Today’s Albuquerque Journal included an excellent article by Bloomberg writer Joe Mysak on the major problems facing underfunded public pensions. The Rio Grande Foundation has done some work on the issue of underfunded pensions in New Mexico including this policy paper.

The paper on pensions cited in the opinion piece can be found here. The simple truth is that the problem can either be resolved through political leadership while there is still time or in the form of an ugly budget crisis as we are seeing in Greece.

I have been in Chicago over the past several days for meetings and training provided by the Franklin Center for Government and Public Integrity.  Part of the training included lectures on detecting and fighting public corruption.  The speakers were a former IRS criminal investigator (think a CPA with a Glock) and a former high-level FBI agent.  I came away with several ideas and specific suggestions for tackling New Mexico’s corruption epidemic.  You can read the essay over at New Mexico Watchdog.

Colordao’s Legislature (over the strident opposition of teachers’ unions), has passed legislation that, in the words of this article from the Associated Press:

Requires teachers to be evaluated annually, with at least half of their rating based on whether their students progressed during the school year. Beginning teachers will have to show they’ve boosted student achievement for three straight years to earn tenure.

Teachers could lose tenure if their students don’t show progress for two consecutive years. Under the old system, teachers simply had to work for three years to gain tenure, the typical wait around the country.

Colorado took initiative, in part, to put itself in position to receive funding under the Obama administration’s Race to the Top competition, a $4.35 billion pot of stimulus money designed to prod just such changes.

Unfortunately, teachers won’t be at risk of losing tenure until 2015 because lawmakers slowed down the process under political pressure from the teachers’ union. Teachers can appeal dismissal all the way to the state Supreme Court, and school districts have the burden of proving why they should be terminated.

Heaven forbid that teachers who we rely on to educate the next generation be held to the same standards as an average office worker in terms of performance evaluation. Nonetheless, it is a step forward for Colorado and should be an example for New Mexico if our next Governor is serious about turning New Mexico around.

I am not a democrat. That’s small “d,” not big “D.” Why? Simply put, I don’t believe in the effectiveness of majority rule institutions. The Founding Fathers were also skeptical of majority rule. That is why we have the First Amendment to protect minority/unpopular speech.

All of that said, I can at least respect self-professed “democrats” if they are intellectually honest. Unfortunately, our “Democrats” are proving that they are more than willing to undermine democracy when it suits their interests. For starters, in Congress, Democrats seem unwilling to vote in favor of an economically-damaging “cap and trade” scheme, but a vast majority of them (including Sens. Bingaman and Udall) want the Environmental Protection Agency to enact restrictions using the Agency’s regulatory powers.

Gov. Richardson has followed his Democratic colleagues in Washington in abandoning democracy, but in even more dramatic fashion. The issue is again “cap and trade.” In a recent article by Michael Coleman of the Albuquerque Journal. Richardson made a very telling statement when Coleman asked the governor how his preferred policies can be done in a contentious political environment, when skeptics doubt the existence of climate change and fear economic effects of mitigation.

Richardson suggested working around the skeptics. “You move without them,” he said. “My main appeal is for the states to take a leadership role and not wait on the federal government.”

Richardson is doing exactly this by avoiding democracy in the form of the Legislature in favor of the Environmental Improvement Board which is filled with his appointees, and, due to a judge’s recent decision, can move forward on enacting a very strict carbon cap here in New Mexico.

Principles mean very little in politics these days, but it would seem that the supporters of a party calling itself “Democrats” might support their party’s founding principle even if it flies in the face of their perceived self-interest. Hopefully this happen, but I’m not holding my breath.

So much has been written on the oil spill in the Gulf of Mexico. It is indeed a tragedy of monumental proportions and it has given environmentalists and those who seem to despise human economic progress a convenient issue to hammer with on the issues of global warming and pollution, not to mention capitalism in general.

But, as columnist Jeff Jacoby writes, despite the spill, life without oil would be even more tragic than the spill now polluting the gulf.

