To the winner go the spoils. The budget recently passed by the New Mexico Legislature and signed by Gov. Lujan Grisham included 6% raises for most government workers. In normal times those are generous raises although to be fair for March of 2023 the annual inflation rate was a robust 5.0%.

But, if you are among Gov. Lujan Grisham’s core lieutenants in government you were hardly limited to 6 percent pay raises. Many within the Gov.’s inner circle received double-digit pay increases with some of them in excess of 20 or even 30%. The following handy chart is from the Santa Fe New Mexican.

Obviously we don’t think these big pay hikes are deserved and New Mexicans should be concerned about the Gov. rewarding her innermost circle for their loyalty.

Starting this evening and for a few weeks Rio Grande Foundation president Paul Gessing will be sitting down with host Diane Kinderwater for a series of conversations about the recently-completed New Mexico legislative session.

The shows last 30 minutes each and you can watch KCHF and find out more about the station and their schedule here. The station is available throughout New Mexico.

Monday April 24, 6:30pm

Tuesday, April 25, 10:30pm

Friday, April 28, 10:00am and 6:30pm

Tuesday, May 2, 10:30pm

Friday, May 5, 10:00am and 6:30pm

Monday, May 8, 6:30pm

Wednesday, May 10, 10:00am

A report from the Santa Fe New Mexican via the American Lung Association places Albuquerque and Eddy County as being among the worst areas in the nation for Ozone pollution. That may be true, but it is also worth noting that Ozone pollution continues to diminish across the nation and in Albuquerque (data were hard to come by for Eddy County).

Below is the chart for Albuquerque between 2000 and 2016 (presumably it has decreased further since then).

The Albuquerque trend line is reflected in national data (below):

Rio Grande Foundation has its hands full in New Mexico, but like ALL Americans should be, we are concerned about economic conditions in our nation and wish to see the federal government do a better job of restraining spending. The federal debt ceiling doesn’t provide much leverage for reformers, but Speaker Kevin McCArthy has put forward a common-sense plan for starting to rein in our out-of-control federal government. It would suspend the debt ceiling for one year in exchange for the following common sense fiscal (and reasonably popular) reforms:

1.  One percent cap on domestic spending
2.  No funding for 87,000 IRS agents
3.  Cancel the hundreds of billions of unspent Covid money (the green new deal)
4.  Repeal Biden student loan bailouts
5.  Enact Reins Act requiring federal regulatory agencies to get congressional approval for new regulations
6. Requiring more low-income Americans to work in order to receive government benefits, particularly food stamps and Medicaid.

McCarthy controls ONE house and narrowly at that. It is unlikely he’ll even get a majority of these items. But, it’s a plan and a reasonable one. So far the Biden Administration has offered nothing but more wasteful spending. This is not meant to absolve the Trump Administration and overspending by previous administrations, but to acknowledge that reductions MUST happen.

On this week’s conversation Paul talks to Mark Abramson the owner of Los Ranchos Gun Store. They discuss gun issues in New Mexico from the past session as well as the Gov.’s plans to attack gun rights in the 2024 session. Also, Mark and Paul discuss the efforts by gun sellers to organize under one organizational umbrella and fight back.

We are told by the Santa Fe New Mexican that Santa Fe’s public school district is expecting a “budget shortfall between $9 million and $13 million for fiscal year 2024.”

The article readily notes that this is the result of a falling student population and even notes that the District expects a decline of 250 students year-over-year. So, while there ARE certain fixed costs there are obviously other costs that can be reduced as student populations decline (as they have for years).

What is really notable is that the article notes the expected student population is 10,946 and the District’s budget is approximately $320 million.  Simple division gets us per-pupil spending of a robust $29,234 PER STUDENT. The number is up from the $25,000 per-pupil that Santa Fe schools were spending back in 2019/2020.

If you can’t educate children at over $29,000 per student you’re doing something wrong. Of course, it isn’t just Santa Fe. As the chart below highlights New Mexico public schools in general are losing students even while spending continues to grow. Perhaps they ALL are doing something wrong.

