Economist Scott Moody recently analyzed state and local government employment for The Rio Grande Foundation. An opinion he wrote on his findings is available here.

The New Mexico legislature has announced that it will be decreasing government funding across the state, which will effect spending on public schools. This has created an uproar among many people who believe that the solution to our education problem here in New Mexico is to give more money to schools. Toward the end of last year members of the New Mexico education board proposed a so-called solution, a one percent gross receipts tax increase to help aid public school funding.
Unfortunately, the only thing that the tax increase will do is create more of a tax burden on New Mexicans and New Mexico-based businesses during difficult economic times. Despite the money which the state plans to spend on government schools, study after study has found little to no correlation between better education and more government funding.
It’s easy to understand why it would be popular to increase education funds; more money should mean more books, better teacher pay, better facilities, and an overall better education. The problem within New Mexico’s education system cannot be solved by an increase in taxes. Certainly a cracked desk or a leaky roof has never caused a child to under-perform. Change must come from somewhere other than an increased supply of government money. It must come from a school’s drive to improve its quality and the realization on the part of parents and students that the educational product being provided is extremely valuable. This is not currently the case.
One option for improving this situation is to offer tax credits to students in low-income families. Parents can utilize tax credits when they decide to place their child in a school that is either private or outside of their district. Although this means that a child may have to travel longer distances to get to school, the benefits outweigh the losses. In the end the child gets a better education. After all, parents would not make the extra effort to get their kids out of the government-run school (and pay a portion of the new school’s tuition) if they were not receiving a superior education.
This tax credit proposal, which has been introduced in the Legislature as SB 355 by Sen. Pete Campos (D), is a more optimal solution than the proposed increase in sales tax. Tax credits affect only those parents who are paying the school fees. Furthermore, it creates competition without privatization. Schools will have incentive to improve, because parents have more options. Although tax credits will not solve all of our public school’s problems, they are a step in the right direction without wasting still more tax dollars.
New Mexicans must shift away from the belief that more money necessarily means better education, toward the idea that a smart use of resources and planning can guarantee better results.

I just love New Mexico’s education bureaucracy and the people who defend it. Now, as I’ve discussed previously, the education establishment is pushing for a massive tax hike to fund even more wasteful spending — this despite the fact that the educational system is set to receive a massive cash infusion from the federal stimulus package.
Anyway, as the tax hike bill (in its current form it would increase both the gross receipts and personal income taxes), HB 346, began moving through the Legislature, New Mexico’s usually acquiescent business community showed signs of life and opposed the tax hikes. That is when things started to get interesting.
According to this article from the ABQ Journal, the head of the Albuquerque Teachers Federation said of the business community “They have no business in the education business…they either need to support the kind of funding education needs or they need to be quiet.” There are so many things I could say about this extremely arrogant statement:
1) Given New Mexico’s near 50% dropout rate (second worst in the nation), it would seem that the teachers’ unions and education experts aren’t exactly doing the job;
2) New Mexico has dramatically increased per-pupil education spending over the years, so money may not be the answer (check out page 6 of this study);
3) Since businesses and their consumers will foot the bill for higher taxes, shouldn’t they have a say in whether they are raised?;
4) When did we decide that teachers’ unions were the final authority on education anyway? After all, unions don’t run United Parcel Service and it certainly seems that the unions have not done much for GM, Ford, and Chrysler. When did we abdicate the education of our children to a union that is primarily concerned with increasing teacher salaries, increasing their own membership, and preventing non-union competition?
5) If there are lawsuits over the supposed “adequacy” or lack thereof of New Mexico’s educational offerings, shouldn’t we at least objectively define “adequacy” first? Perhaps choice would make New Mexico’s schools more adequate? Why is more money the only answer (see question 4 for the real reason).
Hopefully the business community stands its ground. We’ll be there providing intellectual ammunition to opponents of this incredible boondoggle.

Has the current economic crisis been caused by “an unregulated free market” as some in the media would have us believe? To a libertarian or small-government conservative, the answer is clearly “no,” but specifically listing the many ways in which government policies have led us down the current, destructive path is another matter. This is a great posting that explains how we got here and the myriad ways in which the supposedly “unregulated free market” has been undermined and twisted by government policies.

