There has been a lot of discussion recently about New Mexico’s “Three Tiered Licensing System.” This has been spurred by a report from the Legislative Finance Committee which stated that “New Mexico’s three-tiered career ladder system does not align pay with student achievement.”

Curiously, this seems to be a factor IN SUPPORT of the system, at least according to the unions. Quoting directly from the article:

The three-tiered system was never, ever about raising student test scores. In fact, as the Journal itself has aptly pointed out on numerous occasions, including in this article, student test scores correlate more closely with demographic factors such as family income, home language and parents’ level of educational attainment than they do with a teacher’s location on the three-tier professional scale.

So, what he is saying is that we have this three-tiered-licensing system that has nothing to do with improving test scores, but simply results in more highly paid teachers. No wonder the unions like it, but no one else does. While it is obvious that having excellent teachers is an important factor in improving educational outcomes, paying teachers more for simply having another set of credentials is a silly and ineffective way to spend money.

What should be done? Simply put, rather than wasting money on a broken and irrelevant licensing system, why don’t we judge teachers based on the educational outcomes of their students? Standardized tests shouldn’t be the ONLY or even the dominant measure here, but objective measures are important if we are serious about measuring teacher performance objectively.

New Mexico Watchdog Jim Scarantino takes Attorney General Gary King to task for his unwillingness to prosecute State Rep. Ray Begaye for his outright fraud on travel reimbursements. It is hard to imagine anyone wanting to do business in New Mexico when the man entrusted with enforcing our laws is unwilling to prosecute such blatant cases of law breaking by its elected officials.

There’s no doubt that New Mexico needs to become more economically competitive. Tax policy is one area in need of improvement. I discuss the opportunities in this 15 minute interview. The show airs live on KNAT Channel 23 on Thursday, Nov. 29, 2012 @ 10:00 am

Paul Gessing discusses tax reform on KNAT TV from Paul Gessing on Vimeo.

With everything going on in Washington these days, some important issues are bound to get lost in the mix. One issue that Congress will hopefully tackle soon is to open up the international market for natural gas. New Mexico is a big producer or natural gas and to say the least, prices are down.

Unfortunately, while the US has a surplus in natural gas, the international market in the fuel is just developing for a variety of reasons. The federal government holds one major key to opening international markets like Japan to US exports.

Such openness could be a boon for New Mexico which has been hurt by low natural gas prices. Support of free trade SHOULD be a no-brainer for our Congressional delegation because it is clearly in our self-interest and a truly non-partisan issue. The folks at the center-left Brookings Institute have written a brief explanation of the issue and why free trade is a good thing.

Free trade would be a boon for New Mexico, but powerful interests oppose free trade in natural gas. Where does your Congressman/woman stand?

Full-disclosure, I am on the founding board of the charter school discussed in this opinion piece, but the message is absolutely important and relevant to reforming New Mexico’s education system moving forward. Online learning may not be right for every child, but it can help large numbers of them. We need to get out of the “one-size-fits-all” mentality in education.

Sounds like one of those ridiculous forwarded emails that can easily be debunked on Snopes.com or another site, right? Wrong. This legislation is being voted on in a lame duck Congress as early as next week. It would give nearly two dozen federal agencies unlimited access to your email without a warrant.

Yes, we normally stick to “economic freedom” issues here at Rio Grande Foundation, but this threat from power-hungry “representatives” in Washington is simply too big to ignore. Economic freedom requires a semblance of privacy and the ability to carry on business without government meddling and looking over our shoulders.

Bingaman’s DC phone number is: (202) 224-5521
Udall’s DC number is: (202) 224-6621

If you aren’t already aware, the City of Albuquerque which now says it is facing a “severe budget crunch,” is considering the creation of a new “Bus Rapid Transit” system to run down Central Avenue. The good news is that bus rapid transit (BRT) won’t be nearly as expensive as was Mayor Marty’s proposed streetcar. The bad news is that, according to this report, the proposed BRT system will cost more than $100 million to construct. Future maintenance issues are not discussed.

