New Mexico is just one of dozens of states nationwide with massively funded state pension systems. According to this article, “by 2020, coverage will no longer be considered solvent.” Also, “the authority has an unfunded liability of about $4.1 billion but that has dropped from about $5 billion.” This improvement is the result of rate increases in recent years.
Surprisingly, despite the massive shortfall, New Mexico is actually in relatively good shape, at least according to this analysis.
There seems to be several major problems here:
1) Politicians have an incentive to over-promise what they pay state workers in the future relative to what they are paid right away. This is a means of cost-shifting onto future politicians and generations;
2) The inevitable tax increases hurt taxpayers even though they are largely unaware of the future massive burden they will be faced with;
3) From a pensioners standpoint, it is tough to be on a fixed income when fees and rates keep rising.
The single most important solution to this problem is to move away from defined benefit pension plans and give employees greater control over and responsibility for their own retirements.

Sorry to ignore the blog for a few days. I was at the annual State Policy Network conference in Scottsdale with hundreds of other think tank leaders. We exchanged ideas and generally worked to help each other create a more effective free market movement nationwide.
My posting for today is simply this very telling chart which clearly shows how Santa Fe’s gross receipts tax has risen dramatically over the years. As we’ve pointed out previously, the gross receipts tax is devastating to New Mexico’s economy because it most hurts the very businesses that generate jobs and wealth in our economy. Having jumped from 4.25 percent back in 1980 to nearly 8 percent this year and perhaps over 8 percent this fall if voters pass the Rail Runner tax, the gross receipts tax will continue to do untold harm to City and State economies.

In case you missed it, the US Government has recently decided to nationalize our two largest mortgage lenders Fannie Mae and Freddie Mac. American taxpayers are now the proud “owners” of these two houses of cards.
I pointed out a few months ago that this absurd situation has been years in the making. Investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe on Monday. “America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it’s just bailing out financial institutions.”
As the Wall Street Journal points out, while the situation is deplorable:

By far the biggest risk here, however, is that the companies could still emerge with their business model intact. That model is the perverse mix of private profit and public risk, which gave them an incentive to make irresponsible mortgage bets with a taxpayer guarantee.

Hopefully the Bush Administration gets its act together and separates Fannie and Freddie from the government teat once and for all. Otherwise, we’re setting ourselves up for another bailout down the road.

With a hotly-contested Presidential race, not to mention Senate and Congressional races on the ballot here in New Mexico, there has not been much discussion of a tax hike that voters throughout the northern and central portions of the state will be voting on.
Voters in in Bernalillo, Sandoval, Valencia, Santa Fe, Los Alamos, Rio Arriba and Taos counties are being asked to approve a one-eight cent increase in the gross receipts tax to fund the Rail Runner and various transit projects in November. I debated the issue with Laurence Rael, Executive Director of MRCOG before the Albuquerque Chamber of Commerce’s transportation task force recently. The powerpoint of my presentation is available here.

The US Minerals Management Service recently announced that it intends to prepare a new Five Year Leasing Plan for the Outer Continental Shelf. This is a vital first step in initiating more exploration and production on OCS lands that MMS estimates could hold 86 billion barrels of oil and 420 trillion cubic feet of natural gas.
MMS has opened the process for taking public comments. I’m writing to you, in hope that you will take a few minutes form your hectic day to write a brief note or letter to MMS, underscoring your support for leasing these lands and producing more of the oil and gas that are the foundation for our economy, living standards and opportunities.
Already, a number of environmental pressure groups have mobilized their extensive financial and networking resources, to deluge MMS with comments OPPOSING any plan that opens up more OCS acreage for leasing and drilling. I’ve heard that comments to MMS are currently running at approximately 15 to 1 AGAINST opening new OCS areas – and thus in favor of continuing the unconscionable Energy War on Poor Families.
To make it easier for you to write a letter to MMS, I’ve attached a sample letter (click on the link below) that provides some facts and ideas you can use, and that you can tailor to your own taste. Also attached are a couple of background papers by MMS and the National Ocean Industries Association (NOIA) that provide useful information about the OCS program and the laws and technologies that enable us to extract even more energy, from even deeper waters, with even greater care for the environmental values we all cherish.
You can send a detailed letter like this. But even a brief letter supporting a full analysis and expanded leasing program will help greatly.
All comment letters must REACH MMS by SEPTEMBER 15, when the comment period closes.
Letters can be snail-mailed to the addresses on the sample MMS letter – or they can be submitted by going to the MMS website (http://www.mms.gov/5-year/5-YearProgramComments.htm) and using either of the following links:
via the web: Public Commenting System
via e-mail: 5YearRFIComments@mms.gov