As Jacoby summarizes:

Of course there are problems created by oil, as the Deepwater Horizon calamity so heartbreakingly demonstrates. But most things of great value come with downsides. There are 40,000 traffic fatalities in the United States each year, but no rational person suggests doing away with cars, trucks, and highways. Airplanes sometimes crash and boats sometimes sink, but air and sea travel are not derided as “addictions’’ we need to break. Deaths due to hospital infections, medication errors, or unnecessary surgery number in the scores of thousands annually, but who would recommend an end to medical care?

I recently emailed Rep. Heinrich about the second engine for the F-35 jet engine. Like so many people who write their members of Congress, I used a third-party organization. In this case, the group was Citizens Against Government Waste. But that is all just back-story, what is really important is the response (or lack thereof) from Heinrich’s office.

The letter I got (mailed back) from Heinrich’s office can be found here. In the letter, Heinrich — more likely an intern or low-level staffer — acknowledges the issue I wrote in about, but that’s about it. He doesn’t mention how the Congressman voted, offer any additional information about the issue, or offer any other insights. He simply complains about his workload and admonishes me to contact him through his web page. I worked on the Hill, I know that these letters are “canned,” but these people still represent us. Shouldn’t they cater to our desires, not the other way around? If nothing else, these letters are a great opportunity for Heinrich to help educate his constituents on the issue of at least present his views on the topic.

This is not the first time Heinrich has sent back a letter admonishing me to use his website rather than a third-party site.

Contrast that with Sen. Udall’s lengthy and informative letter I just received (yes, I write these guys regularly and you should too) on the financial reform bill that just passed Congress. Udall’s office emailed me (hey, I’m already online, it’s okay to email, plus it saves taxpayers money) a 13 paragraph, highly-detailed response which even included information on how he voted on various amendments to the bill.

Based on constituent services, it would seem that Udall is the one running for office this November, not Heinrich.

I have been asking over and over again whether New Mexico’s higher education institutions are providing as great a return as they could. I have mostly focused my criticism on the unexplained differences between various schools’ costs per student, implying different policies in school administration might lead to greater efficiency. Another important consideration for the well-being of state’s economy is what the students are learning (and what they are not learning).

We could divide learning into ideas that are personally useful and ideas that societally useful. The first kind directly helps a person operate most effectively in life and business — to correctly apprehend the reality around herself and to make choices according to the most reasonable theory she knows. The second kind contributes to better (worse) democratic outcomes as the wisdom (lack of wisdom) are meshed together. In both cases, if many people have foolish ideas, then society as a whole will be less wealthy, as many mistakes are made in business and government.

It seems reasonable to hope that state-subsidized institutions support wisdom and not foolishness. But, there is evidence that this isn’t the case.

Zogby International researcher Zeljka Buturovic and George Mason University economist Dan Klein recently co-authored a paper in Econ Journal Watch that indicated that college students don’t do any better than the uneducated in answering questions about basic economics. George Leef at the Pope Center discusses some of the explanations for this phenomenon, including:

The most persuasive explanation is the one they offer last: Few students are exposed to economic thinking in their college coursework. Courses in the principles of economics are rarely required and even when students do take such courses, it is by no means certain that the professors will teach them in a way that causes students to grasp such lessons as “price controls cause shortages.” Many economics professors are registered Democrats and are comfortable with government intervention in markets.

The questions are all about the basic economic verities that markets and trade have produced and continue to produce a great amount of wealth for society, and that restrictions on market activity often have negative side effects. Certainly, we would expect to see quibbling with some of the language of the questions, but some of the questions have clear answers, so anyone who gets them wrong is really misled in his thinking. See the two columns for college-attendees and graduates in Table 1 on page 183 (a pdf of that page is here).

Missing one or two of the questions could be due to misinterpreting the wording of the questions, but the large blocks of mistaken answers point to a misunderstanding of price theory and markets. How can 1/3 of college graduates believe that the standard of living is not any higher today than it was 30 years ago? Not knowing GDP growth has been dramatic is like not knowing about the Cold War. Isn’t this one of those things an “educated” person ought to know? Meanwhile, the questions about rent control and minimum wage illustrate students’ non-understanding of the effects of price ceilings and price floors. Such students would probably agree with the proposition that the government can make people’s lives easier simply by changing prices on a spreadsheet. Gee, why can’t we fix prices all the time to make everyone richer?