Recantly, the Albuquerque Journal, New Mexico’s largest newspaper, included a letter to the editor from a reader who decried the “failure” of our “free market” health care system. To anyone famililar even in passing with American health care, this concept of a freewheeling, un-regulated health care marketplace might seem to be in stark contrast to the heavily-regulated system now in place.
I pointed out these simple facts in a published response to the letter which can be found below:

In a letter to the editor, Richard Mason recently labeled our health care system “an unregulated free market.” He argued that legislation introduced in the 2008 legislative session that would have created a New Mexico Health Care Authority that Mason argues would solve our problems. Unfortunately, he doesn’t explain exactly how this system would lower costs and improve access to care.
The assertion that our health care system is “free market” is baffling. I don’t have enough time and space to list all the ways in which government intervenes in health care, but here are a few of the big ones: Government spending via programs like Medicare and Medicaid to name just two, accounts for 46 percent of all health care spending. Federal tax policies favor third-party-purchased coverage by allowing employers to purchase coverage tax-free, thus taking cost decisions out of the hands of individuals. States also regulate care, thus piling on costly mandates. New Mexico has 51 of them.
On the supply side, licensing and other regulations enacted at the behest of the medical profession have constricted the supply of doctors and other health-care professionals. Many states also require “Certificate of Need” permission from the government prior to construction or expansion of certain health care facilities.
The fact is that while we don’t face a truly “socialized” health care system as seen in many other countries our health care system is not a “free” market. Before using government to “cure” our health care system, it would behoove all of us to become educated on the ways in which current government policies increase costs and reduce the availability of care.

Recently, our investigative journalist Jim Scarantino reported on the State Investment Council’s misguided investment in the Small Smiles dental chain. I also published on op-ed on the subject.
In his follow-on report on the State’s investment in Small Smiles, Scarantino dug deeper and even requested emails from New Mexico’s top investment officers in which these highly-compensated officials express complete ignorance of how they are investing taxpayers’ money. This is just the tip of the iceberg. The SIC has not adequately tracked its investments on behalf of New Mexicans’ and the problems are beginning to bubble up. Stay tuned!

A few weeks ago the Rio Grande Foundation and CARE hosted global warming expert James Taylor at events in Albuquerque and Santa Fe. The event was a great success, but if you were unable to attend (or even if you attended, but you want to view it again), you should take 5 minutes to check out Taylor’s powerpoint presentation.
As Taylor makes clear, wind and solar are quite heavily subsidized while nuclear, coal, and oil receive relatively few subsidies (our belief is that most all subsidies are bad). Ultimately, as Taylor clearly shows in his presentation, government policies that force the economy to create “green jobs” will come at a heavy price in the form of lower living standards and increasing poverty. Unfortunately, as I wrote recently, President Obama doesn’t seem to realize this just yet.

As I wrote about over the weekend, the so-called economic stimulus now being considered by the Senate is full of waste and pork. This kind of thing is to be expected any time Congress decides to start spending money on a wish list of projects that would otherwise not be funded. Of course, as the folks at the Cato Institute point out, most good economists will admit that artificial government-induced stimulus packages don’t really work.
The stimulus bill would be bad enough if it just wasted money and stalled our economic recovery, but real, harmful policies are being foisted on the American people. One of the most troubling such policies is a provision that would essentially nationalize your medical records.(how this is an economic stimulus is beyond me, nevertheless…) According to the folks at the Institute for Health Freedom, the stimulus bill would require :

* “The utilization of an electronic health record for each person in the United States by 2014.”
* “The National Coordinator shall perform the duties…consistent with the development of a nationwide health information technology infrastructure that allows for the electronic use and exchange of information and that…facilitates health and clinical research…”
The federal medical privacy rule promulgated under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) already permits the disclosure of personal health information without patient consent for treatment, payment, and oversight of the healthcare system. The stimulus bill fails to restore patient consent, while at the same time, mandating electronic health records and facilitating the electronic exchange of every American’s health information.

Regardless of the merits (or lack thereof) of electronic health records, your health information will no longer be your own under this plan. Since information is power, is it any stretch to say that this is the first step to nationalized health care?

