Albuquerque, Santa Fe and Las Cruces offset by “losses in the rest of the state.”

* Since 2006, there has been essentially no job growth in the finance/insurance sector, nor in the retail industry. Construction work is down 20 percent, and manufacturing has dropped by 25 percent. The mining-and-logging sector, which includes oil and gas, “peaked in November and December of 2014 with 29,000 jobs,” but current employment is 18,800, representing the loss “of more than 10,000 mostly high‐wage jobs.”

* Personal income fell by 1.7 percent in fiscal 2016. The average hourly wage rose by just 11 cents.

* According to Moody’s, gross state product declined by 1.1 percent. BBER claims the loss was 0.6 percent.

* Risks to New Mexico’s economy include a national recession and further declines in oil-and-gas prices. A big budget threat is the type of entity that may be hired to run Sandia National Laboratories. If Lockheed loses its contract to a nonprofit organization, “up to a $100 million annual loss in state revenues” could occur.

It’s all pretty frightening stuff. The good news is that there’s no time like the present for elected officials to realize that New Mexico faces an economic and fiscal apocalypse — and finally take concrete steps to build a vibrant, sustainable private sector in the Land of Enchantment.

With massive deficits facing New Mexico, the debate over what spending should be “on the table” or “off” has begun. Democrats say all education spending should be sacrosanct. Several Democratic Senators went so far as to urge higher teacher pay.

As US Census data clearly show, the state spends far more heavily on administration than even the next-highest state:

New Mexico also spends rather heavily on education relative to its neighbors. As seen in the chart below (derived from the same Census data), New Mexico considerably outspends its neighbors on a per-pupil basis.

Performance has not been forthcoming. Perhaps it would be worthwhile for New Mexico legislators and education bureaucrats to consider studying what our neighbors are doing to obtain better results for less money.

It’s the 100th anniversary of the National Park Service, and the media are providing quite a lot of coverage of the celebration.

The NPS has a huge presence in the Land of Enchantment — not surprising, given the number of scenic and cultural wonders here. But while the attractions draw visitors to the state, it’s important to remember that government management has its drawbacks. Exhibit A: The recent disaster over the elevators at Carlsbad Caverns National Park. It’s tough to envision a private-sector entity screwing up to that degree.

Management issues plague the entire NPS. As the Property and Environment Research Center’s Terry Anderson notes in today’s edition of The Wall Street Journal, “a backlog of maintenance projects, including deteriorating roads, buildings and sewage systems … will cost $12 billion to fix. Each year the NPS goes to Congress asking for funding for its operating budgets but almost always gets less than it requests. Between 2005 and 2015, the federal budget grew by 39%, yet the NPS operating budget increased by only 1.7%. Meanwhile, park attendance in 2015 reached a record 305 million visits.”

Anderson recommends that Washington “take parks out of politics and politics out of parks by giving the gift of operating-budget autonomy.” Federal appropriations could then be directed toward the maintenance backlog.

From the Chaco ruins to Fort Union to Glorieta Pass Battlefield to the Gila Cliff Dwellings to White Sands, the NPS controls many of New Mexico’s priceless treasures. But the bureaucracy’s far from perfect, and some simple, but substantial, reforms would improve the system, both here and around the nation.

Several states have embraced reforms including “right to work” in recent years. “Rust belt” stalwarts like Michigan, Indiana, and Wisconsin have adopted such laws to great effect. But, comparisons to New Mexico are difficult. They are industrial powerhouses despite recent problems.

And then there is West Virginia which adopted “right to work” and repealed its prevailing wage law earlier this year. These reforms are also top priorities for conservatives in New Mexico.

And West Virginia is a lot like New Mexico. Just ask the Albuquerque Journal’s Winthrop Quigley. Both states are physically beautiful, culturally and geographically isolated, historically-Democrat-dominated, poorly-educated, and poor.

At the Rio Grande Foundation we believe that incentives matter. We believe that good policies CAN overcome cultural and geographical challenges. It takes time and progress may not be steady, but over time, incentivizing work and removing obstacles to it will result in more work and greater prosperity. The results so far relating to unemployment seem promising.

Since February of this year, West Virginia’s unemployment rate has dropped dramatically from 6.5 to 5.7 percent while New Mexico’s remains stuck at 6.4 percent;

The number of unemployed in West Virginia has dropped 10% while in New Mexico the number has gone up slightly;

The chart below illustrates the unemployment trends in the two states. While  more time needs to elapse, it certainly seems that West Virginia policymakers have begun to move their State’s economy in the right direction.

In Santa Fe, reports the New Mexican, a “City Hall reorganization will create a stand-alone Economic Development Division, removing it from the Housing and Community Development Department.” In addition, the “city is launching a search for a full-fledged economic development director, a job that will pay between $70,387 and $120,640 annually.”