Here is a schedule of public meetings on the topic. Those meetings get underway next week:

Tuesday, November 27, 2012, 6 p.m.-7:30 p.m.: Manzano Mesa Multi-Regional Center – 501 Elizabeth SE, 87123-2887
Thursday, November 29, 2012, 6 p.m.-7:30 p.m.: Alamosa Community Center – 6900 Gonzales Rd SW, 87121
Tuesday, December 4, 2012, 6 p.m.-7:30 p.m.: Loma Linda Community Center – 1700 Yale SE 87106
Tuesday, December 11, 2012, 6 p.m.-7:30 p.m.: Old Main Library/Special Collections, Botts Hall – 423 Central NE (at Edith), 87102
Thursday, December 13, 2012, 6 p.m.-7:30 p.m.: Albuquerque Museum of Art and History (Auditorium) – 2000 Mountain NW, 87104-1459

While this is just the start of the discussions, it seems that BRT should not be a priority for the City. Here are some points for discussion though:

1) At a time of budgetary distress (at both the federal and local levels), is this the best and highest use of scarce taxpayer dollars?
2) Specifically, what improvements in terms of ridership and service will we receive?
3) Could service for the existing Rapid Ride system be improved in other, less-expensive ways?
4) Will this proposal negatively impact mobility in terms of autos/pedestrians/cyclists on Central?
5) This is a big city. Is Central the best possible location for a major transit investment? How about between the airport/downtown/Old Town for example?
6) How will operations costs increase/decrease from present? How will those costs be paid?

Check out the following chart:

The chart is pretty self-explanatory as New Mexico’s per-capita spending was the 6th-highest in the nation during the 2000-2010 decade. This is not surprising since for much of the decade big-spending Gov. Bill Richardson was in office, but it should give license to our current elected leaders to focus on being fiscally-conservative when it comes to state spending.

According to a new report from a group called Economic Modeling Specialists, Albuquerque has been the 2nd least competitive metro area since 2010. The report relies on a concept called “shift share” with which I was not previously familiar and I’m not sure that the report effectively describes the economic reality in Albuquerque, but it is most definitely relevant that we were ranked 99th out of 100 metros.

Richard Florida has an article about this at The Atlantic.

The same outfit did an analysis of the 50 states recently and New Mexico did not fare especially well in that either. Not surprisingly, Texas ranked highly.

Bernalillo County has posted its payroll including names and pay online. You can find this information here. Previous efforts to make the County truly transparent had failed in the Commission, but the Rio Grande Foundation went ahead and requested the information and posted it online on our own website.

Kudos in particular to Commissioner Wayne Johnson for his steadfast leadership on transparency at the County. It is our hope and assumption that the push for transparency will continue at the County regardless of its partisan makeup.

I recently attended a presentation by the Federal Reserve Bank in Albuquerque. At the event, this very informative powerpoint presentation was given. As the presentation illustrates, New Mexico is one of two states to have lost a significant number jobs over the past year (coal-reliant West Virginia being the other). Here is the data in another format.

Why is New Mexico lagging? As the charts on pages 7 and 8 of that report illustrates, New Mexico is over-reliant on Washington as a basis of its economy. And, with the recognized need for Washington to start to reverse spending growth, the decline in federal spending is going to hit New Mexico especially hard.

Not to be one to say “I told you so,” the need to diversify our economy away from the federal government was a topic of RGF back in 2007. It is time for policymakers to realize that the Washington gravy train has left the station. It is time to adopt proven, free market policies that will make New Mexico attractive to businesses.

Obviously, there are different visions for our economy, but I’ll put our ideas up against anyone else’s in terms of proven effectiveness.

(Albuquerque) The Competitive Enterprise Institute and Rio Grande Foundation today released a joint working paper criticizing the Regional Haze settlement agreement recently proposed by the New Mexico Environment Department. The study is the first independent analysis of the settlement, which would resolve an ongoing dispute between the state and the Environmental Protection Agency over the haze-causing emissions from the San Juan Generating Station.

“EPA’s Regional Haze plan would impose almost $375 million in compliance costs on PNM ratepayers, in order to achieve an “improvement” in visibility that is imperceptible,” said CEI policy analyst William Yeatman, who authored the report. “Unfortunately, the state’s alternative proposal is even worse—it would cost almost $20 million more, yet it would significantly diminish PNM’s firm generating capacity. To put it another way, the state’s alternative would cost more, for less.”