Most New Mexicans are abundantly aware that the Rio Rancho Star Center has quickly turned into a white elephant. The City of Rio Rancho recently took over management of the facility, in part because the Center has lost an astounding $580,000 since it opened in 2006 (this does not include the $36 million in bonds floated to finance the arena). Not to be outdone, Albuquerque Mayor Marty Chavez wants Albuquerque to build an arena of its own and is looking for a handout from Washington to do it.
As if to symbolize the waste that often results from investment in sports arenas and stadiums, it was reported today that the famous “Bird’s Nest” stadium where the Olympics were held is being abandoned and turned into a shopping complex. So much for China as a role model! Rather than wasting taxpayer money on centrally-planned boondoggles, arenas, like most other projects, should be built by the private sector when there is adequate demand. Otherwise, our governments will waste massive amounts of our tax money ($450 million in the case of the Bird’s Nest)

Professor Allen Parkman over at the University of New Mexico is one of the most sensible academics I’ve ever met. He has an excellent article in today’s Albuquerque Journal discussing the federal stimulus boondoggle now moving to the US Senate.
As Parkman writes: “Under normal circumstances, there are pressures for the federal government to consider the benefits and costs of projects. That is less likely with the stimulus plans. The federal government is going to spend funds on a lot of projects. Some will be highly desirable, some less desirable, and some — in retrospect — probably undesirable in an attempt to stimulate the economy and create jobs. Seldom will efficiency — benefits versus costs — be a concern.”
Congress should abandon this costly and unwise stimulus and instead let the economy recover on its own terms in the absent of additional government meddling.

A few weeks ago, in the wake of Governor Richardson’s “pay-for-play” scandal, the Wall Street Journal contained an article outlining some of the political scandals facing New Mexico and discussing ways in which the state’s open political process has created problems for the state’s political culture.
As part of the Rio Grande Foundation ongoing efforts to promote transparency in New Mexico government, I point out in a letter to the editor, published today, that New Mexico suffers from a lack of transparency moreso than a lack of ethics and that legislators have successfully kept the entire system opaque and citizens’ ignorant through a lack of information.

With the Legislature in session, I plan to use this space from time to time to point out a few crazy ideas out of Santa Fe and a few that I believe are worthy of support. While the two I am listing here should appeal to free marketers, given the current legislative makeup, straight “conservative” bills probably won’t go very far, so I believe these will have a broader appeal.
1) SJR 1 introduced by Sen. Bill Sharer. This resolution would, if approved by the voters, amend the New Mexico Constitution to preserve the right of all New Mexicans to purchase their own health care. This is the ultimate check against socialized medicine. In fact, in Canada where socialized medicine is the law of the land, this right was only recently restored and only in one province, Quebec. As Brian Day, past president of the Cambie Surgeries Corporation, which operates a private surgery clinic in Vancouver states in the article:
“Access to a wait[ing] list is not access to care.” He estimated there are 75,000 people on B.C. waiting lists and more than a million in Canada.
2) The other bill of interest to those who are truly concerned about good and ethical government is SB 334 which has been introduced by Sen. Mark Boitano. As I wrote in the Albuquerque Journal a few months back, allowing governments to use taxpayer money to promote ballot measures (almost always on behalf of bigger government) is extremely dangerous and unfair to those citizens and grassroots groups who cannot suckle at the government teat.
These are just two examples of reasonable proposals to improve the state of New Mexico. I’ll be posting more examples, both good and bad, as legislation is introduced. A great place to track these bills and find out additional information is our legislative tracking site www.newmexicovotes.org.

It looks like the stars may finally be aligning for improved transparency in New Mexico government. Rep. Janice Arnold-Jones is leading the charge by filming committee hearings in the House. Sen. Mark Boitano too has been a leader on the issue in his chamber where a majority of the body supports filming legislative floor sessions. Of course, as I point out in this op-ed, open government goes beyond filming legislative sessions.

There is an effort underway including legislation sponsored by a bi-partisan group of legislators (led by Sen. Kent Cravens) that would create a searchable, online database of government spending.
Similar legislation, which was championed by then Sen. Barack Obama in Congress, has resulted in the creation of a database of federal spending. Seventeen states have created similar databases with many other states now considering similar legislation.
Enabling average citizens to log on to their computers to find out where their money is going and to whom will not only enhance government transparency, it will allow each of us to become our own government spending watchdog, thus making sure that government is spending taxpayers’ money appropriately and effectively.