Santa Fe certainly needs an economic-development boost. As the chart above indicates, it has fewer private-sector jobs now that it did eight years ago.

But with Mayor Javier Gonzales touting Santa Fe’s “living wage” and “absolutely booming” film industry, is there any hope of reality-based policies? Let’s hope so. One suggestion, Mr. Mayor: Do something about your city’s whopping 8.3125 percent gross receipts tax.

Here’s something you won’t be hearing from the New Mexico Film Office: Research has, once again, confirmed that giveaways to Hollywood are a sucker’s bet for taxpayers.

Michael Thom, an assistant professor at USC, has published new findings on the “incentives” that states provide to film and television productions. He “looked at job growth, wage growth, states’ share of the motion picture industry and the industry’s output in each state,” and found that on average, “the only benefits were short-term wage gains, mostly to people who already work in the industry. Job growth was almost nonexistent. Market share and industry output didn’t budge.”

Thom’s first study, published in the American Review of Public Administration, concluded that between “1999 to 2013, the average annual percentage change in film production employment remained at or slightly above zero — even in California and New York, the headquarters of the entertainment industry.”

The professor’s second analysis, published in the journal American Politics Research, looked at “why states kept or terminated their incentives.” Dead-enders, he found, refuse to acknowledge reality: “After a state has invested tens of millions of dollars, no politician wants to acknowledge that the program is a waste of taxpayer money.”

Amazingly, despite its small size, New Mexico was one of the biggest-spending subsidizers of Hollywood. At $490.3 million, the Land of Enchantment bestowed more largesse on the industry than Texas, Florida, North Carolina, and Illinois!

Thom’s research is a welcome addition to the mountain of evidence demonstrating the failure of taxpayer “incentivizing” of the entertainment business. Let’s hope it gets some serious attention — from elected officials from both parties — in Santa Fe.

The Foundation has repeatedly exposed the specious reasoning behind the left’s campaign to make tax cuts the culprit for New Mexico’s budget woes. Neither cutting the income tax nor reducing the corporate tax caused the big deficits we face today. This is a spending-driven fiscal crisis, and if the state’s projections on Medicaid expansion are to be believed, there will be red ink for many years to come.

In February, Medicaid-expansion apologist Lee Reynis, a UNM professor, cited data from the Human Services Department in a presentation on the fiscal impacts of Medicaid expansion. In fiscal 2017, which began July 1st, the federal government stopped covering 100 percent of expansion expenditures. Thus, the cost to New Mexico taxpayers will be $44.5 million. And as the chart below indicates, the gaps only increase.

Add it all up, and in the current and next four fiscal years, New Mexico-derived revenue will have to rise by $777.9 million to pay for Medicaid expansion. Again, that’s just the gap for the broadening of the program. It doesn’t include the shortfalls that are likely to result from growing “demand” by those who meet the pre-expansion eligibility criteria. Neither does it address the “woodwork effect,” whereby “people who could have been covered by Medicaid before, but for some reason had not signed up for it, and may not have even been aware they could do so,” join the rolls.

Barring a massive injection of tax revenue — unlikely in the short term, given the state’s moribund economy and misguided growth policies — New Mexico’s books will need to be balanced with smart cuts. The Foundation explored many promising expenditure reductions in a recent paper. Another idea worth examining is rolling back Medicaid expansion. It’s been a fiscal nightmare and has not served as a “stimulus.” Governor Martinez’s worst policy decision is overdue for some serious scrutiny — and probably, a complete reversal.

It is no surprise, given the gaping hole in New Mexico’s budget, that Democrat politicians are blaming Gov. Martinez and especially “tax cuts.” See Alan Webber’s piece in today’s Albuquerque Journal as well as Sen. Cisco McSorley’s piece from New Mexico Political Report.

The current talking point among many on the left is that “the Gov.’s tax cuts” were a failure and they caused the deficit. The bill in question was HB 641 sponsored by Democrat Rep. Moe Maestas which passed in the waning seconds of the 2013 session. It was overwhelmingly supported by House Democrats and opposed by all but one Republican although the Senate vote was bi-partisan.

It was a complicated bill with several components, but it DID reduce the corporate income tax by an estimated $70 million as of FY2017. That said, we were not big fans of the “compromise” at the time and had serious concerns about the politics of “owning” the bill down the road.

Fast forward to this year and I’d say those concerns have been borne out. The myriad shifts and slight tax cuts haven’t done much to improve New Mexico’s economy, but they have become a useful tool for liberal politicians to attack Martinez. Sen. McSorley, for example, voted “yes” on the bill.

Notably, the corporate income tax was estimated to “cost” about $70 million in revenue annually. While that sounds like a lot, it is about 10% of today’s budget deficit. That hardly makes it a driving factor. Should those cuts be re-imposed? Not unless the entire bill, including the local tax hikes, is reconsidered.

