In March, 2004, then Gov. Bill Richardson of New Mexico signed into law Senate Bill 43. This bill required sources of renewable energy to make up 5 percent of the investor-owned electric utilities sales by 2006, and 10 percent by 2011. In 2007 the law was expanded by Senate Bill 418, which accelerated the timeline and increased the mandate such that renewable sources account for 10 percent of all power generated by 2011; 15 percent for 2015; and 20 percent for 2020 and thereafter.¹

Renewable sources include energy from solar, wind, geothermal, biomass and small hydroelectric facilities. One might assume that any combination of “renewables” would be adequate in achieving the standard, but this is not the case. The standard was made even stricter by the Public Regulation Commission (PRC) which has adopted diversity requirements for Investor Owned Utilities (IOUs). These mandates require proscribe that the Renewable Portfolio Standard (RPS) must be fulfilled with:

• No less than 20% Wind;
• No less than 20% Solar;
• No less than 10% Other technologies;
• No less than 1.5% Distributed Generation (2011-2014); and
• 3% Distributed Generation by 2015.²

According to the report “The Economic Impact of New Mexico’s Renewable Portfolio Standard,” New Mexico’s RPS will cost utility rate payers $2.3 billion over the decade from 2011 to 2020.³

In this situation, both the PRC and the Legislature can have an impact. The PRC should consider eliminating the provisions mandating that certain percentages of various sources of power be used. The Legislature should reduce or eliminate the RPS levels entirely at least until new more cost-effective technologies are in place that make wind and solar economically viable absent a regime of subsidies and mandates. Nationally, wind and solar combined generate less than 5 percent of electric power generation.⁴

¹David Tuerck, Paul Bachman, and Michael Head, “The Economic Impact of New Mexico’s Renewable Portfolio Standard” American Tradition Institute and Rio Grande Foundation, February, 2011, http://www.riograndefoundation.org/downloads/rgf_nm_rps_study.pdf

²New Mexico Public Regulation Commission, “Resource Diversity and the RPS,” http://www.nmprc.state.nm.us/utilities/renewable-energy.html

³David Tuerck, Paul Bachman, and Michael Head, “The Economic Impact of New Mexico’s Renewable Portfolio Standard” American Tradition Institute and Rio Grande Foundation, February, 2011, http://www.riograndefoundation.org/downloads/rgf_nm_rps_study.pdf

⁴Zachary Shahan, “11 percent of Energy Production from Renewables in 2010,” April 12, 2011, http://cleantechnica.com/2011/04/12/11-of-u-s-energy-production-from-renewable-resources-in-2011/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+IM-cleantechnica+%28CleanTechnica%29

In 2009 the New Mexico State Legislature passed SB 33, which mandates that prevailing wages be set by collective bargaining agreements.¹ The law attempts to ensure that workers who are hired for public works projects are paid a prevailing wage which is equal to collectively bargained union wages. This regulation holds despite the fact that only 8.7 percent of private-sector construction workers in New Mexico are union members.² By negating the merit system which was used by 92 percent of the construction industry, the law places wage setting power among the 8 percent who do use collective bargaining agreements.

Economically speaking, this is a form of price fixing which pushes out competitors who are willing to work for lower wages. The federal Davis-Bacon law (1931) is estimated to raise costs to taxpayers by 15 percent on federally funded projects.³ Additional legislation such as SB 33 only raises this cost, and arguably siphons money that could be used for other projects.

Resources are scarce. Adding costs to construction projects means fewer roads and schools for New Mexicans. The Legislature should repeal SB 33 and any other New Mexico law that forces taxpayers to pay a higher-than-market price for public works projects.

¹http://www.abcnm.org/Public_Policy/Senate_Bill_33.aspx

²Associated Builders and Contractors, "New Mexico,: No Good Government to be Found Here," (link)

³U.S. Chamber of Commerce, "Davis-Bacon Act," http://www.uschamber.com/issues/labor/davis-bacon-act

According to the Institute for Justice, there exist 52 low-income occupations that require licensing in New Mexico, including everything from funeral attendants to animal trainers.¹ These requirements order individuals to pay fees as well as invest a considerable amount of time in training and education. For example, an individual must commit approximately two years in experience before receiving a license to become a pest control applicator, while an aspiring emergency medical technician is required to invest 42 days and pass two exams.²

These licensing requirements for low-income occupations create barriers to entry for those who can’t invest the time or money simply in order to gain governmental permission to work. This results in fewer businesses, which means less competition and higher prices for consumers. If such professions were deregulated and the mandatory licensing system was abolished more entrepreneurs could enter the market and provide their goods and services. The current system solely benefits those businesses that have already attained their licenses, providing protection from potential competitors.