Comments on 5-Year OCS Oil & Gas Leasing Program for 2010-2015
Ms. Renee Orr
5-Year Program Manager
Minerals Management Service (MS-4010)
Room 3120
381 Elden Street
Herndon, VA 20170
Mr. James F. Bennett
Chief, Branch of Environmental Assessment
Minerals Management Service (MS-4042)
381 Elden Street
Herndon, VA 20170
Dear Ms. Orr and Mr. Bennett:
I am writing to express my strong support for MMS plans to initiate a new five year leasing program, and for expanded leasing on the Outer Continental Shelf (OCS) during the 2010-2015 five-year period. I urge you to fully consider and carefully analyze all planning areas of the OCS, leaving none off the table, as you prepare the draft proposed program and environmental impact statement.
Energy is the foundation of modern society and the living standards we enjoy. It is the key to actually securing the rights and opportunities guaranteed by our Constitution. Abundant, reliable, affordable energy is essential for jobs, food, heating and transportation. Reducing the soaring cost of energy is especially important for America’s small businesses, minorities and poorest families.
Right now, the United States is spending almost $700 billion a year to import foreign oil and gas – because we have made the vast majority of our lands and resources off limits to drilling. As T. Boone Pickens constantly reminds us in his ads, this is rapidly becoming the largest transfer of wealth from one nation to another in the history of mankind. It can not, must not, and need not continue.
On top of that, as Investor’s Business Daily notes, “America is nearly helpless in the face of a resurgent Russia intent on reclaiming its czarist empire, an Iran hellbent on acquiring nuclear weapons, a China making common cause with dictators to acquire energy, and a menacing Venezuela aligning with Russia and Cuba to control sea lanes in the Caribbean, where 64 percent of all US-bound tanker traffic passes.”
The oil and natural gas beneath the 1.76 billion acres of the OCS are vitally needed resources that belong to all Americans. Nearly one-third of US domestic production already comes from the OCS, and the Minerals Management Service has conservatively estimated that undiscovered, technically recoverable resources could total 86 billion barrels of oil and 420 trillion cubic feet of natural gas.
The long record of OCS operations demonstrates that this energy can be produced without harming the marine environment – thanks to new rules, technologies, and commitments by government and industry alike to environmental safeguards. In fact, there has not been a major spill from an OCS production platform in nearly 30 years, and MMS data show that only 101,995 barrels of oil were spilled during all operations on the OCS between 1980 and 2007, out of 11,855,000,000 barrels produced.
MMS is required by law to prepare a schedule of OCS lease sales that “best meet national energy needs for the 5-year period.” To achieve this goal, the agency must develop a schedule that has maximum flexibility, and include as much acreage as possible, so that it can respond to our nation’s changing and growing energy needs, population and economic growth, and economic and national security.
Growing US and world demands for oil and gas are not being met with adequately expanding supplies. As a result, gasoline and other energy prices have more than doubled in recent years – and far too many families have had to make painful choices between heating, eating, medical care, transportation, and rent or mortgage payments. Many have little money left over at the end of the month for vacations, college or retirement. This is both intolerable and unnecessary.
A major reason for this situation is that our own government has closed numerous areas to leasing – and denied us access to energy resources that belong to the American people. In fact, for decades now, Congress has imposed “temporary” moratoria that prohibit oil and gas leasing, drilling and production on 85 percent of the Outer Continental Shelf off Alaska and the Lower 48 States.
Over the past year, however, people have begun to realize that government has become the cause of, rather than the solution to, high prices and other energy problems. By margins of 2:1 and even 3:1, they are now demanding that these moratoria be lifted, and drilling resumed on the OCS.
President Bush recently reversed the Executive Branch prohibitions on leasing and drilling, and Americans are demanding that Congress now lift its prohibitions. I am optimistic that Congress will ultimately listen to the will of the people and act responsibly, to end the needless moratoria.
Alaska Governor Sarah Palin has already removed restrictions on drilling for 30 billion barrels of oil in the Chukchi Sea and all the natural gas in the Beaufort Sea off Alaska’s shores. She has already finished the environmental impact studies, so that shipments to the Lower 48 can start in as little as a year or two – if MMS and Congress do their jobs.
I therefore believe MMS has a responsibility to take a long-term view, assume the moratoria will end, and include in its analyses and plans all the Outer Continental Shelf lands and resources that We the People of the United States own off our shores: in the Atlantic, Pacific, Gulf of Mexico and Alaska. The new MMS plan will be in effect until 2015 – and I ask simply that MMS devise its plan accordingly, to reflect continually changing global conditions and steadily rising energy demands.
That means including all areas, off all our coasts in the new Outer Continental Shelf leasing plan.
Thank you for providing this opportunity to comment, and for making the 2010-2015 OCS plan a truly comprehensive plan that does exactly that.
Sincerely,

