Author: Paul Gessing

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Economy Top Issues

Grow Economy, don’t Mandate Sick Leave

The aftermath of the 2016 Legislative session is still being discussed and parsed, but the liberal New Mexico Voices for Children think tank is already clamoring for the next expansion of New Mexico government. The issue this time is paid sick leave. Naturally Voices, which views every societal “nail” in need of a government “hammer,” has a government-driven solution.

New Mexico private sector workers are, according to a new report, offered sick leave at a lower rate than similar workers in any other state. To be honest, we at the Rio Grande Foundation share the concerns expressed by Voices on this. We’d like to see more workers paid better and offered employee benefits.

The difference lies in our proposed solutions to the problem.

We view the issue through the lens of recent news reports that an astonishing 10,000 people applied for 290 job openings at the new Cheesecake Factory in Albuquerque. Obviously, there is an over-supply of relatively low-skilled labor in both Albuquerque and New Mexico as a whole. This is a market reality driven by New Mexico’s historical over-reliance on federal dollars and extractive industries.

Voices wants to simply impose a new regulation demanding that businesses offer workers no less than one week of paid sick leave (their report does not differentiate between full and part-time workers). Their own data claim that this will cost New Mexico businesses $240 million annually.

What they don’t seem to understand is that businesses — especially mom-and-pop restaurants and other small businesses — aren’t just going to take this $240 million out of their bottom-lines. Often, they don’t have profits to speak of. So they will lay off the very workers that this proposal is supposed to help. And if part-time workers are included in the proposal, that means part-time workers just starting out in the work force will be the hardest hit.

The real problem with Voices’ proposal is not its unintended consequences, but rather its the lack of vision inherent in it and so many other similar proposals — like the misnamed “Fair Workweek Act” — which was proposed in the Albuquerque City Council in 2015.

Voices sees the economy as a fixed pie. If you take away from labor, you give more to capital, and vice-versa. We at the Rio Grande Foundation see innovation and productivity as beneficial to everyone.

What Albuquerque and the state of New Mexico desperately need is not more government regulation: it’s more and better jobs of all kinds. It is no surprise that New Hampshire, the most economically-free state in the nation (lacking both a sales and an income tax) has the most generous sick leave policies according to the Voices report.

Unfortunately, when businesses or entrepreneurs look at our state they see onerous and often arbitrary regulations, they see a gross receipts tax that makes doing business here more costly than other states. They see a workforce and school system that are not up to preparing workers for the modern economy and they see high crime rates. Lastly, they see a population — especially in the Rio Grande corridor — that tends to be both suspicious of outsiders and highly sensitive to land use and economic development proposals.

These problems are not unique to New Mexico, but New Mexico is unique in possessing all of them in spades. Addressing some or all of these issues in ways that make New Mexico more attractive to business would grow our economy and make it more likely that workers receive competitive wages and benefits.

For many years, New Mexico has enacted policies that make our state less attractive than many of our neighbors for private sector development. Another new regulation isn’t going to change that. Instead, it is time to move in the opposite direction towards economic freedom and competitiveness. This will make jobs more plentiful leading to higher pay and more competitive benefits for New Mexico workers.

The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to “promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.”

Categories
Economy Tax and Budget

States, Not Cities and Counties, Are Paramount

COMMENTARY: “States may, if its citizens choose, serve as a laboratory.” Justice Louis Brandeis in New State Ice Co. v. Liebmann

When it comes to economic policy issues, the states are supposed to be the dominant actors. This is the view laid out by Justice Brandeis. It flows seamlessly from the United States Constitution’s design which emphasizes “federalism.”

But this isn’t another article about how Washington is overstepping its bounds. Rather, it is about how New Mexico’s Legislature might want to keep closer tabs on policymaking activities of local governments.

Local governments derive their powers from the states within which they are located. In some states they are given broad latitude. In others, like Virginia, their power is strictly limited. Virginia’s minimum wage and other employment-related policies are set by the Legislature.

For simplicity’s sake, this is a good thing, regardless of your views on the minimum wage.

While my organization does not support raising the minimum wage on economic grounds, that has not stopped New Mexico and more than half of all U.S. states from raising their minimum wages above the federally-mandated level of $7.25. New Mexico’s rate is currently at $7.50.