To advocate for abolishing the absurd licensing requirements in New Mexico is not to take the position that standards are unnecessary, rather to promote the idea that such standards should be brought about by consumers and not arbitrarily established by bureaucrats. If state licensing was optional, businesses would have the choice of pursuing or abstaining from going through the licensing process. Consumers could then choose to pay the additional premium set by a licensed business or opt for an unlicensed service that would in most cases be cheaper.

New Mexico needs to rid itself of these unreasonable licensing standards. With fewer state sanctioned obstacles in the way of entrepreneurs, both consumers and small businesses will benefit.

¹Dick Carpenter II, Lisa Knepper, Angela C. Erickson, John K.Ross, "License to Work," The Institute for Justice, May 2012, http://www.ij.org/licensetowork

²Ibid. 98.

Due to Gov. Richardson’s Executive Order #06-001, New Mexico law currently requires all public buildings over 15,000 ft2 to be LEED (Leadership in Energy and Environmental Design) Silver certified.¹ According to the U.S. Green Building Council, these building requirements are intended to promote "sustainable site development, water savings, energy efficiency, materials selection, and indoor environmental quality".² The reality is that this effort to make public buildings in New Mexico more "green" increases costs and doesn’t necessarily provide more energy-efficient buildings.

LEED standards can include building a minimal number of parking spaces in order to encourage the use of car pooling or public transportation, the addition of charging facilities for electric cars, and installing large numbers of bike racks.³ Certification for new schools constructed throughout New Mexico has added between $2,350 to $ 7,950 per building, not including additional material or design.⁴

The added costs of LEED Silver would be a small price to pay for buildings that are more efficient and better for the environment, but there have been numerous examples of LEED certified buildings failing to meet their long-term efficiency goals.⁵ This failure has even been recognized by the U.S. Green Building Council (USGBC), which noted in its own study focusing on 121 certified buildings that "more than half – 53 percent – did not qualify for the Energy Star label and 15 percent scored below 30 in that program, meaning they used more energy per square foot than at least 70 percent of comparable buildings in the existing national stock".⁶

The truth of the matter is that in many cases the efforts led by the USGBC have created more costs while failing to provide more energy-efficient buildings. Executive Order #06-001 should be overturned immediately so that tax-payers are not put in the position of funding inefficient building projects that do little or nothing for the environment.

¹U.S. Green Building Council, "LEED Public Policies," May 1, 2009.

²https://new.usgbc.org/leed

³http://www.usgbc.org/DisplayPage.aspx?CMSPageID=2599

⁴http://www.abqjournal.com/main/2011/08/01/news/to-build-green-or-not.html

⁵Henry Gifford, "A Better Way to Rate Green Buildings," http://www.energysavingscience.com/

⁶http://www.nytimes.com/2009/08/31/science/earth/31leed.html?pagewanted=2&_r=2emc=th

The Construction Industries Division (CID) in New Mexico requires that any individual who is engaged in construction-related contracting must be licensed. This includes "general construction work, electrical, mechanical and plumbing and LP gas."¹ Due to these current licensing requirements of the CID, construction-related projects are significantly more expensive to carry out, reaching levels as costly as an increase of 25 percent.²

Contractors who pursue construction-related contracting without obtaining a license risk being ineligible for licensure for one year. The CID can also suspend construction on the project.³ This prevalence of such barriers to entry varies greatly from state-to-state. In neighboring Oklahoma, construction contracting is almost entirely unlicensed.⁴ New Mexico would benefit greatly by abolishing the current onerous licensing system which would remove unnecessary cost burdens on contractors and provide incentives for individuals who would have otherwise pursued construction outside of the state, thus reducing construction costs in New Mexico.