While much of the attention on health care has shifted to Washington and the Obama Administration, there is still action taking place in the states. Governor Richardson, having largely failed to impose his original vision of bureaucratically-managed health care on New Mexico, has revised his plans and come up with a new “streamlined” health care plan.
Richardson recently unveiled a series of health care bills that will be introduced during the 2009 session. Among the initiatives he has planned are:

It would require agencies that buy insurance for public employees and retirees to work more closely together to save money, but it would leave the agencies themselves in place;
Increase use of electronic medical records;
Require insurance companies to spend 85 percent of premiums on health care and restrict premium increases over time; and
implement “guaranteed issue” policies that would force insurance companies to insure individuals regardless of medical condition

First and foremost, while they sound like a great idea, forcing doctors to shift to electronic records is not a panacea for our health care system;
Unfortunately for us, Richardson seems hell-bent on increasing costs and degrading patients’ ability to obtain coverage. Demanding that insurance companies spend 85 percent of their premium collections on patients simply reduces the incentives insurance companies have to appropriately administer coverage to their customers.
“Guaranteed issue” regulations are another bad idea. They have been found to increase the cost of insurance by 23 percent in the first year and 50 percent higher during the second. Increasing costs ultimately drive young and healthy people out of the marketplace.

I for one and willing to give Obama a chance. Certainly I have deep concerns about some of the rhetoric he used in his campaign, but given some of President Bush’s relatively pro-market rhetoric which did not result in sound economic policy, I was/am rather willing to take a wait and see perspective. Unfortunately, one of Obama’s first proposals as president is absolutely terrible and, given the economic realities facing the nation and in particular the automobile industry, will go a long way to preventing a recovery, thus pushing more American workers into unemployment lines.
Obama’s proposal is outlined in this article, but to summarize, it would allow California and more than a dozen states to impose tougher auto emission standards on carmakers to fight greenhouse gas emissions and new fuel-efficiency requirements to cover 2011 model year vehicles that would require the auto industry to boost efficiency by 40 percent to at least 35 miles per gallon by 2020. The firm IHS Global Insight estimates that these regulations would drive up the price of a new car by $2,000 to $10,000 per automobile. Driving up the price of a new car by 50% or so hardly seems to be an economic stimulus for America, but given Obama’s radical views on energy and global warming, it is hardly surprising that one of his first proposals is to lash out at a struggling industry.
For more on Obama’s radical views on global warming, check the following short video out from our friends at the Citizens Alliance for Responsible Energy.
href=”“>

New Mexico’s Legislature and local governments are busy attempting to close budget deficits. While the Rio Grande Foundation has already proposed several spending programs that could be eliminated including those outlined in our 2008 Piglet Book.
Fortunately, there is more than enough spending statewide to reduce deficits. This fact is made crystal clear in a new Rio Grande Foundation study, “The Government ‘Gravy Train’: An Analysis of New Mexico’s Private versus Public Sector Employment and Compensation” which was released today. The study is available here.
Among the study’s findings:

* In 2007, state and local government employed 24.5 people for every 100 people employed by the private sector, far above the national average of 16.22. Thus, New Mexico’s state and local government employment ratio is 51 percent higher and is the 3rd highest ratio in the country;

* Not only does New Mexico hire more government workers than almost any other state, but those employees those employees are more highly compensated than average New Mexico workers. In 2007, state and local government compensation was $45,516 per job while private sector compensation was $41,669 per job. As a result, the average state and local government job paid 9.2 percent higher than the average private sector job;

* The budgetary savings to the state by aligning New Mexico’s state and local government employment and compensation ratios to the national average would be astounding. In 2007 alone, such an adjustment would have saved taxpayers up to $2,931,228,000.

There is no doubt that even in the best of times that New Mexico’s economy is held back by the presence of bloated state and local bureaucracies. With tax revenues plummeting and budget deficits looming, now is the time to prune state and local government with an eye towards saving taxpayer dollars.

