I love some of the Alibi’s readers. In a recent blog posting, I asked Rail Runner riders and the businesses that benefit from the train to foot the bill to close the system’s $750,000 operating deficit (that’s in addition to the $18 million in recognized annual deficits).

This blog posting generated a largely ad hominem response (first online and then in the print edition, 3rd letter down) from a reader. His essential point, aside from the fact that I’m a jerk, was that people of the conservative/libertarian mind-set don’t care for the poor. This argument falls flat. For starters, the state might not be facing cuts if we hadn’t spent $400 million + plus tens of millions in operating cost for the train. Also, it might be noted that at least in the Washington, DC area, users of the rail transit system are wealthier than average and much wealthier than bus riders.

So, I guess if you are concerned about helping the poor, it would make sense to advocate for more buses, but I’ll be the Rail Runner benefits far more high income tourists and government workers than poor people. Yet another bogus pro-RailRunner argument falls by the wayside.

Needless to say, our investigative journalist Jim Scarantino has garnered a ton of press coverage for the Rio Grande Foundation with his recent work. Jim, while an amazing asset to the Rio Grande Foundation, is not alone in changing the face of journalism through his investigative work. Think tanks all over the country have hired their own investigative journalists to dig up dirt on the wasteful, fraudulent, and abusive practices of their elected officials.

Read the full story on National Review Online.

If you haven’t already seen it, Channel 13 investigative reporter Larry Barker has done a great report on the hiring practices of Governor Richardson. Particularly notable is the fact that he has blatantly disregarded his own “hiring freeze” in order to find cushy positions for his well-heeled friends. And they wonder why we have a government over-employment crisis in New Mexico.

Jonathan Weil of Bloomberg News had an excellent article that appeared in the Albuquerque Journal this week.

When he was director of the Congressional Budget Office, Peter Orszag, in September 2008 said Fannie and Freddie should be included in the federal budget, but that was before Obama became president. Excluding Fannie and Freddie from the budget (as Obama has done), the national debt held by the public is about $7.9 trillion. With them, it exceeds last year’s $13.2 trillion gross domestic product. Worse, this number is likely to grow because Congress and the Treasury have given Fannie and Freddie a blank check to blow through whatever taxpayer money is necessary to keep the U.S. housing market afloat.

By not holding Fannie and Freddie accountable — and actually expanding them instead — the Obama Administration is both attempting to cover up the major role federal policies had in the economic crisis and it is setting the stage for another crisis when this new, unsustainable bubble pops.

In the waning days of the 2010 legislative session, the need to reform the state’s unfunded retiree system remains. The Rio Grande Foundation has produced studies that outlined New Mexico’s state and local government over-employment and pension problems.

In the latest installment of our ongoing effort to bring attention to this problem, we have released a four-point proposal designed to solve the $25.8 billion unfunded government pension problem. That study, “Fixing New Mexico’s $25.8 billion Unfunded Retiree System” is available at: http://www.riograndefoundation.org/downloads/rgf_nm_unfunded_retiree_system.pdf

New Mexico’s defined benefit retirement system is massively underfunded. The pension system officially reports an unfunded liability of $4.6 billion; however, new analysis by two academic economists finds that the pension system is underfunded by at least $7.5 billion and may be as high as $22.9 billion—or three times greater than the state’s general obligation bond debt. The state Other Post Employment Benefits (OPEB) system, mostly health insurance, is underfunded by at least $2.9 billion.

If the unfunded retiree liabilities are not dealt with soon, the annual required contributions to the retiree system will crowd-out other state spending such as roads and higher education. Fortunately, there are solutions which can be summarized by this straight-forward four-step process:

Step 1—Fix the Public Sector Over-Employment Problem

In 2008, New Mexico’s state and local governments employed 25.3 people for every 100 people employed in the private sector versus the national average ratio of 16.72. If New Mexico’s state and local government ratio was reduced to the national average, then the workforce would be reduced by 56,970 people.

Step 2—Transform Defined Benefit System into a Defined Contribution System

Step 3—Continue to Increase Employee/Retiree Contributions to the Retiree Healthcare System

During the 2009 Legislative Session, the Legislature enacted HB 351 which increased the employer and employee contributions to the retiree healthcare system to 3 percent from 1.95 percent phased-in over 4 years. This is an important first step in correcting the unsustainable retiree healthcare system without resorting to tax increases or budgetary gimmicks. However, more reforms of this nature are needed since there are virtually no assets to offset the $3.1 billion unfunded retiree healthcare liability.

Step 4—Expand the Private Sector

States with larger private sectors will grow faster over time than states with smaller private sectors. Finding ways to help New Mexico’s private sector grow is a win-win for both the public and private sector. One low-cost, high impact way to help the private sector is to perform a thorough review and culling of out-dated regulations. In the end, a larger private sector will generate higher tax revenues which could be used to tackle New Mexico’s unfunded retiree system.