The $7.50-an-hour rate is straightforward, but as things currently stand, the cities of Albuquerque, Las Cruces, and Santa Fe have their own wage rates. Separate rates are mandated by the counties of Bernalillo, Doña Ana, and Santa Fe. It’s not just the complexity of varying wage rates and jurisdictions; there are additional, complex rules over how tipped wage rates are calculated depending on the provision of certain benefits like employer-sponsored health insurance.

Complying with myriad tax rates and formulas can be a nightmare for any business, especially small ones. Seemingly well-intended efforts to raise wage rates are creating tremendous complexity and compliance burdens for the very small businesses that we need to create jobs and dig New Mexico’s out of the current economic malaise.

Statewide preemption

That growing complexity is a big reason that groups like ACI and the New Mexico Restaurant Association have gotten behind a “statewide preemption bill.” The bill has been followed in the 2016 session by Rep. Harper in the House and Sen. Moores.

The idea that state legislatures, not a mixture of cities and counties, nor far-off bureaucracies in Washington, D.C., should regulate New Mexico’s economy is self-evident. In fact, Brandeis, quoting further from his “laboratories of the states” argument said that the idea was to, “try novel social and economic experiments without risk to the rest of the country.”

So, if California wants to adopt a $10.50 or even $15.00 per hour minimum wage, let them. If Texas would like to not impose legal wage floors at all, ideally that should be their prerogative. Of course, as things currently stand, the federal rate of $7.25 is the baseline for every state.

I believe that under such a system people and jobs will continue to move from heavily-regulated, high-minimum-wage states like California to less-regulated states like Texas, but I might be wrong. I’d love to give states the leeway to duke it out. Localities, not so much. It’s messy and convoluted with multiple jurisdictions at play. Local borders are unclear to all but the best-informed.

Lest supporters of high minimum wages think this is just an effort to kill minimum wages entirely, local minimum wage hikes give legislators a “pass.” After all, an Albuquerque legislator nowadays can say, “Why should the state raise the state minimum wage when Albuquerque has done it?”

The leading opponents of “preemption” might be rural legislators. They see “big cities” even here in New Mexico as a world apart from themselves and their more conservative constituents. Nevertheless, preemption makes sense. New Mexico’s cities and the businesses located there are engines for New Mexico’s entire economy. We are ultimately in this together.

Gessing is the president of New Mexico’s Rio Grande Foundation, an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

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Uncategorized

RGF President Paul Gessing Discusses The Impact of Medicaid Expansion on KNAT TV-23

Watch “Joy in Our Town” with host, Ebony Romero, and guest, Paul Gessing, President of the Rio Grande Foundation, as they talk specifically about the MEDICAID expansion in New Mexico.

Posted by KNAT – TV 23 on Tuesday, January 19, 2016

Categories
Economy Open Government Tax and Budget Videos

Eye On New Mexico: Talking About The Issues Facing The New Legislative Session for New Mexico

See the entire program below:

Categories
Economy Education Notable News Tax and Budget

Slew of Bad Rankings Reflect New Mexico’s Difficult Reality

Over the years, New Mexicans have grown used to seeing their state at the bottom of a lot of good lists and at the top of many of the bad ones. This long-term systemic problem has grown worse due to declines in federal spending and employment at the Labs and military installations as well as plunging prices of oil and natural gas.

There are a lot of great people in New Mexico. We have a unique culture, internationally-recognized events and attractions, all topped off by incredible weather and landscapes. Unfortunately, for decades many believed that federal largess and mineral wealth were adequate bases for our economy. Business-friendly economic policies were ignored in favor of finding ways to tax and redistribute resources from these two industries.

This phenomenon is quite common. The list of resource-rich, but economically-backward nations is long including Saudi Arabia, Venezuela, Nigeria, Libya, and Iraq (to name a few).

In just the span of a few weeks New Mexicans found their state ranked poorly on a series of national reports:

*51st by the Associated Builders and Contractors on their “Merit Shop Scorecard” of issues important to the construction industry (adding insult to injury, neighboring Arizona ranked 1st);
*50th on the 24/7 Wall Street ranking of best and worst run states in America. The rankings were based in large part on our underfunded government pension programs, high unemployment rate, and high crime rate;
*Highest unemployment rate in the nation at 6.8 percent;
*Lowest graduation rate according to the US Department of Education;
*One of seven states to lose population in 2015 according to the Census Bureau;
*Tied for 46th in overall economic freedom by the free market Fraser Institute of Canada.