The total abolition of the current CID licensing system is indeed a radical proposal, but one which should be seriously considered. In the absence of such a step, the CID should be restricted to simply approving initial construction plans and the final construction. This would allow construction to take place without the costly burden of unnecessary micromanaging by the CID.

Efforts such as the recent "electronic plan review system" which will allow businesses to submit their proposals online for a faster review process that will save both time and money are modest steps towards improving contractors’ ability to get to work.⁵ Much more is necessary in order to provide a free market environment for New Mexico’s contractors, and it begins with limiting the regulatory power of the CID.

¹http://www.rld.state.nm.us/construction/

²October 31, 2011, interview with Harold Meyers who owns a small business in West Texas and Clayton, NM.

³Construction & Manufactured Housing: Overview, http://www.rld.state.nm.us/construction/

⁴http://www.contractors-license.org/ok/Oklahoma.html

⁵http://www.abqjournal.com/main/2012/07/24/biz/business-briefs-45.html

Regulations are expensive (national total regulatory costs for 2011 came out to $1.752 trillion)¹. In economics, there is no such thing as a free lunch. Laws designed to protect consumers and the environment cost money both to enforce and in terms of lost economic activity. That’s not to say that any and all regulations are not worth it, but that there are always some tradeoffs. The tradeoffs between human health and pollution, for example, vary over time and by both individual and culture.

But, that doesn’t mean that all regulations are created equal or that we can’t come to some decisions about the necessity or lack thereof in terms of certain government regulations.

Currently, New Mexico lacks requirements for review of new regulations and rules, and although the state Administrative Procedure Act is still in place (who’s purpose was to impose procedural duties for agencies that chose to opt in), it has failed to be self-enforcing on agencies². Due to the absence of a centralized review process, agencies may or may not use their own procedures such as the use of legal council review, internal review committees, and economic analysis³.

In 2005 the Small Business Regulatory Advisory Commission (SBRAC) was created to review regulations that might have been unnecessary. Unfortunately the commission has not met for years, and according to Administrative Law Division Director John Martinez, "Less than 10 rules were actually reviewed by the SBRAC in the short time that they met regularly. During that time period, over 800 rule actions took place."⁴

Several of New Mexico’s neighbors have developed procedures of regulatory review that should be noted. Colorado’s "Department of Regulatory Agencies" reviews regulations and presents all cost-benefit analyses to the public, allowing for further participation concerning the review process⁵. Arizona’s "Governor’s Regulatory Review Council" regularly hosts "seminars for agencies on rule writing, periodic reviews, and the preparation of impact statements"⁶. Utah has both the "Governor’s Office of Planning and Budget" as well as the legislature’s "Administrative Rules Review Committee" that work collaboratively in the regulatory review process⁷. None of these mentioned processes are perfect, and all are need of improvement, but the unfortunate reality is that New Mexico is still very far from any of these modest review mechanisms.

New Mexico desperately needs a strong, centralized regulatory review process. By implementing such a measures and allowing for a cost-benefit analysis to be provided to the public, exposing undue regulations and furthering government transparency. A regulatory review process which would grant rescission powers to the governor in order to repeal unfair or unjustified rules would certainly help to remove the numerous arbitrary burdens which New Mexican businesses face today.

New Mexico’s Neighbors:

Texas: Currently, Texas lacks a single, centralized regulatory review process. There do exist individual legislative subcommittees, but these groups rarely use their authority to review rules. Overall, the situation in Texas is very similar to New Mexico.

Arizona: Arizona has what is known as the "Governor’s Regulatory Review Council" (GRRC) which does play a more active role in the review process than the state’s largely inactive legislative review committee. It appears that the GRRC, which is a slight improvement from New Mexico’s abject lack of controls, contains shortfalls as well, such as too narrow of distributional analysis (viewing small business impacts while ignoring public benefits etc.)

Colorado: Colorado has the "Department of Regulatory Agencies" which reviews proposed rules submitted by various agencies. The cost-benefit analyses are provided for public use which is certainly a plus concerning transparency. One issue that needs improvement is the State’s legislative review provisions which can "leave regulations in a state of limbo for up to a year"⁸.

Oklahoma: Oklahoma currently has both executive and legislative forms of regulatory review, but reviews often arrive too late during the rule making process and lack the analysis of benefits. The executive review process lacks transparency as well as consistency.