In thinking about the role of universities in preparing a new generation of leaders to guide society, it is depressing to consider that many of these individuals have not learned the basic tools of economic logic and some elementary facts about our society’s wealth creation processes. Economics has important lessons about structuring incentives and designing institutions to motivate individuals towards cooperative, productive behavior. It is no surprise that in the absence of this learning we see spending policies that lead to pernicious budget deficits even as the heavily funded programs don’t work.

A worse version of this story could be that colleges not only fail to teach economic verities, but actually work against a clear understanding by filling students’ heads with confused prattle about social democracy and other anti-capitalist ideological fetishes. In doing so, the schools are effectively undermining society’s ability to create wealth — a wealth that supports the operation of the academy. I ask, to what degree are New Mexico’s budget problems today, directly linked to a failure of certain college-educated citizens to apprehend basic economics?

Recently, Kansas City Federal Reserve Bank President Thomas Hoening was in New Mexico and sat down with Albuquerque Journal writer Winthrop Quigley for an interview. That interview is available here. While Hoening had many good things to say about reducing government spending and stabilizing the US economy, he left out or advocated for some very questionable policies. I responded in a letter to the editor that was published on Monday.

Unfortunately, three things jumped out at me about the article that cause serious problems with Hoenig’s outlook for the U.S. economy and what we need to do moving forward.

First and foremost, Hoenig is quoted as saying “too little taxation” harmed the economy. This is simply wrong. Federal spending as a percentage of U.S. GDP has remained relatively constant at 20 percent for decades. Only in recent years has spending grown out of proportion to the economy.

One major reason for this imbalance is entitlements like Medicare and Social Security. Hoenig does not address the dire need to reform these programs lest they continue to eat up ever-greater percentages of economic output.

Lastly, and perhaps least surprisingly, Hoenig fails to mention the role his own institution, the Federal Reserve (and government in general) has played in the current economic crisis. While the crisis was caused by multiple factors, the Federal Reserve embarked upon an “easy money” policy to prop up the economy after 9/11.

This flood of money and the federal government’s use of Fannie Mae and Freddie Mac to funnel money into the housing market were integral to the creation of the bubble that popped a few years ago.

Economic stability is indeed important, but government policies in Congress and at the Federal Reserve have been the leading causes of instability over the past decade.

Paul J. Gessing
President
Rio Grande Foundation
Albuquerque

As if to underline what I blogged about yesterday, my article on some of the economic issues associated with renewable energy appeared in the Albuquerque Journal today.

The basic points are twofold: Yes, PNM (to name just one New Mexico utility) is raising rates for reasons unrelated to the state’s renewable mandate, but the mandate itself will drive up prices even further by mandating more expensive solar, biomass, and so-called “distributed” technologies.

I love environmentalists like the folks from the Renewable Energy Industries Association who just had an opinion piece in the Albuquerque Journal. The author asserts that solar power is the solution to higher electricity costs. That is news to me because those noted right-wingers at the <em>New York Times say that: “The cost of solar thermal electricity, made by using the sun’s heat to boil water and spin a turbine, would be nearly three times that of coal and more than twice that of natural gas. (It would be almost double the cost of wind energy, too.)”

Sounds more, not less expensive to me, but what do I know. And that number doesn’t even include the federal subsidies for solar which cost taxpayers money on the front end (along with higher rates on the back end). Oh, and yes, while PNM is raising rates for electricity consumers in part to maintain infrastructure, solar and wind will need their own investments in infrastructure in order to transport power from solar fields to urban centers.

For the record, we at the Rio Grande Foundation are against ANY subsidies from Washington (or Santa Fe). Utilities and their customers should be able to choose the energy source that works for them, without government interference or manipulation. This includes solar, wind, and any other power source that entrepreneurs can dream up. If government got out of the way, we’d all be better off.

