A little-publicized bill discussed during the recently-completed legislative session involved the deregulation of Qwest’s basic retail services. Senate Bill 37 was introduced by Sen. Cisneros and would have eliminated Public Regulatory Commission jurisdiction over the regulated telecommunications provider’s rates and terms for basic land-line services if it found “effective competition” in more than 50 percent of the provider’s market area, or if it has lost more than 33 percent of its land lines since 2001.

Sounds reasonable enough, right? After all, people — even living in rural areas — have many different phone services to choose from. Cell phones and cable providers are just two options, but when it comes right down to it, why should the PRC tell Qwest how much they can charge their customers? People who choose to live in far-flung, difficult to server rural areas should bear the extra costs associated with serving them, right?

Unfortunately, Sen. Lovejoy, PRC Commissioner Jason Marks, and apparently, several unregulated telecommunications providers, opposed the effort and the bill died. Sen. Cisneros has threatened to, rather than deregulating Qwest, attempt to bring these other telecommunications providers under regulatory control of the PRC. Hopefully, this is just a threat meant to neutralize the misguided opposition lobbying of these providers. New Mexico policymakers, wherever the market makes it possible, should be attempting to strip the PRC of its regulatory powers. This is because markets are far more efficient in terms of setting prices and “regulating” the marketplace than any politically-controlled regulatory agency.

Don’t give up Sen. Cisneros!

The 2010 legislative session ended yesterday with the House having completely avoided the Tax Lightning issue. According to Dan Boyd of the Albuquerque Journal, The Senate passed four separate bills to address “tax lightning,” including reasonable efforts by Sen. Neville and Sen. Eichenberg. Text of Eichenberg’s bill which would extend the 3% cap to all properties can be found here. Neville’s bill can be found here.

Unfortunately, as I’ve noted before, the New Mexico House seems to be inherently unwilling to make the tough decisions necessary to solve the problems facing New Mexicans. Notably, the entire House is up for election this November.

Hopefully Governor Richardson will put “tax lightning” on call for the special session. Tell him what you think.

While many are disappointed with the lack of a budget agreement during the 30-day legislative session — and I’m disappointed that both Houses and Richardson seem all too willing to raise taxes — the good news is that open government saw a few big successes this session. Of note is that the House of Representatives is now putting votes up on its website.

Bigger still in terms of empowering citizens and concerned taxpayers is the passage in both houses of SB 95 which would create a “Sunshine Portal” for more open government. Pending the Governor’s signature (you can influence that by contacting him), a “Sunshine Portal” will be created. This will include the names of all exempt employees, their title, and salary on a public, easily viewed on-line website.

SB 195, the Sunshine Portal Transparency Act was sponsored by Senator Sander Rue.

Positions and salaries of all other state employees, but not their names, would be released if SB 195 becomes law.

Other items included on the site are:

• state cash balances by account or fund;
• monthly summaries of the state’s investment accounts under the control of the State Investment Council;
• annual operating budgets for each state agency with monthly expenditures by category;
• state agency contracts with a total value of more than $20,000, naming both the recipients and purposes of the contracts;

This website will give average citizens additional tools to see that their money is being spent as efficiently as possible.

Pick up a copy of The Alibi this week (it is free after all). I have the cover story in the paper and I use the platform to reach out to liberals and those on the left in general, many of whom I believe to be good-hearted, well-intentioned people who would be much more effective in using free markets and individual liberty to achieve their goals. This would be so much more effective than the coercive power of government.

If you don’t live in The Alibi’s distribution area or simply want to read the article online, the link can be found here.

Yahoo often has interesting stories on its front page. Today, an article appeared noting that 80% of Americans oppose the recent Supreme Court decision that opens the door for foreign and domestic corporations, labor unions, and other organizations to spend money directly from their general funds to influence campaigns. I know, it sounds pretty shady…allowing anyone to “buy” elections, right? Pretty dangerous stuff.

But was the Supreme Court correct? Simply put, the first amendment to the Constitution states: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.”

“Congress shall make no law…” I kind of wish they’d just stopped there. Anyway, this is meant to be an expansive protection. There are no exceptions, so corporations, unions and the like are all protected. Simple stuff really, but of course our friends in the media will see their power diminished somewhat and are not explaining the issue.

While I disagree with him, at least lame duck Sen. Chris Dodd has embarked upon the one justifiable way to reverse this ruling, with a constitutional amendment of his own.

A new pro-business organization has entered the playing field with an op-ed in today’s Albuquerque Journal urging policymakers to focus on private-sector job creation for New Mexicans. While somewhat short on specifics and filled with happy talk such as the supposed fact that we need “strong and efficient public and private sectors.” No, we don’t need a “strong” public sector and yes, the public sector (ie. government) is in direct competition with the private sector for resources and talent.

Nonetheless, it is great to see an organization here in New Mexico that is focused on private sector job growth, the only way to solve some of our most pressing budget issues. Of course, I hope that the organization will focus on sustainable jobs created by entrepreneurs via a fair and low tax structure and equitable and reasonable regulations, not lavish subsidies focused on narrow industries. Hopefully this group, Creating Opportunities for New Mexicans becomes a powerful, pro-private-sector voice in New Mexico. We need it.

The schedule is set. March 1 is the one and only public comment session being held by the Environmental Improvement Board. Now is the time to begin mobilizing participation so that all voices are heard on the matter of a proposal to implement a New Mexico-only cap on greenhouse gas (GHG) emissions. This is a critical policy issue that could have major economic impacts of the state. I’ll be heading up for this important meeting. I encourage you to attend as well.