At issue is an EPA regulation, known as Regional Haze, which requires that states improve visibility at federal National Parks. In June 2011, New Mexico proposed a Regional Haze plan that required a $36-million retrofit at the San Juan Generating Station. Three months later, in August 2011, the EPA rejected the state’s plan, and imposed a federal plan that required a $375-million retrofit at the power plant—more than ten times the cost of the state’s original plan. During the summer and fall of 2012, the New Mexico Environment Department led negotiations, in an attempt to reach an alternative agreement that would bridge the gap between the state and the EPA on Regional Haze.

In early October, after months of negotiation, the New Mexico Environment Department proposed a settlement agreement, which was then sent to EPA for review. Unfortunately, the Environment Department refused repeated requests for details on the settlement agreement. Despite the lack of specifics, it is nonetheless possible to perform a line-item cost analysis of the proposal, using regulatory filings submitted by PNM and conservative assumptions.

“New Mexico is much better off continuing to fight for its original, affordable Regional Haze proposal in court,” noted Yeatman, referencing litigation launched by the state against the EPA over the Regional Haze regulation in late 2011. The case is pending before the Tenth Circuit Court of Appeals. He continued, “Due to the unique prerogatives accorded to states under the Regional Haze program, New Mexico’s lawsuit has good prospects for success. Even were New Mexico to lose its case, suffering the EPA’s regulation would be better than the settlement negotiated by the New Mexico Environment Department.”

Added Rio Grande Foundation President Paul Gessing, “New Mexico rate payers deserve the best rates possible. While environmental concerns are important as well, the original proposed retrofit is far more sensible and cost-effective than the other two options.”

To read the report, click here.”

I sat down with Mike Jaxson of “This Week in Chaves County” to discuss the election results and what they mean for New Mexico. Take a listen here.

From all of the talk about sequestration, one might be led to believe that it will result in “massive” spending cuts. That could not be further from the truth. What’s massive is our 16+ trillion dollar national debt and the trillion+ annually being added to it. Sequestration is not ideal, but as the Rio Grande Foundation and several other prominent free market groups point out in this newly-released letter, it is necessary to start this nation moving towards fiscal sanity.

It might be self-evident after Tuesday’s election, but I just ran across the interesting chart below which was put together by the Manhattan Institute. It illustrates the relative strength of public-sector labor unions. It will come as no surprise that New Mexico’s public-sector labor unions are the strongest in the region by far and are among the strongest in the nation. To be sure, many of the states with strong public employee unions are also the wealthiest in the nation. They are also the “bluest” (probably a lot of both “cause” and “effect” there) and are generally seeing slow population growth or even loss). This, despite relatively high incomes, makes one wonder why more Americans are moving to middle-income, non-union states rather than high income, heavily unionized states. Lastly, New Mexico is easily the poorest state to have public-sector unions as strong as it does. I can’t get the table to go past Florida, so go to the main paper by clicking here to find it.

The damage that was brought upon the coastlines of New York and New Jersey by Hurricane Sandy, estimated to cost up $50 billion, has some economic analysts stating that the tragic event could be an economic blessing (as discussed in a November 5 article). These individuals believe that the disaster could provide a desperately needed boost for the sluggish economy due to reconstruction. The idea that massive destruction is good for the economy should be seen as absurd on its face, but many economists – including Nobel-winner Paul Krugman – subscribe to this fallacious argument.

The great political economist Fredric Bastiat challenged this erroneous view back in 1850. Bastiat used the example of a broken window to illustrate how although we may see the new work which has been provided to the glazier to fix the window, but we do not see where that money could have been spent or invested absent of the damage. By simply replacing the broken window with a new one, no new wealth has been created; rather society is one window poorer than before.

The scarce resources that will be employed to rebuild the infrastructure destroyed by Sandy will be denied of their other potential uses. Of course, the rebuilding of damaged property is necessary, but it robs us – especially those directly impacted – of wealth. Disasters should not be confused with economic stimuli.