Our new Capitol Reporter, Rob Nikolewski wrote a really interesting story over at Capitol Report New Mexico today about the lack of responsibilities, and heavy costs of, the Lt. Governor’s job in New Mexico. Given the budget problems facing New Mexico these days, it would seem that now is as good a time as ever to cut spending, even if it means pulling the rug out from under government workers looking to rise in the political ranks.

Anyone got a specific objection? I’d love to hear it. It certainly doesn’t seem that NM taxpayers are getting their money’s worth!

According to a recent analysis by the Rio Grande Foundation, Doña Ana Community College (DACC) is New Mexico’s low-cost leader when it comes to higher education. This is certainly praiseworthy and laudable, but it brings up even more questions.

1) What can other institutions of higher ed learn from DACC?
2) How can those institutions maximize student (and taxpayer) value by leveraging the resources of DACC and other low-cost providers:
3) What information can and should the schools share to explain why some are so much more efficient than others?
4) Would students be better off if funding was directed to them in the form of a voucher rather than “trickled down” through the higher ed bureaucracy?

Higher education is just one area of New Mexico budget that is in need of serious reform, but it is a worthwhile place to start. We can take a moment to congratulate DACC for doing something right and hopefully learn what that something (or those somethings) are.

It’s never a good idea to politicize a pending criminal case just to score points in an election campaign.  There are consequences.  NM Watchdog reports.

Whether you agree with him or not, George Will is consistently one of the most insightful pundits in America. His recent article, which ran in today’s Albuquerque Journal, but can be found on the Washington Post website, views the last 100 years of public policy debates through the prism of the differing worldviews of James Madison and Woodrow Wilson.

Madison and the Founders believed:

believed that free government’s purpose, and the threats to it, are found in nature. The threats are desires for untrammeled power, desires which, Madison said, are “sown in the nature of man.” Government’s limited purpose is to protect the exercise of natural rights that pre-exist government, rights that human reason can ascertain in unchanging principles of conduct and that are essential to the pursuit of happiness.

According to Wilson and the so-called “progressives” (who really tend towards socialism), “Government exists to dispense an ever-expanding menu of rights — entitlements that serve an open-ended understanding of material and even spiritual well-being.” In practice, this means that that government has no limits.

This is the battle that is being waged in America today. It is not new, but Will certainly frames it in an interesting way.

Recently, Albuquerque resident David L. Jackson replied to an article by RGF scholar Micha Gisser’s article on property taxes. As you may recall, Gisser’s basic point was that “If in the marketplace your home is worth twice as much as my home, the dollar value of your property tax must be twice the dollar value of my property tax.”

Jackson disagrees, and, while he certainly makes some valid points in asserting that a system involving property tax caps like the one New Mexico adopted in 2001 can be useful, his assertion that we should adopt “progressive” tax rates for property taxes as we have done with income taxation in this country is wrongheaded and dangerous. After all, a rich person who lives in a bigger house (say, twice as expensive as a poor person) will already pay twice as much in property taxes. The last thing we need to do is to further ratchet up rates on certain segments of the population simply because we can.

New Mexico should consider applying the 3% tax cap to everyone or it should throw it out and follow Gisser’s model. Regardless, it is time for the Legislature to address “Tax Lightning.”

This isn’t how anyone would invest funds for their child’s college tuition and expenses.  But New Mexico, under the Richardson/Denish administration, has invested state funds in a fish company, an electric libretto designer (appropriately named “Figaro”) and a company that uses crushed glass to produce toilet bowl scrubbers (what, you don’t have one of those in your home?).  Nearly $400 million has been committed to a program most known for its bad bets on Eclipse Aviation and Advent Solar (remember them?)

The latest report shows not much has changed in this bad bet for taxpayers.  Word is the new State Investment Council and State Investment Officer are giving this Richardson favorite a much-needed hard look.  Here’s the report from New Mexico Watchdog.

ObamaCare was supposed to force health insurance issuers that provide dependent coverage of children to make that coverage available until that child reaches the age of 26. But it looks like someone at the New Mexico Public Schools Insurance Authority didn’t get the memo. So, according to this recent article from the Albuquerque Journal, a woman has had her 24 year old son dropped from her coverage.