You know who your friends are when times get tough. If that old aphorism holds true, then New Mexico taxpayers — and anyone else concerned about good government — should thank their Senator today. That is, if they have been aligned with the vast majority of their Senate colleagues on several recent votes.

In recent days, the Senate has passed two “veto overrides” of Governor Richardson. The first dispute was over the Administration’s refusal to share certain information about the Medicaid program and its managed care vendors with the Legislative Finance Committee. This dispute has been ongoing for more than a year and the bill mandated such disclosure.

The Governor’s veto of a bill which passed unanimously by the Legislature and was endorsed by Attorney General Gary King, was overridden by a vote of 34-8 in the Senate. The override will not be complete until the House also votes by a 2/3 majority to also override the Governor’s veto which would require 47 of the 70 members.

The Senate overrode Richardson and his mismanagement of the State Investment Council by a vote of 33-4.

Both of these issues are bi-partisan and relate to good-government. Hopefully the House will show its willingness to stand up for taxpayers regardless of any pressure the Governor may bring to bear. Now, on to that minor issue of the budget…

Under Obama’s Budget, energy producers — including those in New Mexico — would face more than $220 billion in tax hikes according to Americans for Tax Reform. While the President has repeatedly pledged not to raise taxes on middle-income Americans, the reality is that he has enacted and proposed several tax hikes.

As I pointed out a few months back, these include taxes on tobacco, tires from China, and steel pipes from China as well.

The latest report on the stimulus spending shows that government continues to benefit while unemployment rises in the broader economy. I’ve done two reports crunching data from recovery.gov, the official U.S. government website to track stimulus spending and employment impacts. The first showed that the number of jobs funded by stimulus dollars dropped during the last quarter of 2009 by 13% while the cost per job soared over 50% to $484,505 per job. That report is over at New Mexico Watchdog here.

Today’s report shows that government is gobbling up the stimulus dollars, consuming most of the funding and funding most of the jobs claimed. That report is here.

What is definitely growing is the public sector. Unemployment for everyone, though, is up sharply, to 8.3% from 7.8% in the previous quarter.

We’ve been saying for quite some time that New Mexico’s generous incentives to the film industry do not make sense. Yet another study backs us up on this point. A front page article on the incentives appeared in today’s Albuquerque Journal. According to the new study which was undertaken by a policy analyst with the Federal Reserve Bank of Boston, the state of New Mexico earned $0.39 in estimated new revenues per dollar of credit. In other words, we are losing money on the credits because new revenues are lower than expenditures. This information contradicts the now discredited Ernst & Young report issued in January 2009 found that each dollar of incentive generated a total of $1.50 in revenue.

Rather than going through all the ways this new film study discredits the idea that the film program is an economic boon, I’ll simply offer a few quotes from Lisa Strout of the New Mexico Film Office. Not surprisingly, she is quoted in the Journal article as saying “We will stick by Ernst & Young.” Well, duh. No matter how discredited the data, she has a direct financial interest in the film program. She won’t budge.

Better still, however, is Strout’s quote “Ernst & Young were very tough. They said if they could not get the data (to support an analysis) they would leave it out.” This, of course, directly conflicts with the Boston Fed’s reporting that “(The Ernst & Young) Study findings that increased tourism accounts for between 25 percent and 40 percent of the incentives’ economic impact are “difficult, if not impossible” to verify.

So, there you have it. New Mexico policymakers have created a powerful special interest “entitlement” to the tune of $80 million annually that includes a government entity (The Film Office) that lobbies on its behalf. Killing the program is simply politically impossible at this point. Hopefully the Legislature will seriously consider adopting Sen. John Arthur-Smith’s subsidy cap legislation.

I watched the Super Bowl last night and while the game was quite good, the commercials were pretty lame overall. However, one commercial by Audi made an impact. If the greens have their way, this could come true:

I (and I believe this is true for most economists) have always found the economic impact of taxes to be relatively straightforward. But regulations, particularly those pertaining to the environment, are a bit more difficult to figure out. After all, we all want a clean environment and environmentalists constantly remind us that regulations can push society and lead to resources being allocated to cleaning the environment.

This all leads me to the Pit Rules which have been adopted here in New Mexico. I have intuitively understood that the Pit Rule likely represented an overreach on the part of New Mexico’s regulators, but the ins and outs of drilling for oil and gas can be quite difficult to parse. So, I was pleased to see “Pit Rules Dry Up NM Drilling” which more clearly explained the economic impact of New Mexico’s pit rule than any analysis I’ve seen yet.