Ben Sugg
Policy Analyst
Rio Grande Foundation

Much will be said and hashed over regarding the federal elections, but there is no doubt that the 2012 elections were a mixed bag at best for New Mexicans of a limited government bent.

The good: All three PRC reform Constitutional Amendments passed;
While more was hoped for, the Legislature did not get markedly worse, despite a tough election nationwide.

The bad: New Mexico voters had a chance to shake up the Legislature and did not do it, thus missing out on a chance to end one of the oldest legislative monopolies in the Western Hemisphere.

Albuquerque voters, throwing basic economics to the wind, adopted an increase in the minimum wage mandated under City law.

In addition to the Legislature, reform-minded judicial candidates were defeated. Apparently, having a terrible judiciary is just fine with a majority of New Mexico voters.

We’ll keep educating New Mexicans on these and other important issues. Because the ideas of limited government are rather counter-intuitive (as John Stossel points out) we are likely to lose more than we win.

The ongoing decline of America’s economic freedom has been going on for more than a decade. And, the latest report which ranks nations on their relative levels of economic prosperity shows that for the first time, the US is not among the 10 most prosperous nations in the world. The English “Legatum Institute,” with which I was not previously familiar (but sounds a lot like a British version of the Rio Grande Foundation) has been ranking the nations of the world based on economic prosperity for the past six years. You can see their latest report here and watch a “Yahoo News” report on the report here.

Interesting tidbits from the report: America’s greatest declines in recent years come in the categories of “entrepreneurship,” “economy,” and “personal freedom.”

The report ranks the US 2nd on health (only behind Luxembourg), far better than Canada’s 15th position despite Canada’s overall better rank. American education also performed respectably on the report with a 5th overall ranking.

Fascinating report and more evidence that whoever we elect as the next president and congress of this country, they have got to make the restoration of economic freedom a top priority.

Corporate income taxation is a complex issue. It will be on the 2013 Legislature’s reform agenda as it should be. New Mexico’s corporate tax rate, as Winthrop Quigley accurately points out in his article, is too high. Then, things get complex. Single factor and a host of other issues come into play and Quigley seems to side with his left-wing friends at Voices for Children who of course can “put lost tax revenue to use elsewhere” as they’ve never met a tax cut they liked or a tax hike they didn’t like.

While reforming or even eliminating New Mexico’s corporate income tax would not be a “panacea” for the state’s economy (you don’t rank 49th in economic freedom based on one bad tax), the fact is that the corporate income tax is a poor source of revenue for New Mexico. For starters, it is too volatile: According to the LFC, it collected about $230 million worth of revenue in FY 2011. That was an 83.7 percent increase from the previous year. That kind of volatility makes budgeting susceptible to wide economic swings. It ratchets the budget up in good times only to leave painful cuts (or tax hikes elsewhere) in the bad times.

It also, of course, negatively impacts business location in New Mexico. The oldest principal of taxation is: “If you want more of something, tax it less, if you want less of something tax it more.” New Mexico is among the poorest states in the nation and also happens to have zero Fortune 500 companies headquartered within its borders. Perhaps it is time to try something new by making businesses WANT to come here?

If outright tax cuts are not in the offing, may I suggest restoring lost revenue by eliminating film subsidies and some of the “economic development” programs offered by the state (like JTIP and LEDA)?

We at the Rio Grande Foundation have often lamented the state of New Mexico’s education systems (both K-12 and higher ed). Well, an experience this weekend has given me some hope that our K-12 system can be reformed. I’m referring to the new “Estancia Valley Classical Charter School” which opened in Moriarty at the start of the 2012-2013 school year. I was privileged to attend its grand opening gala which took place on Friday.

Why would a new charter school bring me such optimism? After all, New Mexico already has more than 100 such schools. Estancia Valley Classical is unique in the charter school world because of one of its major supporters, Hillsdale College. It is one of two charter schools in the NATION to have received Hillsdale’s support through its charter school initiative. Hillsdale too is unique in that it is a liberal arts school with an avowedly free market/liberty-oriented approach to the world. Among other unique features, Hillsdale does not accept federal or state taxpayer subsidies for any of its operations.

