In terms of her handling of the virus, the Rio Grande Foundation has been broadly supportive of Gov. Lujan Grisham and her efforts to address the ongoing crisis created by the Virus. We remain concerned about the economic situation New Mexico faces in the short, intermediate, and long terms, but understand (if we don’t always agree) with her handling of a nearly unprecedented situation.

That being said, some of the Gov.’s specific shutdown orders have questionable merits in terms of applying guidelines across various industries. We believe the following are unnecessary limiting to both personal freedom and needlessly preclude  innovation on the part of business owners or others involved in maintaining parts of a functioning economy without unnecessarily endangering public health. Several of these recommendations have the added benefit of generating precious tax dollars for state/local governments and keeping workers employed.

1. Reopen medical facilities to elective and outpatient medical procedures. Hospitals are reporting revenue declines of between 40 and 60%.  This doesn’t even include dentists, eye doctors, and other health providers who seen their businesses shuttered and the patients who have no access to care.
2. New Mexico’s 35 state parks have been shut down. Most outdoor activities involve social distancing at least beyond the 6 foot limit considered safe by medical professionals. Plus, with limited exercise and recreational options it would seem that some innovative solutions to get New Mexicans outside in a safe manner would be helpful.
   
3. Golf courses are a great form of social distancing. Limits could be placed on various aspects of the game (such as the use of carts and the presence of flags and rakes), but golf is another recreational opportunity that appears to be unnecessarily precluded in the current situation.
4. Nurseries should be free to open up provided they maintain social distancing guidelines. Planting flowers and gardening should be encouraged, not hindered during this difficult time.
   
5. Gun stores should be allowed to remain open. This is not the time for the Gov. to use a crisis to implement anti-gun efforts unilaterally. Gun shops should be allowed to open if they maintain social distancing guidelines.
   
6. Liquor stores have been shuttered while grocery stores remain open and are selling liquor. This makes no sense and has actually made shopping for groceries more difficult (and crowded) due to social distancing guidelines in place.
   
7. In advance of the Easter Holiday New Mexico churches were limited to no more than 5 people. If grocery stores and others can remain open while implementing social distancing requirements, there is no reason churches should face stricter limitations.
   
8. Restaurants that can comply with social distancing guidelines should be able to do so in a manner similar to grocery stores. They should also be allowed to sell and deliver liquor as part of their services during this crisis.

On this week’s interview podcast Paul talks to (normally) New Jersey-based corporate site selector John Boyd. Boyd has created a list of “10 Site Selection and Economic Development Takeaways from the COVID-19 Crisis.”

There is no question that New Mexico’s economy will face a steep recovery in the wake of this crisis and depressed oil prices. What trends and changes in the field of economic development does Boyd see coming out of this crisis and how will those benefit New Mexico? Listen to find out!

Our friends at Americans for Tax Reform have put together a list (currently at 200) of ways that the Trump Administration and various states are fighting the Coronavirus. You can find the list here.

Our own Gov. Lujan Grisham made the list with her executive order creating a streamlined process for Emergency Expedited Special Permits for relief supplies. The Rio Grande Foundation has published some recommendations here.

The Trump Administration has suspended a number of regulations related to fighting the virus including:

FDA allows state leeway in virus testing

“The FDA will allow states to take responsibility for tests developed and used by laboratories within their borders. The labs will not have to pursue Emergency Use Authorization from the agency, an emergency clearance that is normally required.” – STAT News (3/16/20)

FDA loosens regulations on distribution of newly developed tests    

“Under certain circumstances, the agency will not object to any manufacturers that distribute newly developed tests before the FDA grants emergency clearance, and a similar stance will be taken toward labs that use these new tests.” – STAT News (3/16/20)

EPA easing enforcement of environmental legal obligations

“The EPA will exercise the enforcement discretion specified below for noncompliance covered by this temporary policy and resulting from the COVID-19 pandemic…

*FOR IMMEDIATE RELEASE*

April 2, 2020

Governor Lujan Grisham,

New Mexico faces an unprecedented crisis on multiple fronts. With the rapid spread of the outbreak, the state-wide call for social distancing is proper. These life-saving measures are necessary and we appreciate your leadership. We value life and must work diligently to preserve it. However, these mitigation efforts will undoubtedly result in an economic crisis. Combining that with the collapse in crude oil prices which fund 40% of New Mexico’s economy and our State faces unprecedented economic and budget challenges for the foreseeable future.