It seems like every week or two the Albuquerque Journal feels compelled to publish a hopeful article by proponents of some “alternative” energy source. This week’s edition, “N.M. Sun, Wind Key To Our Energy Future” comes to us from the N.M. Solar Energy Association.
The authors assert in their article that:

A concentrated solar plant (CSP) utilizing about 15 square miles of otherwise unusable land would produce enough electricity to offset New Mexico’s total electrical energy requirements. A CSP of around 100 square miles could meet the country’s entire need, producing more energy than the U.S. consumption of oil, natural gas, coal, hydropower and nuclear energy.

and,

Wind energy programs are working well in New Mexico and have proven to be a cost-effective energy source. Eastern New Mexico could easily produce 20 times the amount of electricity needed in the state. New Mexico’s wind could supply a major percentage of U.S. energy.

This all seems wonderful and without a doubt that wind and solar can become a more important part of both our state and national energy picture, but as it stands now (according to the Energy Information Agency), they combine for less than 1 percent of our energy supply.
Certainly, what the authors promise for wind and solar doesn’t seem to mesh with reality. It’s hard to believe there’s a conspiracy here because if you could solve our energy problems with the measures they proscribe, someone would have done it or be doing it now.
America can’t run on a pipe dream. Solar and wind can help, but they will be niche players for the foreseeable future.

We at the Rio Grande Foundation spend a vast majority of our time analyzing and discussing New Mexico-specific issues and policies. But, I was given a chance recently by a national syndicate to write an opinion piece on Barack Obama’s tax plan.
With wall-to-wall coverage of the conventions and the campaigns, I humbly submit my $.02. Check the article out here.

I was away for the Labor Day Holiday this weekend and was without internet access and thus not blogging. Summer has reached its unofficial end, so we are back to work and back to blogging.
Last week I weighed in on a tax increase that voters in Carlsbad will face in just a few weeks. This is no minor tax hike, rather it is a 0.5 percent increase in the gross receipts tax rate, an increase from the current rate of 6.8125 percent rate now in place to 7.3125 percent. The money is supposedly needed to pay for repairs to the municipal water system.
The Rio Grande Foundation had previously ranked Carlsbad as the most taxpayer-friendly city in New Mexico, but if this tax hike is passed, that status will undoubtedly be jeopardized. More importantly, as I point out in an op-ed regarding the tax hike, Carlsbad might avoid the tax hike entirely by privatizing its water services. The article was picked up by Len Gilroy on his Reason blog.