Utah: Utah has both the "Governor’s Office of Planning and Budget" as well as the legislature’s "Administrative Rules Review Committee" that work with agencies throughout the review process. Utah has also fared well concerning transparency due to the "Division of Administrative Rule" Website. Although the process is much more effective than New Mexico’s, Utah’s focus on compliance costs while neglecting benefits is an area that needs improvement.

¹http://cei.org/studies/ten-thousand-commandments-2012

²http://www.nmcpr.state.nm.us/acr/presentations/1981MSAPA.htm

³http://policyintegrity.org/publications/detail/52-experiments-with-regulatory-review/

⁴Ibid

⁵http://policyintegrity.org/publications/detail/52-experiments-with-regulatory-review/

⁶GRRC, Council Seminars, http://www.grrc.state.az.us/

⁷http://policyintegrity.org/publications/detail/52-experiments-with-regulatory-review/

⁸http://policyintegrity.org/publications/detail/52-experiments-with-regulatory-review/

New Mexico has been lagging its regional neighbors for many years. Throughout its 100 years of statehood, New Mexico has missed out on a great deal of private-sector economic development that has instead flowed to more economically-free states such as Colorado, Texas, and Arizona. New Mexico has instead relied on a steady and ever-growing flow of tax dollars from Washington for economic growth.¹

Unfortunately, this reliance on Washington has not made New Mexicans prosperous or their state wealthy. Rather, New Mexico has the highest poverty rate in the nation according to the Census Bureau.²

And, while economic trends are best understood over the long-term, New Mexico has again been lagging behind its regional counterparts as the growth of federal spending has stalled. The following chart from the Albuquerque Journal shows that New Mexico is the only state in the West that lost jobs between August 2011 and August 2012.³

It is often said that the definition of insanity is doing the same thing over and over again and expecting a different result. One area where this is true is in the area of government regulations. New Mexico suffers from overregulation of its economy. These regulations increase economic costs to businesses and consumers alike and enrich well-connected special interests. The Rio Grande Foundation has compiled a list of regulations that should be eliminated or at least modified in ways that liberalize markets. Most of these regulations are economic in nature, but some of these regulations are simply silly and place unnecessary burdens on those looking to run for the Legislature (as one example). It is often said that the definition of insanity is doing the same thing over and over again and expecting a different result. One area where this is true is in the area of government regulations. New Mexico suffers from overregulation of its economy. These regulations increase economic costs to businesses and consumers alike and enrich well-connected special interests. The Rio Grande Foundation has compiled a list of regulations that should be eliminated or at least modified in ways that liberalize markets. Most of these regulations are economic in nature, but some of these regulations are simply silly and place unnecessary burdens on those looking to run for the Legislature (as one example).

Notably, deregulation is not a partisan issue; at least it has not been during recent U.S. history. President Carter and Congress deregulated the airline, freight rail, and trucking industries, as well as the micro-brew industry that has spawned an entire new craft beer market in the last decade.⁴

Every day for the next several weeks, the Rio Grande Foundation will be E-mailing its "Burdensome Regulation of the Day." Our hope is that as we approach the 2013 legislative session, policymakers in Santa Fe and around the state – many of our proposals are not targeted at the Legislature – will consider addressing these issues in ways that make New Mexico more attractive to businesses and entrepreneurs while encouraging the spirit of free and open competition that has been so integral to the fabric of American life and economic growth.

Unlike so many other economic development schemes, these regulators issues can be addressed without any cost to taxpayers. If there are "costs" associated with demolishing these regulations, they come from removing privileges given by government to special interests. Those benefits will, in turn, accumulate to the population at large instead.

¹The Economist, "Greek Americans?" July 30, 2011, http://www.economist.com/node/21524887

²The Huffington Post, "How New Mexico, Poorest State in America, Fights Poverty," September 13, 2012, http://www.huffingtonpost.com/2012/09/13/new-mexico-poverty-rates_n_1881321.html

³Employment Highlights, Albuquerque Journal, Business Journal, October 22, 2012

⁴William L. Anderson, "Rethinking Carter," Mises Daily, October 25, 2000, http://mises.org/daily/535

It is a new year and another opportunity for New Mexico to turn over a new leaf by becoming a freer, more economically-prosperous place. We at the Rio Grande Foundation provide the intellectual ammunition policy makers need.