The article refuted Joanna Prukop, Former Secretary, New Mexico Energy, Minerals and Natural Resources Department, and her article, “Don’t Blame the Pit Rule…” Mr. Maxey, the author or the anti-pit rule piece displays far superior understanding of the oil and gas industry and how public policy impacts the migration of businesses between different political jurisdictions in a constant search for policies that are sensible.

I’m glad to see the oil and gas industry stick their necks out and oppose anti-business policies. Hopefully this is a trend that will continue and grow.

The Heritage Foundation blog had an interesting post about government labor unions. According to the blog, “2009 became the first year in American history that a majority of American union members work for the government.”

This is both unsurprising and troubling at the same time. First and foremost, while I have my concerns about the impact of private sector labor unions, the good news is that they ultimately benefit from private sector economic growth (just like the rest of us). To Government labor union members, however, the private sector economy is an irrelevant annoyance. They have absolutely no incentive to care.

Of course, as we have seen recently, government has continued to grow while the private sector is hurting and cutting back. Nowhere is that trend more prevalent than in heavily-unionized private sector industries where high-priced union labor unions have priced their members out of the market. Government knows no such check. That is why they are so dangerous.

New Mexico is an excellent case-study. As the Rio Grande Foundation has pointed out, our public sector work force is extremely bloated. And, as we see from recent efforts of the liberal House of Representatives to not cut government at all, the government labor unions (like AFSCME and The Albuquerque Federation of Teachers) have a very strong grip on New Mexico politicians.

Ellen Bernstein is the radical left wing head of the Albuquerque Teachers Federation. She wrote an article in the Albuquerque Journal on the ongoing debate over the potential West Side split of Albuquerque Public Schools. She made the point that “there is no data showing school district size as a factor in student’s success.”

This is indeed the case. In fact, splitting districts, a topic which the Rio Grande Foundation is neutral on, is not the type of fundamental reform that is really needed in New Mexico. Rather, if we actually want to improve educational results in Albuquerque or anywhere else, it is Bernstein and her cronies that must be dealt with first. They (the teachers unions) are a primary obstacle to improved educational outputs.

The effort to split APS, while understandable given its broken nature, is not targeting the root problem. Instead, choice in the form of vouchers or tax credits (two different things), smaller schools, and merit pay and accountability for teachers will actually improve schools. Unfortunately, Bernstein and her allies oppose every one of these options.

The Rio Grande Foundation (RGF), New Mexico’s only free market think tank, is starting a new Capital Reporter project and is looking for an independent, self-starting journalist to cover state government, particularly issues with the state government in Santa Fe.

The idea behind this project is to cover tax, budget, and fiscal issues for an online newspaper. Currently, the paper is online at: www.capitolreportnewmexico.com.

We are hoping to expand operations with video, audio and written content with a capable reporter who can provide objective, factually accurate reporting in these formats for a Web-based audience.

This would be a full-time job, but schedule is flexible. Busiest time of year would be legislative sessions. Salary and benefits will be based on experience with a baseline and incentives based on quality content. We are a virtual office, so self-starter necessary.

Interested parties should send a resume and cover letter or statement of interest to:

HumanResources@RioGrandeFoundation.org

In case you haven’t noticed, New Mexico faces difficult budgetary times. Thankfully, the folks at the Santa Fe Opera seem to recognize this fact and have given back $1.3 million in taxpayer money that would have been used to build a recital hall. Maybe the folks at the Opera should try to instill this sense of fiscal responsibility in members of New Mexico’s House of Representatives, the leaders of which seem to have no clue that cutbacks are necessary.

Oh, and I would be remiss if I didn’t note that the Opera’s recital hall project was contained in our 2008 Piglet Book (check page 22). Chalk another victory up to Rio Grande Foundation efforts to expose wasteful and unnecessary spending.

According to Dan Boyd over at the Albuquerque Journal, House Speaker Ben Lujan has postponed the body’s vote on a $5.6 billion budget bill. Reason being, the House “progressives” (or socialists) want to add another potential tax hike to the mix in order to avoid making any tough decisions that could cut their beloved government programs. Instead, they’d rather push $400 million worth of tax increases on New Mexico taxpayers.

Thankfully, the Senate, led by stalwarts like John Arhur Smith remain opposed to massive tax hikes absent any real attempts to redress spending or make government more efficient (the House would cut spending by only 1 percent). Unfortunately, Governor Richardson seems to be willing to forfeit his title of “tax cutting governor” as he has sided with the House thus far. Thankfully, Republicans in both the House and Senate have remained opposed to balancing the budget based on tax hikes.

The House’s behavior is no surprise. They have a long track record of doing the Governor’s bidding and being to the left of him on tax and budget issues. The question that moderates in the House ultimately have to decide is whether they are facing a massive repudiation at the polls this coming November. Obama seems to have taken Republican Scott Brown’s upset victory in Massachusetts as an opportunity to double-down and attempt to pass his left-wing agenda. New Mexico’s House seems to be following the same tactic which I believe will ultimately lead to electoral despair.