One thing is definite: New Mexico remains united in defeating coronavirus. I have never witnessed a coming together of the entirety of the state in the way that I’ve seen in the last three weeks. But some of our greatest challenges lie ahead.

We must also unite in defeating the economic scourge that will plague us long after the coronavirus threat has been eliminated. We want you to know that the entire team at Rio Grande Foundation stands ready and willing to help our state on the road to recovery.

At the Rio Grande Foundation, our economic policy experts have the experience to help New Mexico overcome this challenge and emerge stronger than ever before. We are capable, we are ready, and we are willing. Already we have made some detailed suggestions at our blog site: www.errorsofenchantment.com. Consider sending your team there for details but you and your staff can also reach us directly at 505-264-6090.

Please, let us help develop solutions now so that we are prepared to act as soon as we are free to do so. We are together, New Mexico.

Sincerely,

Paul Gessing
President

On this week’s discussion podcast, Paul and Wally discuss the fact that New Mexico is estimated to be facing a $2 billion deficit according to Sen. Finance Committee Chair John Arthur Smith. How will that gap be filled and what additional concerns should New Mexicans have about this situation?

Wally and Paul agree that raising taxes would be a really bad idea. Data from the Mercatus Center done in 2018 states that “if spending commitments demand more revenues, are states in a good position to increase taxes without harming the economy? (New Mexico ranks 50th in this area.)

Speaking of taxes, candidates for the Legislature and federal office in New Mexico can take the pledge not to raise taxes here: https://www.atr.org/take-the-pledge.

Speaking of the Legislature, a group misleadingly calling themselves, “No Corporate Democrats” is attempting to make some waves in legislative races. The groups attempting to defeat these legislators are definitely of the left, but they aren’t anti-corporate. In fact, one of their main areas of focus is abortion which really isn’t an issue of corporate concern.

NM’s budget/K-12 system will be even more vulnerable to budgetary downturns than other states

The Journal editorializes in support of RGF efforts to at least temporarily repeal city/county plastic ordinances. Bernalillo County suspends ban on single-use bags for 60 days and Santa Fe does the same. Both say they are concerned about health issues.

The Americans for Tax Reform has a website where they have collected no fewer than 171 Regulations Waived to Help Fight COVID-19

https://www.atr.org/rules

Paul urges Gov. Lujan Grisham to check out the site and adopt some of the ideas.

As has been widely reported, including on this podcast, New Mexico faces a serious budget challenge due in part to falling oil prices, but also due to the ongoing virus and Gov. Lujan Grisham’s response to it which has virtually shut down New Mexico’s economy (she is hardly alone in taking such drastic steps).

Anyway, with fat budgets in the past two years and growth above 20% over that time period, the usual suspects from NM Voices for Children are making an oblique push for tax increases through tweets like the one below.  What is more troubling is that the Chair of the House Tax Committee Javier Martinez appears to share the Voices view of things.

Also troubling is that when it comes to the left’s education and health care priorities of the past decade (really they’re referring to the Martinez Administration) there was hardly “austerity.” Below the tweet you can see how early childhood spending rose during the Martinez Administration.

As this article (linked directly to the Voices website) Martinez also embraced Medicaid expansion under ObamaCare and despite a generous federal match given by the feds was still forced to come up with extra money from the State budget.

Ultimately, Voices is NOT interested in truthfully discussing the alleged “austerity” of the past. They simply want to continue the big-spending ways of the very recent past. If that means Rep. Javier Martinez will have to push some major tax hikes, so be it.

Our country is facing an unprecedented crisis. We are fighting an invisible enemy that has challenged us deeply, but has also brought out the best in people as we come together in community. Indeed, the best of America has been showcased over the last several weeks as we fight through this.

The Territory of New Mexico was first organized as an incorporated territory of the United States that existed from 1850 until 1912, when the remaining extent of the territory was admitted to the Union as the State of New Mexico, making it the longest-lived organized incorporated territory of the United States, lasting approximately 62 years.