Please spread the word and encourage participation at the March 1 public comment session in Santa Fe. , Please consider sending an alert to your membership in the next week to remind them of this key date and urge their participation. Below is a sample alert that you are welcome to forward.

Attached are some background materials that may be of use to you as you brief others on this issue.

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The New Mexico Environmental Improvement Board (EIB) will hold a public comment session on March 1 to hear input on a proposal to implement a cap on greenhouse gas (GHG) emissions in the state.

Numerous groups are in opposition to this proposal because of the severe economic impacts such a measure would likely have on New Mexico.

The proposal calls for a reduction in statewide Greenhouse Gas emissions to 25% below 1990 levels by the year 2020 – a more aggressive goal than anything currently under consideration at the federal level. The cap would apply to such entities as oil and gas producers, refineries, manufacturers, cement and asphalt plants, power plants, universities, military bases, mineral processing operations, and numerous others.

* When: March 1 from 10 a.m. to 5 p.m.
* Where: State Personnel Office Auditorium, Willie Ortiz Building, 2600 Cerrillos Road, Santa Fe 87505
* What: EIB public comment session on proposed New Mexico Carbon Cap.

The EIB has not yet set the exact process for the session, but if you plan on making a comment you should assume you will be heard on a first-come, first-served basis unless you hear otherwise.

Key concerns that those opposed to the proposal include:

* This proposal provides no cost mitigation measures because it requires affected sources to reduce their emissions of greenhouse gases through the addition of pollution controls that are not commercially available, fuel switching, reduced operation, or closure.

* The cap would affect regulated industries, and their customers, in the state of New Mexico only. It would represent a cost driver unique to New Mexico, and therefore place the state at an economic disadvantage with other states. Ultimately, it creates an incentive for affected industries to leave the state.

* While exact impacts are not yet known because no comprehensive economic impact study has been performed, it is clear that this price driver unique to New Mexico would significantly increase the cost of doing business in the state.

* The cap would make no discernable impact on the amount of manmade greenhouse gasses widely believed to be contributing to global climate change.

* The proposed cap on GHG emissions is applicable to regulated sources in New Mexico and covers only about 32 percent of anthropogenic GHG emissions in the state.

* Under current law, the Board has no authority to regulate air emissions from power plants located on tribal lands. Such sources represent the single largest emitter source of GHG emissions in New Mexico and nearly half of all GHG emissions from the electric utility sector in the state.

The Rail Runner is insatiable! Like The Money Pit, it consumes ever-greater amounts of taxpayer money. The latest source it has latched onto is $643,000 in “stimulus” money. We’ve already raised the gross receipts tax 1/8th of a cent to pay for the train, but it still faces a $750,000 operating deficit above and beyond that tax hike — fare revenue only covers 13% of the train’s operating costs.

Richardson is more than happy to use this federal money to extend the train’s financial life for another year. After all, that gets him out of office in enough time to force the next Governor to deal with the train’s ongoing shortfalls. As Los Ranchos Mayor Larry Abraham pointed out: “My concern with using the stimulus money is the fact that, if we’re covering recurring expenses, what are we going to do in the future? All we’re doing is pushing the problem forward. We really need to address the expenses now rather than later.”

I added on to Abraham’s point saying, Gov. Bill Richardson has made it clear he will use any funding source — including stimulus money — to keep the commuter line running, regardless of cost. It seems to be that whatever Rail Runner wants, Rail Runner gets. It boggles the mind that they think it’s stimulus activity.”

Of course, the problem with the stimulus in the first place is that it would inevitable that it would become a slush fund for politicians who want to disguise their irresponsible spending. Besides, as I’ve pointed out in the past, economic stimuli plans simply don’t work. Of course, politicians will always support such boondoggles because they are in their own interest.

Eventually New Mexicans will learn the true costs of the Rail Runner. Richardson, acting in his own self-interest will attempt to push that date back as far as possible.

The House and Senate have now passed their own budgets. The House relies on a broad basket of economically-harmful tax hikes and very little in the way of spending cuts. The Senate relies instead on controversial food taxes and regressive tobacco tax hikes. The Senate cuts a bit more in terms of spending.

An interesting opinion piece from Republican legislator and education administrator Dennis Roch appeared in the Albuquerque Journal recently. While Roch makes a good case against spending massive amounts of taxpayer money on the Spaceport and RailRunner, both of which we have spoken out against, Roch argues that if we reduce education spending, we are “shortchanging” it.

Quite simply, he has no way to back this up for the simple fact that our entire K-12 education system is socialized. Absent price signals which tend not to be found in socialized systems, determining the optimal allocation of resources is nearly impossible. That said, if the Soviet Union is any indicator, the allocation of resources in socialized economic systems are horribly inefficient. We can therefore assume that our K-12 system is not very efficient (duh).

Of course, we know that New Mexico’s graduation rate is 54%. We also know that New Mexico spends more per capita than most other states and on support services. Mind you, this is in comparison with other socialized school systems that achieve far better results, typically with fewer resources.

Aside from balancing the budget, the Legislature should be focused like a laser on improving educational results, but instead we get the Hispanic Education Act which will do nothing to improve results (regardless of demographics). Are we shortchanging education? Well, in terms of adopting solutions that work, we are, but in terms of money it seems hard to believe that we are.

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.