The Albuquerque Journal editorial today has a interesting discussion of Gov. Lujan Grisham’s line item vetoes of numerous provisions in the Legislature-passed tax bill. Numerous (leftists) from Sen. Heinrich to numerous letter-writers expressed various forms of “outrage” over the vetoes.

The editorial essentially answers its own question about the Gov.’s “right” to veto parts of the package as much of the bill was spending and had nothing to do with tax policy. Of the four provisions in the final package both the film subsidies and child tax credit are spending. So, under the law MLG could veto them.

The more interesting issue is the idea that Democrats in the Legislature and environmental groups suddenly claim to care about the Gov. potentially abusing her powers. This is nothing new as in 2021 MLG took it upon herself to spend COVID relief dollars resulting in a lawsuit by then Sen. Jacob Candelaria (a Democrat).

Of course, at the Rio Grande Foundation we have been pushing for three sessions in a row to simply give the Legislature a seat at the table in emergency declarations. Sadly, few Democrats in the Legislature were willing to cross the Gov. on such a basic issue of governance.

All of this only reinforces the somewhat cynical view that many on the left care only about getting their payoff out of Santa Fe. Process and principle are sadly lacking.

Few New Mexico politicians wish to recognize publicly just how much New Mexico taxpayers must pay in order to bring Hollywood film companies to the State. Few even admit that the subsidies represent spending of our tax dollars.

But, budgets have a way of clarifying the situation. The following is data taken directly from Gov. Lujan Grisham’s FY 2024 proposed budget. We will remain in FY 2023 until July 1 when the ADDITIONAL film subsidies passed in the recent legislative session kick in. While the Legislature’s Fiscal Impact Report claims the recent tax bill will have a “minimal, but negative” impact in FY 2024 (see below) the cost to taxpayers of those increased film subsidies will increase by an ADDITIONAL $61.5 million in FY 2025,  $75.9 million in FY 2026, and another $87.3 million by FY 2027.

With New Mexico’s corporate income tax revenue collections (before deducting film subsidies) hovering at $400 million or so annually, the Legislature could easily eliminate the corporate income tax (while making other needed tax reforms). Sadly, before the Gov.’s vetoes corporate income taxes were set to go up. Nonetheless, we get more than $100 million in subsidies for one chosen industry.

On the latest Tipping Point discussion Wally and Paul take on a number of fiscal issues:

Contrary to the views of NM politicians, lower taxes CAN result in higher revenues.

According to the latest Rich States Poor States report New Mexico sticks out relative to its neighbors (in a bad way). New Mexico’s economy isn’t in great shape, but according to a report from Pew the government has seen more tax revenues than any other state since January of 2020. Based on the recently passed budget in Santa Fe Paul put together a chart to illustrate just how quickly spending has grown.

New Mexico’s capital outlay process has always been corrupt, but the $10 million for an abortion clinic added to this year’s bill only highlighted the corruption.

Insanely Germany has shuttered its last 3 power plants (resulting in more coal and wood being burnt). Meanwhile the

Biden Administration is planning to force EV’s on Americans whether they want them or not.

Paul had a chance to talk to KOAT Channel 7 about the ongoing cost of the DOJ consent decree.  Folks in ABQ’s “International District” want a grocery store now that Wal Mart has closed but they vote for people who won’t get serious about crime.

The 9th Circuit Federal court of appeals gave supporters of gas stoves a victory when it ruled that cities like Berkley cannot impose their own bans. The opinion found the “Energy Policy and Conservation Act  expressly preempts State and local regulations concerning the energy use of many natural gas appliances, including those used in household and restaurant kitchens.”

The battle over “stove freedom” is hardly over of course. While local bans may not be constitutional, the Biden Administration (including but by no means limited to the US Department of Energy) continues to work to find ways to regulate and limit use of gas stoves. To that end the Rio Grande Foundation signed a national letter commenting (against) the DOE’s efforts to impose additional regulations on gas stoves.

You can read the entire comment and find out who else signed on here.

Susana Martinez’ last budget was $6.3 billion. Over the next five budgets (fueled in large part by growth in New Mexico’s oil and gas industry) state general fund spending rose an astonishing 52.38% to $9.6 billion. That comes to average spending growth of nearly 10.5%.