For over 108 years now, New Mexico has been a part of the American community, united by the common values we share. On January 6th in 1912, New Mexico was admitted to the union of the United States as the 47th state, setting it on a historic path.

In so doing, we recognized our belief in a fundamental set of principles founded on liberty, freedom, and personal responsibility. We joined a society governed by the Constitution, a document that empowered the people instead of a king and wrote into law an unprecedented form of republican governance.

We are proud to announce the creation of the 1912 Society, an association aimed at honoring the time-tested principles that we share, which we can trace back to the date when New Mexicans became Americans. This membership society is brought together to honor and connect those donors who support the work of the Rio Grande Foundation at a certain annual level.

Through this exclusive giving club, members will get special updates from the president, an auto decal to showcase their membership, and advanced notice and reserved seating for events.

Click here to join the new 1912 Society

Thank you to the many individuals who have continued to give their generous support to our organization. It is only through your investment that we’re able to continue our work and in so doing fight for liberty, opportunity, and prosperity in the Land of Enchantment through public policy advocacy, thought leadership, and litigation.

Recently, the Rio Grande Foundation successfully pushed Albuquerque Mayor Tim Keller to put the City’s plastic bag ban on hold for 30 days. Keller claims that he will make the ban even more stringent (eliminating thicker, reusable bags) and that the removal of the  ban had “nothing” to do with keeping people safe from viruses and other health concerns with unclean bags. 

Taking a somewhat different tack, was Bernalillo County  which has an even stricter ban on plastics than does the City. According to a recent press release Bernalillo County Manager Julie Morgas Baca has issued an order suspending the single-use plastic bag ban for 60-days. Notably, unlike the City, the County cited public safety as a reason for suspending the ban.

“In the interest of safety during the coronavirus Covid-19 shutdown, I’ve lifted the ban so these single-use bags can be put to use,” says Bernalillo County Manager Julie Morgas Baca.

Chalk another one up for the Rio Grande Foundation which was also cited for its work on the issue in a recent Albuquerque Journal editorial.

Update: The City of Santa Fe has put its plastic bag ban on hold for now. Mayor Alan Webber. Unlike Albuquerque Mayor Keller, Webber cited health concerns saying, “If we don’t limit customer and employee interactions, and customer-to-customer interactions, they risk being high transference sites.” Webber’s order also asks stores to stop allowing customers to bring in reusable bags.

The decline in oil and gas revenues and New Mexico’s reliance on them are well-documented. But, as this informative webinar “What will the financial turmoil mean for public education” points out, New Mexico faces some additional challenges relating to the crisis.

1. The decision under Gov. Richardson to exempt groceries from taxation (while raising taxes on everything else) is going to have negative impacts on revenue, especially at the local level. After all, groceries are some of the few items being sold in smaller, rural communities nowadays;
2. Sales (or in NM’s case) GRT is more volatile than other taxes. NM is 7th-most reliant on the GRT among all US states;
3. NM’s K-12 system is funded statewide to an extent unseen in any other state besides Vermont or Hawaii.  In most states K-12 systems rely on more stable property tax revenues. In New Mexico oil and gas and GRT play larger roles (oil and gas pay GRT as well).All of this means that Gov. Lujan Grisham needs to be extremely proactive in addressing the budgetary impacts of the current economic situation.

I sat down with Jim Williams of ABQ Connect for an interview this week. These are the topics we cover in today’s interview with links to additional information:

1. The budget situation in New Mexico with oil below $22 a barrel – Errors of Enchantment Budget
2. Ideas for dealing with the immediate COVID-19 Crisis – Errors of Enchantment Economic Ideas
3. Parents need to assert themselves in educating their children with schools shut down – Errors of Enchantment Education
4. The City of Albuquerque has placed the ban on plastic bags on hold – Errors of Enchantment Bags

The Rio Grande Foundation website is an amazing tool to use for information about local and state government politics!

On this week’s interview, Paul sits down with Carol Wight, head of the New Mexico Restaurant Association. We discuss the challenges facing her industry both in the short-term as well in the longer term with regard to the overall economic picture.

Carol brings a trove of data and personal details to the discussion which spans basic business issues, liquor delivery, paid sick leave, and the plastic bag bans on the books in Albuquerque and Bernalillo County.