If Democrats want to blame Gov. Martinez for decisions that are exacerbating the State’s budget woes, perhaps they should consider the fateful decision to expand Medicaid? Unfortunately, as bad as the budget picture is now, Medicaid expansion will only worsen the budget picture in the years ahead as New Mexico is placed on the hook for more of that program’s cost.

According to the libertarian Cato Institute’s new “Freedom In the 50 States” report which ranks the states by “policies that shape personal and economic freedom,” New Mexico is at the “top of the heap” when it comes to personal freedom. This is a small bit of welcome news for beleaguered New Mexicans who are used to seeing their state at the bottom of most lists.

The report defines personal freedom to include, “gun policy, alcohol policy, marijuana-related policy, travel policy, gaming policy, mala prohibita and miscellaneous civil liberties, education policy, civil asset forfeiture, law enforcement statistics, marriage policy, campaign finance policy, and tobacco policy. That is good news and the Rio Grande Foundation has worked actively and successfully in the area of civil asset forfeiture policy.”

Unfortunately, while New Mexico does a good job on personal freedom, its fiscal and regulatory policies rank 42nd and 38th respectively. That poor showing on “bread and butter” economic issues goes a long way towards explaining the State’s economic and budget woes. Interestingly, it would appear that Americans value economic freedom (fiscal and regulatory) more than personal freedom as neighboring Texas scores a poor 49th in “personal freedom,” but scores well in economic freedom. Notably, Texas is seeing massive population and economic gains while New Mexico is losing population and hemorrhaging red ink.

Click here to go to the index itself and check out the map below:

The various economic policy categories are outlined and defined below:

The fiscal policy dimension consists of categories for state and local tax revenues, government employment, government spending, government debt, and fiscal decentralization. Each of these categories consists of a single variable. The variables are measured for each fiscal year: FY 2010, the latest year for which data are available, encompasses the period between July 1, 2009 and June 30, 2010. Taxation and debt are measured for each fiscal year.

The regulatory policy dimension includes categories for the liability system, real property rights (eminent domain and land-use regulation), health insurance freedom, labor market freedom, occupational freedom, cable and telecom, and miscellaneous regulations that do not fit under another category. Regulations that seem to have a mainly paternalistic justification, such as homeschool and private school regulations, are placed under the personal freedom dimension.

No politician relishes the job facing New Mexico’s leadership in the months ahead. Facing massive budget deficits and the prospect of an election-year special session in an unpredictable and unsettled political season is no elected official’s anyone’s idea of fun.

Like most problems, New Mexico’s budget woes did not sneak up on us overnight. Decades of over-spending combined with tax and regulatory environments that make our State relatively unattractive as a place for doing business caused undue reliance on federal spending and extractive industries like oil and gas.

Economic realities have recently impacted both areas, exposing this.

The current situation could have been avoided with the enactment of pro-growth economic policies, but that didn’t happen. The task now is to balance the budget while minimizing the harm to our future economic prospects. Once the budget is balanced, perhaps the Legislature, especially the Senate, will embrace pro-growth policies.

The good news is that Gov. Martinez has made it clear that she won’t raise taxes. The last thing our businesses and hard-working New Mexicans need is higher taxes. According to the Kaiser Family Foundation in FY 2014 New Mexico spent $7,767 per-person. Among our neighbors, Colorado was the next-highest at $5,853. Texas spent $4,086 or just over half the amount spent by New Mexico. Clearly there is room in the budget to cut.

The other good news is that Rio Grande Foundation has pored over the budget and found enough cuts for policymakers to avoid tax hikes without harming its economic future.

The bad news is that some are already digging in to protect their preferred programs. Senate Democrats have already put education spending – 57 percent of the general fund budget – “off the table.” For their part, several leaders of the business community have urged the preservation of “economic development” spending.

The truth is that closing the budget gap will require compromise. Here are a few of the potential cuts laid out in the new RGF report:

• LEDA: $55 million; LEDA is classic “corporate welfare.” Worse, it is ineffective. Earlier this year, the Legislative Finance Committee (LFC) reported that “the state does not receive sufficient reporting from businesses using … LEDA … funds to properly evaluate” the program. Thus, “it is impossible to determine relative effectiveness and cost-efficiency” of it. Other dubious “corporate welfare” programs could add to the savings.

• Film subsidies: $50 million; There has never been a justification for spending $50 million annually to subsidize Hollywood studios. Massive deficits should mean massive cuts or elimination. Recently, Alaska and Michigan killed their programs while Louisiana downsized dramatically.

• Higher education: $30 million; Student populations are down by more than 8 percent, but the number of branch campuses continues rising. Reducing their number is an easy starting point. Cutting back on taxpayer subsidies for athletic programs (more than $4 million at UNM alone) must be considered as well.