Do you feel that your own personal slice of New Mexico’s economy is benefiting from all that spending? Do you feel that average New Mexicans should see broad-based tax relief rather than bigger government?

Every year for the past 16 the “Rich States, Poor States” report has carefully examined s slew of economic data from all 50 states. This is a meaty report with lots of interesting data and even more can be found here.

A particularly notable chart (2nd below) from the report shows just how badly New Mexico lags its more free market oriented neighbors: Utah, Arizona, Colorado, and Texas. New Mexico (ranked 42nd overall) sticks out like a sore thumb.

New Mexico’s economic performance (as seen below) is propped up by the incredible growth of oil and gas in recent years.

We’re number 1! Is it good news or bad news? According to a new report from the Pew Center on the States New Mexico has led the nation in tax revenue growth since the start of 2020 just before the COVID pandemic hit the US.

The reason for New Mexico’s revenue growth is the massive boom in oil and gas revenues. The fact that government has spent a vast majority of the money (as opposed to cutting taxes) is certainly another factor. You can see for yourself which states have seen the strongest growth in tax collections.

Rio Grande Foundation president Paul Gessing sat down with TJ Wilham of KOAT Channel 7 recently to discuss the lack of progress in getting the City out from under the Department of Justice consent decree and the high cost of paying independent monitor James Ginger.

Full story here and you can click below:

Every New Mexico legislative session there is talk of reforming the State’s inherently corrupt capital outlay system. With Gov. Lujan Grisham’s $10 million for an abortion clinic (explicitly to “serve” Texas customers) the capital outlay bill generated more opposition and debate than usual, but it passed easily nonetheless.

RGF’s president spoke at length to The Built Environment about the State’s awful capital outlay process. Click here or below to find the full article

The following is from an email from the Committee to Unleash Prosperity. A number of great economic names including Art Laffer and Stephen Moore are involved in that organization, but the chart below specifically addresses federal tax rates and revenues for “The 1%” when the Trump tax cuts took effect.

It highlights how reducing federal tax rates for the very highest earners can actually result in higher revenues. This implies that for simple revenue maximization (Laffer Curve) the federal government should probably reduce tax rates for the highest earners.

It also highlights how short-sighted New Mexico policymakers are (both Gov. Lujan Grisham AND the Democrats who control the Legislature. While not all tax reductions will result in MORE taxes paid, the fact is that reducing taxes can spur economic growth and diversification. We don’t need to look too hard for examples of that in New Mexico. The Richardson tax cuts were a home grown pro-growth success story, just ask Jennifer Rubin.

On this week’s interview Paul sits down with the Foundation’s luncheon speaker Todd Myers. Todd was in Albuquerque discussing his new book, “Time to Think Small: How Nimble Environmental Technologies Can Solve the Planet’s Biggest Problems” in which he outlined ways in which the free market and individuals can actually do a much better job of environmental stewardship than big government. Check out this informative conversation!

As usual, Albuquerque Journal cartoonist John Trever summarizes the situation perfectly with his cartoon from Sunday, April 19, 2023.

Here are a few notes about the final tax bill as line-item vetoed by Gov. Lujan Grisham. New Mexico had a $3.6 billion surplus going into the session. The Legislature originally allocated $1.1 billion for “tax cuts.” $1.2 billion of that $3.6 billion was for new spending. That means over $1 billion would have been set aside for the future. The point is that (contrary to MLG’s veto statements about having anxiety over future revenues) plenty of money was available.

To her credit, MLG vetoed all the tax hikes in the bill (corporate, capital gains, alcohol, and tobacco), not just the tax cuts.

Here are the so-called “tax cut” provisions approved by the Gov. in the final bill (we used the 2027 fiscal impact for the tax/spending bills):

• Film subsidies: $87 million by FY 2027. This is NOT a tax reduction. It is new spending;
• Health practitioner deductible/copay: $38.5 million (this is the one ACTUAL tax cut passed and signed);
• The Child Tax Credit: $111 million; While a small portion of this will indeed represent a tax cut, this is a very “progressive” and “refundable” credit (it is given whether you make money or not). We estimate $100 million of this is spending and only $11 million is an actual “tax cut.”
• $500 or $1000 tax rebates: The one-time “cost” of these rebates is $667 million.