 

They say insanity is doing the same thing over and over again and expecting different results. New Mexico has relied on government and natural resources to solve its problems for far too long. It is time for a dramatic new free market strategy.

The strategy works wherever it is tried. Texas which continues to be a magnet for both jobs and people (it led the nation in population growth during 2015 and from 2010 to 2015) also ranked 3rd in overall economic freedom. It is a “right to work” state with no personal income tax and no corporate income tax. These are just a few of Texas’ many positive attributes when it comes to business and investment.

Colorado is another state that does a lot right. All tax hikes in Colorado must be approved by voters at the polls while government revenue growth is limited to the combined rates of inflation and population growth. The state also legalized marijuana in a way that maximizes market flexibility and is expected to generate an astonishing $1 billion for the state in 2016. Lastly, in 2004 Colorado adopted the “first-of-its-kind” voucher system for higher education.

Unfortunately, the complacent attitude of many New Mexicans is not going to change quickly or easily. Special interests have built up over the years that are perfectly happy with the status quo even if it impoverishes their fellow New Mexicans.

But more people than ever are demanding serious reforms. There are even some small successes to point to. For example, reductions in the excise tax on “micro-breweries” a few years ago has led to exploding growth in this area.

Last year with Republicans in control of the New Mexico House for the first time since the 1950s passed more than a dozen specific reforms designed to make our state more attractive to business investment. Unfortunately, the Democrat-controlled Senate with Michael Sanchez at the helm did not even hold votes on many of these reforms.

As we head into the 2016 legislative session, many of these same issues will be discussed. For the good of New Mexico, enough Senate Democrats must demand at least a fair vote on basic reforms. Long-overdue reforms will allow young, educated New Mexicans to find gainful employment at home rather than forcing them to relocate elsewhere out of economic necessity.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility

Categories
Economy Open Government Tax and Budget

Eric Fruits, PhD: ‘Free’ federal Money Costs New Mexico

With the 2016 election right around the corner, the candidates are searching for wedge issues to appeal to large swaths of the electorate. Medicaid expansion, particularly in New Mexico and other states that have already participated, is proving to be a major sticking point.

The Affordable Care Act (ACA) contains a provision that expands Medicaid coverage to almost all individuals with incomes below 138 percent of the poverty line. But in the Supreme Court’s 2012 decision to uphold the ACA’s constitutionality, the court ruled that the federal government could not compel states to expand their Medicaid programs. At this point, 30 of them have done so (New Mexico chose to in early 2013).

The arguments over whether to expand Medicaid vary by state, but proponents often point to the federal government’s offer to foot almost the entire bill. For example, Ohio Gov. John Kasich supported Medicaid expansion as a way “to bring Ohio money back home” — that is, avoid bearing any of the cost.

My latest research suggests that this argument may be lacking, since it doesn’t account for associated increases in state and local spending.

Analyzing all federal funding to state and local governments finds that each additional dollar of federal money sent to the states is associated with an average increase of 82 cents in new state and local taxes. Across all states, a hypothetical 10 percent increase in federal grants to state and local governments would be associated with approximately $50 billion in additional increased state and local taxes, charges, or other revenue sources.

In real terms, this translates to an additional government burden of $158 per person. This is in line with existing peer-reviewed research that concludes that each dollar of additional federal grants is associated with 54 cents to 86 cents in new state and local taxes.

Under the ACA, states will be on the hook for 10 percent of the costs of expanding Medicaid. While 10 percent sounds like a small share, it represents billions of dollars that states will have to pull from other programs or raise taxes to fund. For example, the Kaiser Family Foundation projects that if neighboring Texas were to expand Medicaid under the ACA, the state would have to come up with an addition $13.5 billion in state money over the next 10 years. Implementing the ACA’s Medicaid expansion in the remaining 20 states, which would cost the federal government an estimated $470 billion over the next decade, would therefore cost state and local governments an additional $318 billion.

And the fact that these 20 states have not expanded the program reflects a realization that “free” federal money can be very expensive after all.