Voices for Children can always be counted on to propose the worst possible policy ideas for New Mexico. Recently they argued in the Albuquerque Journal  that “now is exactly the right time for New Mexico to enact nationally leading (read costly) regulations to reduce methane waste and pollution.”

Oddly, they also argue that “over-reliance on oil and gas revenue leaves our state vulnerable.” We actually agree with the latter statement. New Mexico IS over-reliant on oil and gas, but that’s because the Legislature hasn’t enacted policies that make New Mexico an attractive place to do business.

Speaking directly about the methane issue, however, natural gas prices are low and going even lower. New regulations will cause permanent closure of so-called “marginal” gas wells. This is likely the goal of Voices and the radical environmentalists calling for strict methane rules.

However, with oil production plummeting in the Permian Basin (and likely elsewhere) natural gas prices and thus production in the Four Corners (where gas, not oil is the primary product) COULD be set to rebound in a few months.

The Four Corners faces a dire economic future due to low natural gas prices and the shutdown of San Juan Generating Station. New Mexico is essentially seeing 40% of its budget evaporate. Following the path laid out by Voices would be another self-inflicted wound for NM/the Four Corners.

KOB TV’s Patrick Hayes talked to RGF and Sen. Finance Committee Chair John Arthur Smith about budget challenges facing our State. Smith says we are facing a shortfall of up to $1.5 billion.

Thankfully, it seems like Smith agrees with us that tax hikes are not the answer.

At the Rio Grande Foundation we do a lot of presentations and discussions. With the recent announcement that New Mexico faces up to a $2 billion deficit in FY 2021 (starting July 1) we decided to make a short video.

This was an experiment. For some reason Skype focused on Patrick throughout the video. We’ll do these ever week or so as events dictate.

On this week’s podcast, Paul and Wally discuss the fact that New Mexico’s schools have been shut down and, like it or not, parents are again responsible for their children’s education. While challenging, this is both an opportunity and a challenge for New Mexicans.

A massive $2.2 trillion stimulus passes. But what will it mean? What does it do for individuals and the State of NM? What pork is in it?

In this time of social distancing and the need for state and local news and analysis, we urge listeners to share this podcast!

The Rio Grande Foundation led the charge in getting plastic bags brought back to the City of Albuquerque. The mayor recently did just that for 30 days. Also, the NY Times covered our efforts albeit in a very biased manner.

A Special Session is inevitable for the New Mexico Legislature. Should that happen sooner or later? Should the GOP be calling for one ASAP? /Oil Prices/ Ideas for cutting the budget.

Finally, many celebrated “Earth Hour” recently, but in this challenging time, we should actually be celebrating what technology and fossil fuels do to enrich our lives.

(Albuquerque, NM) – Immediately prior to the 2020 New Mexico legislative session, the consulting firm Moss Adams released a study claiming that Spaceport America began producing net economic and fiscal benefits for New Mexico as early as 2013.

Danny Seymour, a policy analyst at the Rio Grande Foundation, (the Foundation is a long-time critic of the decision by then-Gov. Bill Richardson to spend hundreds of millions of taxpayer dollars in such a speculative venture) immediately went to work analyzing the study and its findings. But Seymour didn’t stop at merely deconstructing the Moss Adams report.

In his new brief, “Lost in (Sub-Orbital) Space: Financial Reality vs. and Fantasy at New Mexico’s Spaceport Authority” Seymour considers the overall financial impact of the facility as well as what it has spent and what it has brought into the State.

Seymour’s analysis, using publicly-available information in the Moss Adams report and other public documents, shows that the Spaceport America has now cost New Mexico taxpayers in excess of $275 million. This number contrasts with the project’s “original” cost of $225 million, but in the meantime there have been operational expenses as well as significant expansions and improvements made to the facility at taxpayer expense.

In his analysis Seymour contrasts the Moss Adams claims of “break-even” with a broad calculation of how much the facility has attracted to the State. Seymour finds that the facility has brought in just under $55 million to New Mexico that would have otherwise not been spent here. Even this number should not be used to calculate profit and loss as only direct lease payments could really be counted in a profit and loss statement for the Spaceport.