Recently, the Rio Grande Foundation and CARE co-hosted a series of screenings of the film “The Great Global Warming Swindle” statewide to large audiences. You can view the film here.
Bob Balling, a climate scientist at Arizona State University gave a post-film presentation with his take on the movie. His powerpoint presentation is available here. Video of Bob’s Albuquerque presentation along with some Q and A is available below:

As the Albuquerque Journal reported on Wednesday, New Mexico Treasurer James Lewis travels as a part of his job — a lot. The Journal followed up with an editorial questioning who is paying for Lewis’s flights around the globe and to what extent those who pay for Lewis’s flights might be doing so to curry favor with the man that — as The Journal points out, “is the elected official in charge of billions of dollars in New Mexico’s investment portfolio.”
While it is hard not to read about Lewis’s inflated airfare costs — $3,600 first class to Atlanta, business to Brazil — and $2,200 in hotel charges, my question is why the State of New Mexico should be investing billions of dollars. I know it is in the Constitution, but wouldn’t the permanent fund money be better off in the hands of New Mexicans’ instead of politicians? Isn’t it the very definition of socialism to have governments to own and control businesses?
It may be impossible to abolish the office as a whole, but shouldn’t we as individual New Mexicans control whatever revenue is generated by taxes on extractive industries? Aside from that, government really shouldn’t be in the business of investing. Instead, New Mexico should adopt the Alaska model and return oil and gas money to taxpayers. This would serve another positive function by creating a constituency for ongoing mining/drilling.

During the recently-completed special session, the New Mexico Legislature passed a tax “rebate” program. As has been discussed here and elsewhere, the “rebates” weren’t so much designed to give money back to taxpayers, but to redistribute money from those who paid taxes to those who do not.
The following information underscores just who pays and does not pay taxes. Remember that rebates are only being given to those who make less than $70,000 annually.
What is the number of returns in each bracket? What is the percentage breakdown in each of those ranges of returns with payments?

Thus, those who pay 75% or New Mexico’s income taxes get nothing while large numbers of taxpayers who paid no taxes get the largest checks from the state. Not much of a “rebate” was it.
HT: Matt Kennicott

Whether you like John McCain or not, he has undoubtedly been one of Congress’s undisputed leaders in fighting Congressional pork-barrel spending. Recently, Jonah Goldberg who will be coming to Albuquerque for a breakfast and book signing hosted by the Rio Grande Foundation, wrote about how Sen. McCain could capitalize on his leadership against pork-barrel spending as a means of getting elected to the White House.
As Goldberg points out, Alaska is one of the most significant recipients of federal “pork” projects. What Goldberg doesn’t mention is that New Mexico actually gets more money out of Washington than even Alaska (according to the Tax Foundation). Maybe we can get Mr. Goldberg to write an article about the porky behavior of New Mexico’s elected leaders?
It will also be interesting to see if McCain can make his anti-pork efforts an issue in the campaign. So far, it doesn’t seem to be a prominent issue.

City Councilor Michael Cadigan has an op-ed in today’s ABQ Journal that defends the City’s practice of charging <a href="http://www.cabq.gov/council/impact-fees“>”impact fees” on development. The opinion piece was in response to Councilor Sanchez who recently questioned the economic impact of these fees when he said, “fees for the west end of Central Avenue are nine times higher than on the east end,” and that he’s “concerned that we are not getting commercial development … because of the way the impact fees work.”
Certainly, I understand why builders don’t like impact fees. We as citizens are paying taxes on a wide variety of items and yet, those who construct new buildings and developments must pay and then pass along these fees to those who purchase or lease that space. Whether or not there is any direct benefit to these people is unclear. Where the money goes that would have otherwise been allocated to this newly developed area is also unclear.
Ultimately, the problem with impact fees is that it is hard to tell who exactly benefits from them. What needs to happen is for builders to band together to construct their own internal infrastructure. Perhaps they could strike a deal with the government along the lines of a Business Improvement District that would handle such infrastructure needs privately? The problem is, once the government gets involved, there is no accountability or ability to separate “impact fees” from other taxes and spending and those who pay the fees wind up just paying another tax.
City Council is not going to solve this problem because they like taxes. Only the local development community can push Council to get rid of or limit these fees while also taking care of infrastructure needs.