How committed is Hillsdale to this school? Their president, Larry Arn flew out for the event and gave a great talk about the importance of moral virtue in learning and how studying the universal truths in Shakespeare can help students achieve that rarest of all traits, wisdom.

Obviously, this is a great opportunity for New Mexico in general and Moriarty specifically. The crew at Estancia Valley Classical are just getting their “sea legs” after a long and difficult charter application process (I know something about that myself). It will take some time to fully develop as an institution and to “hit its stride,” but I know that I will be watching its development with great anticipation.

If there is one we have learned in the last month about University of New Mexico, it is that their leaders and supporters are die-hard Keynesians. A few weeks ago, as I note in this posting, new UNM president Robert Frank’s justification for the now-delayed UNM Hospital was built on the shakiest of foundations. His argument was essentially that the project would create jobs through Keynesian stimulus, not that we need a hospital or some other sensible justification.

In today’s paper, we see proponents of Bond Measure C (the bond for higher education) make similar arguments on the supposedly stimulative nature of higher-ed construction.

As I wrote in a brief posting about the various ballot measures:

Bonds may not raise taxes, but they do cost real money that could otherwise remain in your pockets. If a project is indeed a priority like the Paseo del Norte Interchange, by all means vote for it, but also realize that higher education in New Mexico is bloated and recently handed out a $453,093 parting gift to departing NMSU President Barbara Couture.

In other words, money that will be spent on higher ed facilities could remain in taxpayers’ pockets. That money doesn’t disappear into thin air as Keynesians would have you believe. Rather, savings and investments are used elsewhere in the economy. That’s not to say that a bond measure can’t have a positive economic impact. I think the case is strong that the Paseo interchange will generate returns in terms of less time wasted in traffic, less pollution, and higher quality of life. While higher education can have similar stimulative impacts in the long term, New Mexico needs to focus on the quality of its institutions, not the quantity of campuses and/or buildings (as we’ve pointed out).

So, by all means, vote for bond measures if you think they are a worthy investment, but don’t fall into the Keynesian stimulus trap.

A short, nice video from Arthur Brooks of the American Enterprise Institute:

No matter who controls the White House and Congress after this election, there is no doubt that a close look at Canada’s successful deficit reduction policies are in order. Check out this article from the Washington Post written by the head of a Canadian think tank.

Also, see this chart from the Cato Institute which shows just how much spending has declined north of the border:

Lastly, it is worth noting that while spending in Canada is a big factor in their recent economic prosperity, our neighbors to the north have seen economic freedom increase as ours has declined in the USA.

As Americans head to the polls to vote, the issue of “ObamaCare” and health care reform in general remains one of the most heated points of contention. Unfortunately for all of us, both major party candidates for President have supported centralized, bureaucratic control of health care and thus the issue of true health care reform remains elusive as a campaign point.

The good news is that free market health care, also known as “consumer driven health care” is working, and that includes new data from New Mexico (since I have a BlueEdge health savings account, my family and I were likely part of this particular report).

As free market health care expert Greg Scandlen writes:

We’ll start with a study by the Health Care Service Corporation (the Blue plans in Illinois, Texas, Oklahoma and New Mexico) on the experience of their customers with their CDH plan, known as BlueEdge. Enrollment in BlueEdge has passed 1.5 million people this year and this study tracks them from before they entered the Consumer-Directed plans, which include both HSAs and HRAs.

A press release reports that BlueEdge enrollees –

Were four percent more likely to use preventive services.
Reduced overall utilization by 12 percent.
Were 10 percent more likely to use generic medications.
Spent 24 percent less on inpatient and 8 percent less on outpatient services.
Reduced hospital ER care by 12 percent.

These are changes in behavior by the same people before and after they joined the BlueEdge program. Unfortunately, the study itself is not available to the public, but a summary on the company web site reports that the reductions grew over time, dropping by 9.1% in the first year, but by 11.4% over three years.

In other words, those who use consumer driven health care are more conscious about costs, but also are using preventative services at a higher rate than others in traditional insurance plans. To paraphrase the “Occupiers,” THIS is what health reform looks like!