The latest policy area to cause us concern involves regulations right here in New Mexico. Some regulations may be necessary, but many regulations do nothing but protect well-connected special interests at the expense of consumers.

To publicize the negative impact regulations can have and explain what can be done to make New Mexico’s regulations work for consumers, not special-interests; we at the Rio Grande Foundation are going to send an E-mail every day starting tomorrow. These E-mails will explain:

• How deregulation can spur competitiveness and economic growth.
• That deregulation is not a partisan issue.
• How some of New Mexico’s unnecessary regulations hinder our economy and thus make us all poorer.
• What we can do to make regulations in New Mexico work FOR consumers and businesses rather than against them.

The Legislature start meeting in mid-January. It is important that if you find the ideas contained in these daily E-mails compelling and interesting that you share these ideas with your friends and family as well as your legislators.

Please forward this and subsequent E-mails to those who you think might be interested and encourage them to sign up for the Rio Grande Foundation’s E-mail list. Also, keep an eye out for media appearances relating to the need for regulatory reform.

For more information on this and other important economic issues to New Mexicans, check out our Website: www.riograndefoundation.org.

See the full paper here.

Recent press reports indicate that state workers are lobbying for higher pay. That’s no surprise because we all want higher pay.

The question that needs to be asked and perhaps studied is: “Is New Mexico government losing high-performing employees to the private sector or jobs in other states?” Surely the government has these data…

After all, we at the Rio Grande Foundation understand that governments don’t operate in anything resembling a competitive free market. Before blindly offering raises to government workers simply because “they deserve it,” policy makers should analyze whether the labor market is indicating that New Mexico government workers are indeed “underpaid.” Our past analysis indicates that government workers in New Mexico are both too plentiful and highly paid. Is that still the case?

We know that New Mexico is not creating many jobs these days.

As we approach the fiscal cliff with Obama simply unwilling to agree to any deal that doesn’t massively increase taxes (and Republicans unwilling to press the issue on spending), I see this story about an airport in New Hampshire that is basically giving flights to Boston away so that the airport can tap into $1 million of our tax dollars.

Oh, and just in case you think this doesn’t happen here in New Mexico…

As Margaret Thatcher famously said, “The problem with socialism is that you eventually run out of other people’s money.” Unfortunately, with the printing presses revved up to full speed in Washington, we won’t realize we’re off the cliff (both fiscal and the overall economic cliff) until it is too late.

I recently spoke to KRQE Channel 13 about the impending “Fiscal Cliff.”

Leap off fiscal cliff would cost N.M.

Every day that passes and we find out more about ObamaCare makes the law look worse and worse for average Americans. Soon, a series of major tax hikes resulting from the health care law will take effect.

But, as RGF scholar Deane Waldman points out in his new article at American Thinker, the law’s supporters have “drunk the Kool Aid” and will not be deterred.

(Albuquerque) New Mexico’s business community and other groups have long discussed in broad terms the need for “regulatory reform.” And, as the Rio Grande Foundation has discovered by undertaking an exhaustive review of regulations imposed by various New Mexico governing bodies, our state is indeed overregulated at great cost to taxpayers, potential entrepreneurs and workers, and consumers.

Said Rio Grande Foundation president Paul Gessing of his organization’s findings, “We looked high and low for some of the most obvious and egregious regulations on a wide variety of issues. While the primary state-level regulatory bodies in New Mexico are the Legislature and the Public Regulation Commission, burdensome and unnecessary regulations administered by the Courts were an unexpected discovery.”

To publicize the need for regulatory reforms and elimination, the Foundation will be publishing “an email a day” throughout January. These emails will include information on what other states do or don’t do to analyze regulations prior to adoption, explain how former US President Jimmy Carter used deregulation to set the table for the 1980s economic boom, and outlines a path toward wiser, fairer, more economically viable system for New Mexico’s various regulatory bodies.