News stories this week cited the fact that Amtrak ridership has risen significantly in recent months in response to high gas prices. In a free market, a record number of riders would mean record profits (or at least increased profits), but Amtrak is America’s state-owned, socialist rail system (government ownership of the means of production, in this case a railroad), so profits are not even a consideration. In fact, Illinois Senator Richard Durbin has used increased ridership to argue that more taxpayer dollars should be funneled into the rail system, in part to purchase more train cars.
As the story points out, however, rail advocates shouldn’t get too excited about the railroad’s so-called “success”: Even though Amtrak ridership last month increased 14 percent compared to July 2007, the railroad provides less than 1 percent of all trips made nationwide, as car and air travel reign. Air and rail rely far less on subsidies on a per passenger mile basis.
This one-percent is at a relatively high cost to taxpayers of more than $1 billion per year. The Southwest Chief, which runs through New Mexico is one of Amtrak’s most heavily-subsidized routes operating at a cost to taxpayers of $236 per passenger.

A few weeks ago, the Rio Grande Foundation hosted educator Ben Chavis from the American Indian Public Charter School in Oakland, CA. Chavis shared his “radical” ideas on education which included holding all minority children and children of all income levels to a high standard. You can listen to the interview we did with Bob Clark of KKOB 770 here when Mr. Chavis when he was in town for our education event in Albuquerque on July 31st.
In addition to this informative radio interview, syndicated columnist George Will had an article that appeared in today’s Albuquerque Journal and in newspapers all over the country.

The special session ended with a whimper instead of a bang this week. This means that the career of one of New Mexico’s staunchest conservatives ended as well. While Rep. Foley certainly made enemies among Democrats and some conservatives (enough to unseat him in a primary earlier this year), he also had the courage to fight for free market, conservative principles that we at the Rio Grande Foundation hold dear.
In fact, Foley laid out a model for Republican success as an opposition party (and potential majority party) during the special. He introduced a little-publicized bill, House Bill 12, that would have eliminated New Mexico’s personal income tax by 2012. While the Governor’s “rebate” plan was an embarrassment both as public policy and ultimately, politically, Foley laid out a clear vision for a better New Mexico. I might add that Foley relied on intellectual arguments (and data) from the Rio Grande Foundation in putting together his bill.
Hopefully, since Rep. Foley will not be returning to Santa Fe in January, someone in the Legislature steps forward to put ideas like fundamental tax reform on the table in the New Mexico Legislature. Thanks Dan.

In case you haven’t already heard, the special session is over. The Governor’s pared down rebate plan was pared down further so that if your family earns $70,000 or more, you get nothing. Medicaid has been expanded by $20 million which is likely to be recurring and will grow over time.
It would certainly have been better for the majority of New Mexicans — even those who will receive these miniscule rebates (on their taxes in 2009) — if the Legislature had never been called into the session in the first place, but we survived with only minor damage. It will be interesting to see if oil and gas prices rebound, thus generating a real windfall for the state or if they continue their recent slide, thus wiping out this supposed windfall that Richardson used as an excuse to call the session in the first place.

My former colleague at the National Taxpayers Union, Andrew Moylan, had an excellent op-ed in the Wall Street Journal recently which discussed yet another often-overlooked reason to open new areas to domestic drilling: a gusher of tax revenues.
As has been made abundantly clear in New Mexico during this special session, this state relies heavily on oil and gas revenues for tax revenues. We’re not alone. The federal government also collects billions of dollars annually from oil and gas and, as Moylan points out:

The potential federal revenue from Arctic National Wildlife Refuge (ANWR) oil development is $191 billion over 30 years — roughly $18.36 per barrel, based on projections of recoverable reserves. Applying that formula to the 107 billion-plus barrels of recoverable oil that federal agencies estimate is in ANWR, the nearby National Petroleum Reserve and offshore tells us that sensible drilling could yield nearly $2 trillion in overall revenue over 30 years, or an average of about $65.5 billion per year.