We are often told that government acts with the best of intentions. Personally, I believe it, but also realize that the road to hell is indeed paved with the those very same good intentions. This scenario is about to play itself out when it comes to toys. In the wake of the scandal over the toys from China that contained lead and other harmful substances, Congress passed a law called the Consumer Product Safety Improvement Act which was supposed to rectify the problem through a whole host of regulations. Unfortunately, the government solution may be as bad as the problem of unsafe toys itself.
As abundant materials on the Handmade Toy Alliance point out, these laws, by adding a $300 – $4,000 fee per toy in the form of testing and licensing costs, this law will actually make it tougher for domestic, small-scale toy producers to stay in business. There were a few excellent letters to the editor in the Wall Street Journal on the topic as well.
The fact is that the large toy companies that import toys from China can easily fold testing and licensing costs into the cost of their mass-produced toys, small, domestic producers will go out of business. Congress is now considering amending the legislation which is set to take effect in a few weeks, but this really is an excellent example of what well-intentioned government policies can do when they are actually implemented.

Perhaps you missed it in all the hoopla over President Obama’s Inauguration on Tuesday, but Governor Bill Richardson delivered his State of the State address on Tuesday as well. You can read the text of that address here.
While admitting that the state faces hard times financially and laying out a few ways to resolve those problems, Richardson laid out an extremely ambitious agenda which, if adopted, would result in massive tax increases and higher energy prices for New Mexicans.
I discussed the Governor’s address on Artesia’s KSVP 990AM. Listen here.

A few days ago I discussed the generous incentives that have been used to attract filmmakers to New Mexico. I’ve had several questions about which study I believe to be more accurate and unequivocally I say the Arrowhead Center Study which was done at the request of the Legislative Finance Committee, not the Ernst and Young study, is closer to the truth. But, we have been talking about these subsidies for the film industry for a long time (see this entry from 2004) saying that they are bad public policy and should be eliminated.
But what about an objective, outside opinion on the studies’ relative merits. Here is an interesting analysis from “The Contrarian.” A couple of choice quotes from the posting indicate the reasons to be skeptical of the Ernst & Young study:

It’s hard to explain the discrepancy without culling through footnotes and looking at the methodology and data used. But the study commissioned by the governor’s office might be slightly more suspect, given the political and economic capital Richardson has invested in the issue. Even the pro-subsidy report concedes that the direct economic benefits don’t make up for the foregone tax revenue, dollar for dollar. But it manages to find a net benefit by estimating the present and future impact of “film tourism.”
Does anyone really choose New Mexico as a vacation destination because some scene in an Indiana Jones movie was shot there? Possibly. But this seems a slender thread on which to hang a program that has handed out an estimated $67 million in tax breaks since 2003. And does Steven Spielberg really need the handout? I think not.

Recently, the Rio Grande Foundation took a close look at the investment practices of New Mexico’s State Investment Council (SIC). This work turned in to an opinion piece that was subsequently published in the Las Cruces Sun-News.
Not surprisingly, when called to the carpet, the bureaucrats in charge of the SIC responded not with contrition or explanation of their practices, but instead by lashing out at those who criticize their practices. You can read Gary Bland’s response here. In his response, Bland makes a number of personal attacks, but fails to adequately respond to the arguments in our original discussion of the SIC’s shortcomings.
I’ve posted a brief response to Bland’s attack below:

Gary Bland’s defense of the State Investment Council (1/15/09) shows even more why the Legislature and the public need to pay attention to what is being done with their money.
In a January 8, article in the Sun-News, the Rio Grande Foundation exposed an investment of over half a million dollars in an Arabian owned chain of scandal-plagued low income dental clinics. That business, Small Smiles, had been touted by the State Investment Council as a New Mexico company when in fact it is owned by a bank in the oil-rich nation of Bahrain. We also reported on the allegations of child abuse, Medicaid fraud and unethical medical practices that have been leveled against this company into which the State Investment Council has allowed the public’s money to be invested. Since we issued our report we have learned that of the 19 states where Small Smiles has clinics, it is being investigated by 16 State Attorneys General.
Mr. Bland, who is the state’s investment officer, had no response whatsoever to these revelations. The chance that taxpayers will ever seen any positive return on this investment are about zero, as has been the case with many of the other investments made under Mr. Bland’s leadership. Mr. Bland is a defendant is a whistleblower lawsuit as the result of that imprudent investment of our money.
Mr. Bland misleads in his effort to shine a positive light on the State Investment Council’s venture capital risk-taking. He touts a 7.2% five-year return for the Land Grant Fund investment. Problem is, the Small Smiles investment, and the other high-risk New Mexico venture capital investments have been made our of the Severance Tax Permanent Fund, not the Land Grant Fund. The Severance Tax Permanent Fund—based on the same report from which Mr. Bland obtained his figures—has a lower rate of return over the past five years. It comes in at 6.9% as of September 2008, well behind other indexes such as the S&P 400 returned (8.7%), the Russell 1000 (7.1%) and the Russell 2000 (9.4%). This underperformance raises the question whether New Mexico would be better off scrapping its expensive investment advisor relationships and simply investing its money in low cost and very low risk indexes. This would virtually eliminate the potential for kickbacks and pay-to-play that has corrupted the world of New Mexico’s money management.
The investment returns cited by Mr. Bland are entirely worthless in judging the performance of the New Mexico venture capital program. Mr. Bland focuses only on claims of job creation. Giving away money to favored businesses will, until those businesses collapse, certainly create some jobs. In terms of investment returns like capital gains and dividends, however, the program continues to run in the red to the tune of tens of millions of dollars.
Lastly, Mr. Bland failed to mention that the 7.2% five year return he brags about comes from reports issued before the market collapse of 2009. Failing to mention this rather significant fact falls short of the candor New Mexicans deserve from the man responsible for managing their money.

A decade ago, if the board game Monopoly were created, there is no doubt that Microsoft, a company that the government deemed to be “too competitive” and successful would have been the central focus of the game’s creators.
As bad as it is for a company’s competitors to use government power to fleece one company and their customers, if “Monopoly” were created today, the theme would have been even more depressing. For a humorous look at the way the game might have looked today, check out this link. For a taste of what we’re talking about, check out the following “Chance” card.

Ya gotta love Governor Richardson. A few months ago, as we have discussed here in the past, the Arrowhead Center at New Mexico State University studied the economic impact New Mexico’s film industry incentives were having on New Mexico’s economy. The study is available here. Advocates for spending taxpayer money on the film industry were not amused when the Arrowhead Center analyst found that the program returned only 14 cents for every dollar spent.
So, what was the Governor to do? After all, he has been one of the primary supporters of the film industry? Simple…just pay for a new study and make sure the results come out the way you want. That seems to be the case with the latest study by the consulting firm Ernst & Young which was just released and has been discussed in the media.
The study which is available here found that the film program returns $1.50 to the state for every dollar spent by taxpayers. This study was just released, so I can’t verify that the numbers are inflated, but the claims seem quite inflated. Check back soon for a deeper analysis and comparison of the studies, but, as we saw with recently published arena studies the data can easily be manipulated to make such projects appear economically viable even when they clearly aren’t.

As bloggers Mario Burgos and Steve Terrell have pointed out in recent blog postings, the leadership of the New Mexico Senate has decided to disregard a majority of its members by refusing to provide webcasts of Senate floor action. Last year, the Senate passed Senate Memorial 45 which provided for filming and broadcasting of floor actions.
Unfortunately, it seems that a bi-partisan group of senators simply don’t think New Mexicans should know what their elected officials. Of course, the House refuses to show what they are doing by filming their floor actions as well. According to this chart from the National Conference of State Legislatures, New Mexico is one of only three states that do not provide any webcast or telecast of legislative floor proceedings.
Isn’t it time that we shined some light on Santa Fe?

Depressing as it may seem, at least for those who are familiar with the book, as Stephen Moore of the Wall Street Journal points out in this interesting article, we seem to be living in the world of “Atlas Shrugged.” After all, government is standing the way of success and subsidizing failure like never before and if Obama lives up (or down) to expectations, things will get a whole lot worse in the years ahead.
Fortunately, I think the American people are beginning to realize what is happening and what has happened under the Bush Administration, but we will be in for some tough battles ahead.