Among the most egregious regulations found in the report:

• According to the Institute for Justice, there exist 52 low-income occupations that require licensing in New Mexico, including everything from funeral attendants to animal trainers. These requirements order individuals to pay fees as well as invest a considerable amount of time in training and education for jobs that could easily be learned in other ways;

• In 2009 the New Mexico State Legislature passed SB 33, which mandates that prevailing wages be set by collective bargaining agreements. These “Prevailing Wage” laws unnecessarily increase the prices taxpayers pay for roads and schools (and other public works progress) by up to 15%;

• New Mexico’s “common carrier” laws require potential entrants into the market for taxi cabs and other motor vehicle industries to gain approval from their competition. As Leslie Linthicum wrote in a recent Albuquerque Journal piece, this resulted in one prospective taxi operator spending eight years fighting to obtain approval from the Public Regulation Commission;

• The New Mexico Spaceport which cost taxpayers $209 million will be a total failure unless the Legislature passes a liability exemption for suppliers of parts and equipment for the spacecraft that will launch from the Spaceport. This liability exemption will not impact New Mexicans in any direct way unless they choose to pay $200,000 to go into space.

Concludes Gessing, “These and other regulations are holding New Mexico’s economy back. Nonetheless, deregulation should not be a partisan issue. While we have tried to be thorough, there are undoubtedly other rules and regulations that should be addressed. We welcome the input of others (and encourage you to sign up for the emails) at: info@riograndefoundation.org

Needless to say, the RailRunner advertisements you are seeing are paid for by you, the taxpayers. Interestingly, the ads focus on the future of commuting in Albuquerque and show a bunch of kids saying how happy they are that their parents made the “investment” in the train. Ironically, it is those very same kids who are going to be stuck with the bill for the Rail Runner in about a decade when those balloon payments come due.

In case you missed it, the media is now reporting that the vaunted $20 million New Mexico Supercomputer is going to be parceled out. Supporters of the project claim that “Encanto’s capacity helped leverage $60 million in federal funding for university research.”

“Helped leverage” is what they call “weasel words” along the lines of the Obama Stimulus which “helped create or save” X number of jobs. Even if it brought $60 million in totally new spending to the state, the project is still a waste of money because what matters when government goes about creating jobs is not money generated, but tax revenue generated. After all, the computer was purchased with 20 million tax dollars. These dollars are the product of some fraction of economic activity generated elsewhere in the marketplace (7% in the case of Albuquerque’s GRT).

So, the only thing this supercomputer “stimulated” is more government spending and higher taxes. Like the film subsidies, Spaceport, RailRunner, and subsidies for Schott Solar and Eclipse Aviation, Richardson’s legacy will be one of boondoggles falling apart. Unfortunately, we have to wait another decade before the true cost of the Rail Runner is fully understood.

Recently, we at RGF made a pretty big deal out of a Forbes report that called New Mexico the number one “death spiral” state in the nation. Albuquerque Journal economy reporter Winthrop Quigley took issue with the report and argued that New Mexico, while it has some problems, is not in a “death spiral.”

Rio Grande Foundation policy analyst Marcos Portillo wrote the following response to Quigley which appeared in Monday’s Albuquerque Journal.

Mr. Quigley may believe that Forbes’ “death spiral” claim is unwarranted, but the fact is that New Mexico’s economy is among the worst in the nation.

Quigley’s assumption is that New Mexico will continue getting infused with federal dollars into the foreseeable future. Federal funds currently make up nearly $6 billion of the $15 billion in total state expenditures. New Mexico also has one of the highest concentrations of federal employees (of about 33,000) in its various military bases and laboratories.

When the federal government tightens its belt, our economic problems could worsen.

Currently, New Mexico is: Ranked dead last in economic freedom by the recent Fraser Institute report;

Has a poverty rate that is highest in the nation;

Has an education system ranked 46th of 47 by the US Department of Education;

Has a Human Services Department website proclaiming that it is “serving one in three” even prior to the massive government expansion under ObamaCare.

Has a judicial climate ranked 44th of 50 by the US Chamber of Commerce;

And, while most states experienced some economic growth over the past year, New Mexico lost more jobs than any state but coal-dependent West Virginia.

There’s great potential in NM and many good things about the state and its people. Unfortunately, its current economic structure is dependent on the whims of bureaucrats 3,000 miles away and public policies are holding us and our citizens back.

Marcos Portillo
Additional contact information
Policy Analyst
Rio Grande Foundation

I talked with Mike Jaxson of KEND radio in Roswell. Download the interview here.