• Personnel: $165 million; a 2014 study by the American Enterprise Institute found a 24 percent advantage for New Mexico government employees when total compensation, including the value of job security, was scrutinized. A 10 percent reduction in the total cost of state-employee compensation is a reasonable goal. This could be achieved by reducing the size of the workforce, by reducing compensation packages, or both.

• K-12: $252 million; at $9,012, New Mexico spends more on K-12 per-student than Utah ($6,555), Arizona, ($7,208), Oklahoma ($7,672), Texas ($8,299), and Colorado ($8,647).

The most promising tactic for immediate savings to is to renegotiate the collective-bargaining agreements that excessively compensate teachers and administrators, especially through an unfair and broken pension system that incentivizes longevity over quality. Expanding school choice is another way to save money and cut costs.

Absent a “miracle” rebound in oil and natural gas prices, New Mexico’s budget faces long-term “structural” deficits. Gimmicks and tax hikes will not solve the problem. We’d all like to see a thriving private sector and voters will decide this November between two very different visions of New Mexico. In the meantime, we need to do some substantial pruning of the budget in order to avoid raising taxes that further make New Mexico uncompetitive with her neighbors.

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

The Pew Research Center’s Stateline is lamenting the fact that 13 states “and many localities continue to tax the sale of groceries, even though the taxes disproportionately hurt the poor and may affect the quality, variety and even the amount of food they can afford to put on the table.”

But New Mexico offers an instructive lesson in the “progressivity” of exempting groceries — i.e., cut or eliminate a levy somewhere, and the foregone revenue will be obtained someplace else.

On January 1, 2005, sales of food at grocery stores were made exempt from the state’s GRT. But to compensate, the tax’s rate was raised on other purchases. And a few years ago, local governments were allowed to impose GRT hikes, to produce revenue that the state would no longer provide.

Such “hold harmless” hikes have been implanted all over New Mexico. Last week, the Silver City Town Council passed a “notice of intent ordinance” to hike its GRT. Mayor Ken Ladner explained that the action was “necessary so that the town can position itself so that it can move quickly to enact the hold harmless gross receipts tax if a special session of the legislature results in the elimination of the planned revenues upon which the town created its budget. If that unfortunate action does occur, the town needs to be able to adopt this ordinance instituting the tax before September 30 of this year in order for it to be effective on January 1, 2017.”

In 2013, Dick Minzner, a former secretary of the New Mexico Taxation and Revenue Department, and Brian McDonald, a former director of UNM’s Bureau of Business and Economic Research, concluded that the effect of the food-tax exemption “has been the opposite of that intended.” Why? By providing “only limited benefit to the poorest … of our households, combined with a tax increase on all other purchases, [it] probably made our tax system more regressive by most measures.”

Give Stateline’s Elaine S. Povich credit for balance. She interviewed the Tax Foundation’s Scott Drenkard, who noted that states “might be looking at getting rid of sales tax on groceries, but groceries are between a sixth and a seventh of all consumption. If you want to raise the same amount of money you might have to increase the [general] sales tax by a full percentage point.”

There are no free lunches in tax policy.

San Juan College High School commenced operations on Monday, with its first class of 80 students.

A partnership between the Aztec, Bloomfield, Central Consolidated and Farmington school districts, SJCHS grads will earn a high school degree and “up to sixty transferable college credits.” Students will have access to campus resources, including the library, computer lab, and tutoring center, and “will have the option to participate in appropriate San Juan College student clubs, activities and organizations.”

Unfortunately, while 80 students “seeking a non-traditional high school experience” are about to start a new adventure, 43 won’t. The Farmington Daily Times reported that demand exceeded available slots, so a lottery had to be held to determine who was picked for enrollment.

Will SJCHS live it up to its promise of equipping graduates “for success in higher education and grow them into contributing members of society”?

Who knows? But that’s the point. School choice, in all its forms, is a recognition that one-size-fits all education doesn’t work. By cracking open an ossified system, and permitting experimentation, options can proliferate — including the opportunity for some high school students to benefit from learning on a college campus.

Best of luck to SJCHS. New Mexico needs more — many more — experiments like it.

Happy National Employee Freedom Week!

A “national effort to inform union employees about the freedoms they have to opt out of union membership and let them make the decision that’s best for them,” National Employee Freedom Week is sponsored by “a coalition of national, state and local organizations dedicated to employee freedom.” The week’s founding organizations are the Nevada Policy Research Institute and Association of American Educators. Many state-level think tanks, including the Rio Grande Foundation, participate.

Employees in “organized” workplaces are often told that they must join the union and pay full dues in order to keep their jobs. It’s not true — several U.S. Supreme Court decisions have recognized the right to decline union membership. In addition, workers covered by collective-bargaining agreements cannot be required to pay more than the portion of their dues that fund legitimate union activities, such as contract administration and grievance adjudication. (In right-to-work states, such “agency fees” are not permitted.)

Here’s a helpful link for New Mexico’s private-sector workers who want the specifics on employee freedom. The National Right to Work Legal Defense Foundation has a guide for state- and local-government workers here.