So, here are the tallies for what happened to New Mexico’s $3.6 billion surplus:

1) $1.2 billion or 33% was spent (adding in film subsidies and refundable child tax credit as spending;

2) $667 million or 18.5 percent of the surplus was returned in the form of one-time “rebates.”

3) $50 million or 1.4 percent comes in the form of “recurring” tax cuts.

The tax package that had managed to get through the New Mexico Legislature was dramatically altered (yet again), this time by Gov. Lujan Grisham. We haven’t seen the actual signing statement but according to Dan Boyd of the Albuquerque Journal, the Gov. eliminated the tax hikes on alcohol and eliminated subsidies for electric vehicles (we applaud her for those).

On the other hand she eliminated income tax rate reductions at lower income levels and also killed a phase in GRT cut of 0.5%. Both of these are unfortunate moves and from a revenue perspective the GRT reductions were the most impactful provisions in the Legislature-passed bill.

More generous film subsidies as well as tax hikes on tobacco, corporate income, and capital gains will make their way into law. Indexing of capital gains to inflation and elimination of GRT on deductibles and co-pays also made it through.

The Gov. cited concerns about the sustainability of enacting tax cuts, but showed no such concern about film subsidies OR the 14 percent budget increase she just signed.

We are looking forward to this free event! You can sign up here.

Apparently (but not surprisingly to us) Gov. Lujan Grisham is having some heartburn about HB 547, the big tax “omnibus” bill the Legislature passed this session. Veto it! 

Then, she should bring the Legislature back (possibly for a special session) and do two simple (and consistent) things that would boost New Mexico’s economy and reduce the harm of the gross receipts tax which is a “regressive” tax. Thus, addressing it would be “progressive” public policy.

There are two things to note: 1) the Legislature set aside $1.1 billion for tax reductions. The Gov. says she is having heartburn about making tax reductions that large. 2) The deadline to sign or veto is Friday, April 7, so MLG doesn’t have much time to act.

Here’s what SHOULD be in the tax bill:

1. End pyramiding of business services. According to the Legislature’s own analysis this will reduce State revenues by $118 million annually by FY 27. In other words, this can easily be done. If cities need to be temporarily have some revenues made available due to the relatively small amount of revenue lost, that could be done. Local government concerns should not block much-needed tax reform.
2. Immediately and permanently reduce GRT rates. According to the Legislature’s analysis each .5% reduction in the GRT reduces state revenue by about $500 million annually. So, realistically the top rate could come down by .75% immediately.

This is based on ideas that have been analyzed and vetted during the 2023 legislative session. Since the GRT is a “regressive” tax as left-wing Voices for Children points out reducing it is inherently “progressive.”

Will this happen? It’s extremely doubtful. The New Mexico Legislature traditionally exists not to pass good public policy that would help all New Mexicans, but to redistribute oil and gas money to other special interests.

Another Wallethub report, this one says New Mexicans bear relatively heavy tax burdens (despite massive oil/gas revenues).

New Mexico, land of unlimited film subsidies.

The New Mexico United and their push for a new stadium are in the news.

Policy debate: energy issues in the wake of the war in Ukraine. 

New PED secretary give details on new social studies standards.

These are the senators with the best scores on the Freedom index.

The Gov. has until April 7 to sign bills. She has not acted on the big tax bill yet.

After Gov. Lujan Grisham single-handedly reduced Rail Runner fares (from $9 for a day pass to $2.50) a year ago, many people thought they’d never go back up. Shockingly, they recently DID go back up to the normal price (which, of course, comes nowhere near paying even for the train’s operations, but it’s something).

Unfortunately, the City of Albuquerque seems hellbent on keeping “free” fares on the city buses despite the manifest problems caused by this policy. As we have discussed previously, Albuquerque’s bus ridership has been in a long-term decline that precedes the COVID pandemic. The number of people riding the bus DID increase slightly under the new fare regime of 2022, but the end of the pandemic and other economic forces may have played just as significant a role (or free fares MAY have even decreased ridership due to security concerns).