“Ultimately,” notes Seymour, “to be considered economically successful (let alone profitable), New Mexico’s Spaceport must become the home base for Virgin Galactic’s frequent manned commercial launches as the project was originally sold to the people of New Mexico.”

In conclusion noted Seymour, “Major government construction projects like the Spaceport often suffer from the “sunk cost” problem. It is easy to sell elected officials on the idea that the next dollar spent will make the project a success. In reality the Spaceport is a cautionary example of a State government spending taxpayer money on an extremely speculative project for which it had no expertise.”

Currently, the primary focus of our elected officials remains on addressing the viral outbreak that continues to infect people and shut down large swaths of our economy. Soon, however, a special session of the Legislature will be called to address the situation. When it happens will depend on the dynamics of the current outbreak and any number of political decisions made in both Washington and Santa Fe.

What we DO know is that there are numerous potential cuts to be made. These include everything from  17% pay raises for the Gov’s cabinet secretaries to some  more substantive savings to be had.  Regardless, as the following chart illustrates, New Mexico government is substantially bigger in terms of spending as a percentage of GDP than any neighboring state. You can check the data for other states (including state and local breakdowns) here. 

We know the State budget is going to be deeply affected by the decline in oil and gas prices. But, when they do meet to address the budget New Mexico’s legislators MUST cut spending BEFORE even considering tax hikes.

The following article appeared in the Current Argus on March 13, 2020

With Coronavirus grinding travel and much of society to a halt and oil prices having crashed, there is little chance the budget passed during the 2020 Legislature will survive the year without some major revisions.

Even prior to the session ending Senate Finance Committee Chairman John Arthur Smith said, “I don’t think any of us can walk away from here and say the spending was controlled, we’re skating on very thin ice from a spending standpoint.” It’s hard to argue with that considering that Governor Lujan Grisham and the Legislature grew government by 20% (from $6.3 billion to $7.6 billion in just two years)

They should have seen this coming. Even as the Legislature met the price of a barrel of oil was dropping. On January 6, 2020 oil was $63.27 a barrel. It dropped to $42 a barrel before the Russians and Saudis announced their price war which further reduced oil prices to about $30 a barrel. Since oil and gas comprise 40 percent of New Mexico’s budget a sustained price war makes a special session very likely.

The Legislature didn’t learn their lesson of the last decade during which New Mexico experienced stagnant economic growth due to declining oil prices. Price dropped from over $100 a barrel to less than $50 a barrel over a few short weeks in late 2014. And, despite Gov. Susana Martinez’s efforts to address systemic problems in New Mexico’s economy, the Democrat-controlled Legislature opposed her at every turn. New Mexico typically underperforms its neighbors economically, but that situation grew far more apparent as New Mexico’s oil dependency was exposed.

By the time Michelle Lujan Grisham and a new band of more “progressive” Democrats took over at the start of 2018 New Mexico was suddenly awash in revenue thanks to new discoveries in the Permian Basin. But, did we get policy reforms designed to diversify New Mexico’s economy? Not at all.

While they talked a lot about “diversifying” New Mexico’s economy the Legislature did nothing of the sort. Instead they enacted numerous tax hikes and regulations that make New Mexico even less friendly to business. We are more dependent on the volatile oil and gas industry than before.

In 2019 the Legislature adopted HB 6, the largest tax hike in New Mexico history. Among many economically-harmful provisions, that law increased personal income taxes which disproportionately impacts small business. Excise taxes on new cars were also increased by 33%.

The controversial Energy Transition Act is also going to make it harder to attract energy-intensive manufacturing operations. The Act is already impacting the Four Corners economy directly with the shutdown of San Juan Generating Station coming soon, but the cost of shifting from coal to “renewables” is going to be substantial for all PNM rate payers. Businesses will avoid uncertainty and set up shop where electricity prices are not as expensive or likely to rise in the future.

The biggest problem of the past two years was that no pro-business tax relief was passed and no reforms were made to the onerous and problematic gross receipts tax. And, rather than embracing needed reforms like “Right to Work” or “Davis Bacon” prevailing wage laws, the Legislature and Governor teamed up in this year’s 30 day session to allow more time consuming and costly complaints to be levied at construction businesses (SB 98) and for local governments to face higher labor costs and labor forces that are harder to work with (HB 364).