Additionally, polling on two questions relating to unionism is being released today: For National Employee Freedom Week, 2016, union members were asked two questions about employee freedom. In addition to asking if union members would like to opt out of their union, NEFW also looked at the support for “Workers Choice” reforms, which would allow employees who opt out to negotiate directly with their employer.

Question 1: If it were possible to opt out of membership in a labor union without losing your job or any other penalty, would you do it?

Nationally, respondents said:

Yes: 28.7

No: 71.3

Question 2: If employees opt out of union membership and stop paying dues or fees to the union, should they instead represent themselves in negotiations with their employer?

In New Mexico, respondents said:

Yes: 54.7

No: 45.3

Wendell Cox has released his latest look at which states Americans are moving to — and from. Using IRS data, which offer “probably the best approximation of domestic migration available,” the demographer found that from 2013 to 2014, Texas and Florida were still superstars. Low/no taxes and reasonable regulations continued to attract both residents and investments to the states. Where Big Government rules — e.g., New York, Illinois, New Jersey — populations and economies stagnated, or even withered.

Big states tend to be either big losers or big gainers in migration. So Cox’s most useful metric is the “state attraction ratio,” which divides “out-migration by in-migration (stated in out-migrants per 100 in-migrants).”

Sadly, New Mexico ranked eighth on the list of states people fled. The Land of Enchantment wasn’t as bad as New York or Illinois, but it ranked among consistent laggards such as Rhode Island, Pennsylvania, and Massachusetts. In its region, New Mexico was at rock-bottom. Four of its five neighbors attracted more residents than the drove out. (Surprisingly, Utah’s ratio fell just below 100.)

Great weather. Nice people. Fine food. Fascinating culture/history. A low cost of living. On the surface, at least, New Mexico should be a growth powerhouse. Yet it remains trapped in a seemingly never-ending economic mire. Isn’t it time for some significant policy course-corrections?

Proponents of the mandatory sick leave ordinance are touting the benefits of yet another new local government mandate. The City’s elevated minimum wage is apparently not luring Millennials to town. Now, mandatory sick leave is being put on the ballot for consideration this fall.

The economic issues faced by this City/State are the result of too few jobs. Low wages are the result of plentiful low-skilled labor. Both data and anecdotes bear this out.

New Mexico’s unemployment is 6.2 percent, second-highest in the nation (as of June). Earlier this year, 10,000 people applied for 290 jobs at the Cheesecake Factory (a chain restaurant).  Piling more rules and regulations upon businesses and job creators will result in fewer jobs for young people.

A new study using data from Connecticut backs up that claim. Connecticut adopted mandatory sick leave in 2012. The report by Dr. Thomas Ahn of the University of Kentucky is the first to examine multiple years of Census Bureau data (2012-2014) on the impact of Connecticut’s first-in-the-nation state paid sick leave law.

To isolate the effects of the paid sick leave law, Dr. Ahn compares Connecticut to the five surrounding New England states, and controls for other relevant economic factors that might be responsible for changes in employment.

Dr. Ahn finds that the fraction of employees working at companies with paid sick leave benefits rises from virtually zero at ages 18 to 20 to about 70 percent for workers in their mid-30s and above. He thus expects a new benefit mandate to have the greatest potential for negative impact on younger employees, who are less likely to have the benefit currently.

Among his findings:

Younger employees in Connecticut aged 20-34 saw a 24-hour reduction in annual hours worked. For a part-time employee in the service industry, that’s the equivalent of roughly one lost week of work per year. These employees lost $850 per year in annual income, the equivalent of 3.5 fewer pre-tax paychecks for someone working part-time at the state’s minimum wage.

There are also other consequences to consider: In forthcoming research, Dr. Ahn and his colleague Dr. Aaron Yelowitz find that recent paid sick leave policies in the United States have increased employee absenteeism by 1.2 days per year. Notably, these absences do not tend to occur in times of the most severe influenza outbreaks—suggesting that employees may be using the benefit even when they’re not sick.

There is no doubt that sick leave is a nice benefit to have. However, a one-size-fits-all mandate imposed from the date of hire is the wrong approach. After all, businesses are clearly willing to offer sick leave as a benefit especially as workers gain skills and time in the workforce.

This mandate is not flexible. It will make jobs and job experience further out of reach for young people, especially those in part-time jobs working their way through college. Tracking will be a nightmare as will be the potential legal issues it thrusts upon employers. Ultimately, another mandate is exactly what this community needs if the goal is to push more young people and businesses into Texas and out of New Mexico.

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

There can be no doubt that New Mexico’s construction industry faces some serious public policy challenges. The Associated Builders and Contractors, for example, ranked New Mexico 51st (behind even Washington, DC) on policies affecting the industry. The scorecard included such “bread and butter” RGF ideas like “right to work” and Davis-Bacon “prevailing wage” repeal.