Additional domestic oil and gas drilling is already a “win, win.” As Moylan concludes, “More supply, lower gas prices, greater energy security, and lower taxes. What are we waiting for?”

I was down in Alamogordo over the weekend and had the opportunity to stop by and visit with Mike Haymes and the gang over at AM 1230. Check out the podcast from August 15 (at the bottom of the top-most list) at this page. We discuss the proposed Spaceport tax increase for Otero County, the special session, and an array of other topics.

With all of the hullabaloo over the Presidential election and US Senate and House races, voters in and around Albuquerque may not be aware that they could face higher taxes if they and their fellow voters approve a tax increase for the RailRunner and “other transit projects.” Recently, the New Mexico Independent did a story on the vote complete with quotes on the issue from yours truly.
My basic arguments from the article follow:

Even if gas hits $5 or $6 a gallon, Gessing said, not enough people will use the Rail Runner to reduce congestion on I-25 or warrant the train’s high operating cost. “We’d be much better off maximizing bus service,” he said, by running more buses and taking riders directly to the places they want to go, such as Albuquerque’s West Side, rather than to fixed stations.
Though his group will fight the tax proposal, Gessing said he isn’t sure whether it will pass or fail. “People don’t like to raise taxes, especially in tough economic times. But there are a lot of people who can’t get enough mass transit,” he said. “There’s something that warms the heart of a lot of people to see a bus on the street, even if they don’t use it and it’s only partially full.”

I have publicly supported Governor Richardson’s plan to use this special session to give tax rebates to New Mexicans. Under the Governor’s original plan:

New Mexico families would receive an income tax rebate from the state of between $150 and $75. Those with family incomes below $60,000 and no children would receive $150 while families making more than $70,000 would receive $75. Having children would result in additional refunds, with lower-income taxpayers receiving more than higher earners.

As I pointed out, this was less-than-optimal because it actively penalized those who make more money, but since everyone got a rebate it was still a good plan.
Unfortunately, under the Governor’s revised plan which was outlined in today’s Albuquerque Journal(subscription required), the Governor, in response to revised oil and gas revenue numbers, has decided that no taxpayers with family incomes above $80,000 are deserving of a rebate.
There’s nothing at all wrong with giving rebates to all taxpayers — in fact we encourage it — but the idea that families who make more than $80,000 (upper-middle class, but by no means wealthy) and pay higher taxes, is absurd. In fact, this transforms an otherwise viable rebate plan into nothing more than another welfare program.
Unless the rebate plan is revised in order to include all taxpayers, we’d be better off if legislators simply went home right away and the special session was aborted before it got off the ground.

Watch Nancy Pelosi dance around the issue of offshore drilling in the video below. As I’ve noted before on this blog, Congress must act before Election Day to renew the offshore drilling ban or it expires. Pressure on Pelosi and others will keep offshore drilling and homegrown energy sources on the agenda.

Keeping track of what is happening in Santa Fe during the legislative session can be a real chore. Special interests, media outlets, and those with highly paid lobbyists are often the only ones capable of keeping on top of what is going on. Worse, even if you can track how particular legislators are voting on the issues, you often need a law degree to figure out what bills actually mean.
In order to allow individual New Mexicans (and media outlets/bloggers that don’t have the time or resources to send a dedicated staffer to Santa Fe) to keep track of what the Legislature is doing, the Rio Grande Foundation has created a new online resource called New Mexico Votes. The website, which can be accessed at www.NewMexicoVotes.org is being made public just in time for the special session which is set to begin on Friday. Read the Foundation’s press release to find out more about more about how to take full advantage of New Mexico Votes during the special session and beyond.

Many readers of this blog undoubtedly attended the Rio Grande Foundation/Educate New Mexico screening of “Flunked, the Movie” on July 31. If you missed the event, you may want to check out the video below of the discussion with educator Ben Chavis, a star of the film, Steve Maggi, the film’s director, and President of the Rio Grande Foundation Paul Gessing.
The video is in two parts and represents our first foray into the medium. Please let us know what you think: info@riograndefoundation.org