Will we suffer the same economic stagnation if prices remain depressed? It is hard to say for sure. This is a volume-driven boom and is not as price-dependent as prior booms. But, if prices remain too low, the Permian Basin producers will reduce activities or pull out completely. That means fewer jobs and tax dollars.

What happens next is anyone’s guess, but we do know all 112 members of the Legislature are up for election in November.

Gessing is president of New Mexico’s free market think tank, Rio Grande Foundation 

On this week’s episode, Paul interviews David Young who describes himself as a speaker, performance coach, and community leader. David is originally from Columbus, OH, but lives in New Mexico now and runs a consulting business called Being Wholehearted.

A young man, David lived in China a few years back and the two discuss Chinese culture and politics fairly extensively including aspects of the current Coronavirus outbreak.

Then, Paul and David discuss the power of virtual learning and how that tool can be used effectively not just in times of pandemic crisis, but also as a time-saving but effective learning tool.

Imagine being THIS Governor. Just a few weeks ago she was touting all manner of new government programs as part of a downright Orwellian “cradle to career” proposals.  Today this same Gov. Lujan Grisham canceled one of the supposedly core functions of state government (provision of an “adequate education” is in the State of New Mexico Constitution) for the rest of the year.

The order doesn’t impact virtual charters schools like New Mexico Connections Academy (full disclosure, I’m on the board of that school), but I have two kids in traditional public schools, so my wife and I are about to become full-fledged teachers.

In fact, this shut-down exposes the reality that, while we pay a great deal of money (more than $18,000 annually for APS) the reality is that (no matter their education levels) parents are ultimately responsible for their child’s learning. The good news is that there are more options for students than ever before. Schools are supposed to provide resources, but Khan Academy is great. There are numerous other options here.

If you live in an area that doesn’t have great Internet service, that can be a challenge. Hopefully you have books and other reading materials and textbooks.  These are not easy times. It would be great to see a more diverse, market based education system ultimately operating outside of state control that could come up with innovative solutions to these challenges. But, for now, we are all home schoolers.

The FY 2021 budget begins on July 1. The budget passed in the 2020 legislative session which wrapped up in February. Total spending contained in the budget amounted to $7.6 billion. Gov. Lujan Grisham vetoed $50 million worth of infrastructure spending as concerns mounted over the budget mounted, but a combination of low oil prices and drastically slowing economic growth will lead to spending at far lower levels than those in place today.

In an effort to put forth some real, specific ideas to address New Mexico’s looming budget shortfall, here are some ideas for legislators and Gov. Lujan Grisham to consider in a special session dealing with the FY 2021 budget.

For starters, the focus needs to be on spending cuts. Tax hikes during this time of economic crisis are simply unacceptable.

1. The early childhood fund created by House Bill 83 which is otherwise expected to receive $320 million this year should be put on hold.
2. “Free” college will have to be canceled for a savings of $27 million (between the $17 million directly appropriated for the program and the $10 million allocated to the Lottery Scholarship program.
3. Under the FY 2021  budget most State employees are expected to receive 4 percent pay raises.  This comes on top of raises passed the previous year. Cabinet secretaries received 17% pay raises in 2019. In a time of shared sacrifice with some economists from the Federal Reserve predicting unemployment rates of 30% this is a simple way to save $179 million.
4. Film subsidies as expanded in SB 2 in 2019 could cost New Mexico up to $110 million annually.  The cost to New Mexicans of these subsidies should be eliminated or at least reduced.
5. Infrastructure is a core function of government. $50 million in badly-needed infrastructure spending was vetoed by the Gov. due to budget concerns from this session. It is time to eliminate or rework New Mexico’s Davis-Bacon prevailing wage law to get more bang for our infrastructure bucks and put more New Mexicans back to work in the trades.
6. According to the Legislative Finance Committee operating the New Mexico Rail Runner costs $33 million annually. The train has been shut down due to the virus. Shutting it down permanently or at least for the duration of this crisis would save scarce resources.

Businesses are allowed plastic bags for their customers, City will suspend enforcement of the plastic bag ban.

This afternoon Albuquerque Mayor Tim Keller released an announcement that for the next 30 days, businesses will be allowed to use any type of plastic bag for their customers and the City will suspend enforcement of the plastic bag ban.