Interestingly enough (albeit unsurprisingly to us), New Mexico suffers from high levels of unemployment in construction per this chart from June 2016. Both charts and additional commentary can be found here.

To be fair, Alabama has a higher rate in June, but this is a snapshot, the real kicker comes in the subsequent chart in which we find that New Mexico’s second-highest unemployment rate of June 2016 represents a VAST improvement over the same time last year:

In addition to “right to work” and “prevailing wage” there are permitting, land-use, and a whole host of other factors that make construction more difficult in New Mexico than it has to be. It would be nice if policymakers focused on ways to address the issue.

New Mexico’s taxpayers didn’t need more lousy fiscal news, but they got it, courtesy the Associated Press. Yesterday, reporter Morgan Lee revealed that the state’s “two major public pension funds have missed targets for investment returns for a second straight year, likely pushing up unfunded liabilities that can extend the time it takes to meet obligations to public employees if benefits and contributions remain unchanged.”

The New Mexico Public Employees Retirement Association “achieved” a return on investments of “less than 1 percent for the fiscal year ending in June.” The Educational Retirement Board fared somewhat better, at 2.6 percent. Both are far cries from the funds’ long-term targets, which surpass 7 percent.

Sheesh. Last month, PERA’s boss gushed that due to recent reforms adopted by the legislature and Governor Martinez, the fund will “meet our goal of being 100% funded by 2043.” That certainly won’t be the case, if ROI remains so weak.

Yesterday, at a summit sponsored by the National Conference of State Legislatures, the Rockefeller Institute’s Don Boyd and Yimeng Yin Pension disclosed that pension underfunding, as a percent of state- and local-government taxes, is at a “near record”:

In New Mexico and elsewhere, more must be done to relieve taxpayers’ pension obligations. While alterations to existing systems are fraught with political peril, at the very least, new hires should be offered 401(k) plans. As an Oregon resident recently wrote in The Wall Street Journal, “Why government employees need a defined-benefit pension plan while the taxpayers who fund their benefits are required to survive on defined-contribution plans has always puzzled me. Government employees should be required to fund their own retirement plans with defined contributions like the rest of us. Maybe gaining an understanding of the real economy that supports them would be a corollary benefit.”

In a sense, New Mexico’s liberals are correct: The state’s budget does have a revenue problem.

“Progressives” see tax hikes on corporations and “the rich” as the “solution” to deficits. But their prescription is unwise for all sorts of reasons — not the least of which is the damage it will do to New Mexico’s economic competitiveness.

But there is a salutary way for more revenue to contribute to closing current and future budget gaps. A Texas-style, rapidly growing economy would fill the state’s coffers in short order.

The Land of Enchantment’s longstanding economic slump has produced anemic overall tax revenue. As an example, let’s look narrowly, at the levy placed on incomes. It is second only to the GRT as an in-state revenue-generator. Amazingly, in the 2015 fiscal year, the income tax yielded less revenue than it did eight years earlier:

Critics of the income-tax cuts phased in during the administration of ex-Governor Bill Richardson gleefully place the blame for slow/no revenue growth on the rate reductions he touted as “our way of declaring to the world that New Mexico is open for business.” But it’s a facile analysis. Between 2003 and 2008, revenue from the income tax rose by 50 percent, while inflation was just 10 percent.

It was the horrors of Great Recession that reversed the revenue trend. It’s tough to believe, but there are fewer people employed in New Mexico today than there were in 2008, and the jobs that are being created don’t pay impressive wages. Turn that trend around — i.e., immediately implement an effective economic-development strategy — and the revenue will flow, once again.

ALBUQUERQUE — It is no secret that New Mexico faces serious budget challenges. Senate Finance Committee Chairman John Arthur Smith called the budget situation “a crisis” and noted that the State is facing a deficit of more than $150 million for the budget year that ended June 30 and faces a gulf of up to $500 million for the current fiscal year.

That means that New Mexico’s elected officials face the unpleasant task of making serious budget cuts in an election year. To assist in that effort, the Rio Grande Foundation has compiled a list of budget cuts that would enable policymakers to achieve needed savings. The paper, “What to Cut Solutions to New Mexico’s Budget Crisis” is available at the Rio Grande Foundation’s website www.riograndefoundation.org.

Said Rio Grande Foundation president Paul Gessing, the study’s lead author, “To her credit, Gov. Martinez has clearly stated that she opposes tax hikes. We applaud her strong leadership on the tax issue which also makes having a solid plan with specific budget cuts an imperative.”

Here are some of the specific ideas outlined in the new brief:

• LEDA: $55 million; LEDA is classic “corporate welfare.” Worse, it is ineffective. Earlier this year, the Legislative Finance Committee (LFC) reported that “the state does not receive sufficient reporting from businesses using … LEDA … funds to properly evaluate” the program. Thus, “it is impossible to determine relative effectiveness and cost-efficiency” of it. Other dubious “corporate welfare” programs could add to the savings.