For the time being, New Mexico hangs in the balance and the Atlases in the Senate dare not shrug!

If you have never checked out the “Independent Forum,” I encourage you to check it out. Along with a handful of community leaders, I have been providing my own thoughts on various current-events issues, many of which are being considered by the Legislature in Santa Fe. This week’s forum question is on proposals for a “Ethics Commission.”

My thoughts are the first response (they typically are) so go ahead, put your own thoughts up there and if you agree or disagree, let me know: pgessing@riograndefoundation.org I’d be interested in your thoughts.

New Mexico’s free market think tank, the Rio Grande Foundation, is hosting a candidate forum for all current candidates – of both parties – for New Mexico’s 3rd Congressional Seat (currently held by Ben Ray Lujan).*

The forum will be held on Monday, February 22, 2010 from 6:00 to 8:00PM in the Jemez rooms of the Conference Center at Santa Fe Community College. The College is located at 6401 S. Richards Avenue, in Santa Fe. Admission is $5 payable at the door. Those who want to attend can send us an E-mail to: rsvp@riograndefoundation.org. Unfortunately, due to rules associated with this facility, no food or drinks will be available, but vending machines are available on-site.

This is not a formal debate format, rather it is an informal question and answer discussion that will allow average citizens, regardless of party affiliation, to “kick the tires” and find out more about the candidates who have declared for New Mexico’s highest offices. Attendees will have the opportunity to submit questions that help attendees determine each candidate’s stances on the issues and observe how they interact with the crowd.

The discussion will be moderated by Rio Grande Foundation president Paul Gessing. The event will be filmed by the Rio Grande Foundation with footage posted at: www.riograndefoundation.org. Media are encouraged to attend and cover the event.

At least, that is how much a voucher system implemented in Milwaukee is estimated to have raised graduation rates in that city according to a new study. Now, does that mean we should adopt vouchers in New Mexico? Maybe not, but the fact is that choice is working where it has been tried. Tax credits would be another option and pursuit of the full-fledged reforms adopted in Florida is another option.

Based on a separate study, the annual impact from 3,352 more MPS graduates would include an additional $21.2 million in personal income and $3.6 million in extra tax revenue. Perhaps New Mexico could at least partially solve its budgetary problems through the aggressive adoption of school choice? One can only hope…after all, raising graduation rates and a healthier economy…that’s change I can believe in! The full report on Milwaukee’s school choice results can be found here.

Given all the tax hikes now moving through the New Mexico Legislature, we at the RGF have had to choose our battles. That said, having written extensively on the dire economic harm inflicted upon New Mexico’s economy by the gross receipts tax, I thought our political establishment would focus on reinstating the grocery tax or going after smokers, drinkers, and junk food or high-earning taxpayers.

Thankfully, our friends at the New Mexico Tax Research Institute have re-explained to New Mexicans that the gross receipts tax charged in New Mexico is much different, and much more economically-harmful, than a traditional sales tax. The article appeared in the Albuquerque Journal on Sunday and I couldn’t have said it better myself. Raising the GRT in today’s bad economy would further exacerbate the already-severe problems associated with this tax.

I was originally scheduled to appear on KNME’s “In Focus” to discuss the upcoming vote on the $616 million bond measure, but the birth of my first child made that impossible. Thankfully, RGF Vice President Jean Baugh happens to be quite knowledgeable about education issues, so she stepped in and appeared on the show. Later on in the program, our investigative journalist Jim Scarantino, who appears regularly on KNME’s roundtable program also discussed the APS bond measure (along with other current events). Check it out below:

In the past, we at the Rio Grande Foundation have had our share — okay, maybe even more than our share — of disagreements with the Albuquerque Chamber of Commerce. After all, on a diverse range of economic issues involving limited government and taxes including: taxpayer-financed pre-kindergarten, massive government intervention in health care, restoration of the grocery tax, the RailRunner, the increased minimum wage, and more….they have come out on the wrong side.

All that being said, I am please to see that, with the lack of political support for restoration of the grocery tax, the Chamber is firmly opposing tax hikes as a mechanism for solving the current budget situation. In fact, they have a fine letter for which they are asking signatures. I am not sure how broadly they are casting their net in search of signatories, but if you are interested in signing on, send them an email here: signon@abqchamber.com

I still wish they’d realize that the Rail Runner is a huge boondoggle that will be a drain on New Mexico’s economy for decades to come, but this is a nice first step.

We’ll see you back in the blogosphere next week.

Perhaps our “leaders” in Washington and Santa Fe could benefit from watching this rap video (of all things)? It is at least an entertaining watch!