Obviously, this is just one, relatively minor, bureaucratic snafu within a very complex piece of legislation, but one has to ask: if a state insurance agency set up for the sole purpose of insuring its members can’t get it right, how should small businesses and other private-sector employers? The answer, quite simply, is that they won’t. They’ll drop coverage instead.

Reality intrudes.  Where’s the money?  Cut through the hype, the warm fuzzies of “green jobs,” and you still need money, lots of it.  There’s lots of gullibility in the mix–from Bill Richardson to Jeff Bingaman to the city fathers of Rio Rancho–what’s missing is real money. New Mexico Watchdog still on the trail of Green2v and the elusive half a billion dollar letter of credit that’s not worth the paper….. Well, you know how that sentence finishes.

Awhile back, our higher education analyst Kevin Rollins outlined the need for greater efficiency at UNM in particular and higher ed in general. This generated an immediate and somewhat hostile response from the University’s president David Schmidly.

In today’s Journal, yet another response to Rollins’ piece appeared. This article, while unfairly criticizing Rollins for conflating CNM and UNM (he simply questioned ways to leverage the best features of the lower-cost institution for the benefit of all students), the author, a former professor at UNM, cited several possible areas for budget savings. This is exactly the type of discussion we were trying to spur with this effort. There is, after all, no question that higher education is a bloated area of New Mexico state government. Input from education experts, former university employees, students, and policymakers is necessary to getting the most bang for our bucks in a strained budget environment.

My cousin graduated today from the Digital Arts and Technology Academy (DATA) here in Albuquerque. More than four years ago, when I got to Albuquerque, he was headed to high school and was not finding either the situation in terms of school size or studies that he was looking for. This was no small matter as he had already been held back a grade and he was not enthusiastic about high school. The last thing we wanted was for him to become yet another New Mexico dropout.

So, with a little help from Lisa Grover and the New Mexico Coalition For Charter Schools, we found DATA, which is a vocational charter focused on the film and computer animation. Now, he has graduated. I’m certainly pleased that we have some type of school choice in New Mexico in the form of charter schools, but we have a long way to go before New Mexico — or any other state — realizes the benefits of a truly “free market” education system.

Interested in finding out what the candidates themselves felt about their performance in the debate. How about undecided voters? For some post-debate interviews and analysis, check out Capitol Report New Mexico. Post-game analysis from the candidates can be found here while thoughts from two undecided voters can be found here.

In case you missed it in person or on Channel 4 last night, the Rio Grande Foundation along with KOB TV Channel 4 and 770 KKOB hosted a televised debate — the only one I am aware of — between all 5 GOP candidates for Governor. While the candidates were by and large discussing their goals for New Mexico’s future and turning around the state, some sparks did fly.

Watch the entire debate here:

I have a fair amount of respect for the folks at Albuquerque Studios. After all, they plopped down a lot of private money to build their studios just south of Albuquerque. Certainly, they did this with the intent of taking advantage of New Mexico’s massively-subsidized film industry, but unlike the Santa Fe Studios which are again subsidized, the Albuquerque Studios themselves were not. Unfortunately, in a sign that the film industry is not economically-viable in New Mexico — perhaps even with massive taxpayer handouts — it has come to light that the folks at Albuquerque Studios owe $334,000 in unpaid property taxes. This comes on top of the Studios’ recent flirtation with bankruptcy.

If the film industry is so great, shouldn’t SOMEBODY in this state be able to create a going concern without directly relying on government handouts?

Oh, and then there is this nice analysis of that state’s film industry subsidies from our friends at the Mackinac Center, a free market think tank based in Michigan. Despite $117 million in film subsidies over two years, there are fewer people employed in the film industry now than before the program took effect!

With a new governor coming into office this November and the economy (and budget) still in the tank, now would seem to be a great time to discuss the future of the film subsidy program and whether we can eliminated or at least limit its negative impact on taxpayers.

Great story by Kim Holland of KRQE-TV.  http://bit.ly/blHbcI