• Film subsidies: $50 million; There has never been a justification for spending $50 million annually to subsidize Hollywood studios. Massive deficits should mean massive cuts or elimination. Recently, Alaska and Michigan killed their programs while Louisiana downsized dramatically.

• Higher education: $30 million; Student populations are down by more than 8 percent, but the number of branch campuses continues rising. Reducing their number is an easy starting point. Cutting back on taxpayer subsidies for athletic programs (more than $4 million at UNM alone) must be considered as well.

• Personnel: $165 million; a 2014 study by the American Enterprise Institute found a 24 percent advantage for New Mexico government employees when total compensation, including the value of job security, was scrutinized. A 10 percent reduction in the total cost of state-employee compensation is a reasonable goal. This could be achieved by reducing the size of the workforce, by reducing compensation packages, or both.

• K-12: $252 million; at $9,012, New Mexico spends more on K-12 per-student than Utah ($6,555), Arizona, ($7,208), Oklahoma ($7,672), Texas ($8,299), and Colorado ($8,647).

The most promising tactic for immediate savings to is to renegotiate the collective-bargaining agreements that excessively compensate teachers and administrators, especially through an unfair and broken pension system that incentivizes longevity over quality. Expanding school choice is another way to save money and cut costs.

In conclusion Gessing said, “Cutting the budget is never fun. New Mexico needs a larger, healthier private sector built on sound public policies like economic deregulation, tax reform, educational choice, and a sound legal system.”

Proponents of the mandatory sick leave ordinance (as is typically the case with feel-good policies like the minimum wage) are touting the benefits of yet another new government mandate. Unfortunately, as a new study using data from Connecticut which adopted mandatory sick leave in 2012, the reality is that mandatory sick leave will hurt young workers (who area already leaving New Mexico).

The report, by Dr. Thomas Ahn of the University of Kentucky, is the first to examine multiple years of Census Bureau data (2012-2014) on the impact of Connecticut’s first-in-the-nation state paid sick leave law. To isolate the effects of the paid sick leave law, Dr. Ahn compares Connecticut to the five surrounding New England states, and controls for other relevant economic factors that might be responsible for changes in employment.

Dr. Ahn finds that the fraction of employees working at companies with paid sick leave benefits rises from virtually zero at ages 18 to 20 to about 70 percent for workers in their mid-30s and above. He thus expects a new benefit mandate to have the greatest potential for negative impact on younger employees, who are less likely to have the benefit currently.

Among his findings:

Younger employees in Connecticut aged 20-34 saw a 24-hour reduction in annual hours worked. For a part-time employee in the service industry, that’s the equivalent of roughly one lost week of work per year. These employees lost $850 per year in annual income, the equivalent of 3.5 fewer pre-tax paychecks for someone working part-time at the state’s minimum wage.

There are also other consequences to consider: In forthcoming research, Dr. Ahn and his colleague Dr. Aaron Yelowitz find that recent paid sick leave policies in the United States have increased employee absenteeism by 1.2 days per year. Notably, these absences do not tend to occur in times of the most severe influenza outbreaks—suggesting that employees may be using the benefit even when they’re not sick.

This month, the Southeastern New Mexico Economic Development District is hosting six “capital outlay application workshops.” Dave Venable, the organization’s president, told the Alamogordo Daily News that the events “will go over all the details on how to do the capital outplay applications and talk about making sure the infrastructure improvement plan is also completed for counties, cities, villages and municipalities.”

Interesting timing, given the drop in oil-and-gas revenue that is plaguing the state’s fiscal health. Severance taxes, which fund Santa Fe’s sleazy capital-outlay process, aren’t generating the kind of money they did just a few years ago. The 2017 legislative session is sure to be disappointing for local governments seeking pork — er, “critical community infrastructure.”

Meanwhile, The Wall Street Journal observes that infrastructure spending by local and state governments across the country is dropping, with bond issuances falling “to levels not seen in the past 20 years.” Low interest rates haven’t been able to compensate for sluggish revenue and taxpayer resistance. In addition, “Many struggling legislatures and city halls are instead focusing on underfunded employee pensions and rising Medicaid costs.”

So the picture isn’t pretty for fans of infrastructure spending. But that’s not necessarily a bad thing. Powerful interests publicize the nation’s infrastructure “crisis,” but taxpayers need to be skeptical. As the Cato Institute’s Randal O’Toole recently noted, the number of structurally deficient bridges in the U.S. has “steadily declined … even as the number of highway bridges has grown,” and the “average roughness of [highway] pavement has steadily improved.”

As for the Land of Enchantment, the latest version of the Reason Foundation’s report on the condition of state highways found that New Mexico ranked “7th in the nation in highway performance and cost-effectiveness.” Its best performance was in “maintenance disbursements per mile (1st), capital-bridge disbursements per mile (6th) and rural arterial pavement condition (6th).”

When the infrastructure lobby isn’t peddling its crisis meme, it’s pushing public-project spending as a powerful tool to promote economic growth. But again, skepticism is warranted. Last year the Andrew M. Warner, an economist at the International Monetary Fund, told the Journal, “When you flip the infrastructure switch, the light doesn’t necessarily turn on. The returns are a long way from being automatic.”

In New Mexico and elsewhere, infrastructure is vital, and government’s role is essential. But taxpayer spending on roads, bridges, sewers, and the like must make financial sense. To the extent possible, it must be purged of politics. And its value in job- and wealth-creation must be subjected to strict scrutiny.

They’re the twin pillars of corporate welfare in New Mexico, and the “business” community wants them preserved.

Last week, the “Greater Albuquerque Chamber of Commerce and Albuquerque Economic Development … with 30 additional economic development organizations and Chambers of Commerce throughout New Mexico” wrote a letter asking “Senate Finance Committee and House Appropriations and Finance Committee members to keep LEDA (Local Economic Development Act) and JTIP (Job Training Incentive Program) funding intact as the state considers its budget challenges.”

LEDA, often called New Mexico’s “closing fund,” distributes subsidies for infrastructure in sums that can run into the millions of dollars. Its current “total unencumbered funding level” is $55.4 million, and such a relatively large pot of revenue could make a sizable contribution to sealing the budget breaches for the current and just-ended fiscal year.

LEDA has a legion of fans, but the reality of the program isn’t so rosy. The Legislative Finance Committee (LFC) has found that “the state does not receive sufficient reporting from businesses using … Local Economic Development Act … funds to properly evaluate” the program. Thus, “it is impossible to determine [its] relative effectiveness and cost-efficiency.” (What does LEDA think it is, the Legislative Lottery Scholarship Program?)

JTIP, with a fiscal 2017 appropriation of $6 million, “funds classroom and on-the-job training for newly-created jobs in expanding or relocating businesses for up to 6 months.” While the program is a treasured tool for New Mexico’s economic-development bureaucrats, there is no evidence that it makes meaningful, lasting contributions to job- and wealth-creation in the state.  As reported by the LFC, the Economic Development Department has pursued “less reporting and oversight for JTIP by asking to reduce the performance measures for JTIP from four to two. The agency wanted to stop reporting the average hourly wage of jobs funded through JTIP and discontinue reporting the percent of employees whose wages were subsidized by JTIP still employed in New Mexico after one year. However, these are critical measures to ensure jobs funded are not low or minimum wage positions and that the workforce the state is training remains employed and in the state after the training. If a majority of funds are used to fund poorly paid positions and those employees then leave the state to find better job opportunities, it would be a clear signal JTIP is not serving its intended purpose.”

New Mexico’s business lobby has shown a lot of guts in recent years, through its advocacy for a right-to-work law. It’s a position that has surely drawn the intense ire of union bosses and the considerable number of local, state, and federal politicians who kowtow to Big Labor. But last week’s letter offers a reminder that old habits can be hard to break. Corporate welfare is not true “economic development,” but the “New Mexico Coalition for Jobs” stubbornly refuses to abandon government policies that pick winners and losers in the marketplace. Fairness issues aside, it’s not at all clear that LEDA and JTIP provide much “return on investment” to taxpayers. The programs should not be preserved — they should be among the first items chopped to balance the state’s books.

We don’t yet know the date, but a special session will soon be called to tackle New Mexico’s budget woes. The fiscal year that ended June 30 fell into the red, and the current fiscal year is facing a deficit of hundreds of millions of dollars.

One stat that’s sure to be heard again and again during the special session was recently cited by the Albuquerque Journal — “the state’s $6.2 billion budget.”

Technically, that amount is correct. But it describes just one portion of New Mexico’s total expenditures, namely, the General Fund. Described by the Legislative Finance Committee as “the primary state fund from which the ongoing expenses of state government are paid,” the General Fund derives its revenue from the GRT, income tax, energy levies, investments, and miscellaneous sources, such as tribal casinos, license fees, and “reversions of unspent funds from state agencies.”

To see how much loot the General Fund fails to include, consider another amount: $19.1 billion. That’s the all-in figure for 2015’s state expenditures, which include transportation, subsidies from Washington, and quasi-public entities.

Here’s a look at the last dozen years of total spending, courtesy the state’s comprehensive annual financial reports:

Expenditures in the 12-year period rose by an inflation-adjusted 46.5 percent. In contrast, population growth was just 9.8 percent.

The bottom line? New Mexico spends far, far more when every dollar is accounted for — not just the bucks that fall within the General Fund. Something to remember, when politicians and activists wail about “cuts” to “essential public services.”