But why does federal government spending, which should theoretically replace state spending and taxes, in reality increase spending and associated taxes? The U.S. Government Accountability Office suggests two ways. First, federal grants usually require matching state spending, which is often paid for by increased taxes or fees. Many necessitate a dollar-for-dollar match in spending by state or local governments. Second, federal grants often have a “maintenance of effort” condition, which requires states to prolong the funding after a certain time frame. In this way, the federal government guarantees that federal money adds to state spending rather than takes its place.

Yet even when the federal government promises to cover nearly 100 percent of the cost, as it has done with Medicaid through 2016, state taxes can still increase because of increased ancillary costs, such as additional infrastructure and personnel. New Mexico, for instance, now needs to come up with an additional $85.2 million — or 8.5 percent increase in Medicaid spending — to keep up with skyrocketing enrollment.

And this extends beyond health insurance coverage. In 2012, New Mexico state and local governments received $5.9 billion in federal transfer funds and spent $13.1 billion raised from taxpayers. This so-called “ratchet” effect means that a hypothetical 10 percent increase in federal transfers to New Mexico would amount to about $590 million more in state and local spending — meaning significant tax and fee hikes.

These findings shed new light on the potential consequences of accepting federal money. While Medicaid expansion might make sense in some states, New Mexicans should be particularly wary of “free” federal money. It already costs them billions of dollars.

Eric Fruits, Ph.D., is president of Economics International Corp. and an adjunct scholar with the Rio Grande Foundation.

Categories
Economy Energy and Environment

Rio Grande Foundation Gives Obama Administration Lump of Coal for Christmas

For Immediate Release: Tuesday, December 22, 2015

For further Information, Contact: Paul Gessing 505-264-6090

(Albuquerque) – Today, the Rio Grande Foundation announced it is suing the Obama Administration over the Clean Power Plan (CPP), which is an illegal rule to regulate carbon dioxide emissions from power plants. The Foundation is joining the Competitive Enterprise Institute (CEI) in asking the Courts to review the CPP rule.

Rio Grande Foundation President Paul Gessing said, “This is yet another unlawful Washington power grab by the Obama Administration that will cost New Mexico rate payers dearly. The Rio Grande Foundation believes the appropriate Christmas gift for economically-strapped New Mexicans is a lawsuit to stand up for those would pay the price for this ill-conceived and illegal regulation.”

In 2014, the Foundation, along with New Mexico Representatives Candy Ezzell and Tim Lewis filed comments against the CPP. In part, the Rio Grande Foundation cited, the traditionally-state nature of electricity regulation and the fact that under the plan, residential rates are projected to increase by 13 percent to 14 percent, while industrial rates are projected to increase by 23 percent.

Gessing concluded his remarks saying, “This regulation is a continuation of President Obama’s promise to make electricity prices ‘necessarily skyrocket’ while his Administration lavishes subsidies on so-called ‘renewables.’ The CPP is an effort to use government regulations to hinder the use of traditional energy sources.” The Rio Grande Foundation is taking legal action in an effort to stop these disastrous effects from happening.”

The Foundation’s 2014 comments as well as more information about the organization’s work on energy and a wide variety of issues relating to New Mexico’s economy can be found at The Rio Grande Foundation’s website, www.riograndefoundation.org.

Information on the Competitive Enterprise Institute can be found at: www.cei.org.

Categories
Economy Tax and Budget

“Free” Money is Killing New Mexico

Nothing seems to unite New Mexicans like the desire for “free” money.

Over the past few weeks, no fewer than three opinion pieces have run in various media outlets in support of Medicaid expansion. Two of these articles were from Democrat legislators.

While “compassion” and alleged health care improvements – unsupported by real-world data – were cited, a central argument involved “free” money that is flowing into the State from Washington.

Recently, I had the chance to testify before an interim committee of the New Mexico Legislature on the economic impact of Medicaid. The program for the poor was expanded under the federal health care law commonly known as “ObamaCare.” New Mexico was one of 24 states to expand the program in January 2014.

Initially, the expanded portion of the Medicaid program is being financed 100% by the federal government. Starting in 2017, that will go down to 95% and by 2020 federal support will drop to 90%. As 2017 approaches, New Mexico legislators have been quoted as saying that the increased cost of Medicaid is a “runaway train” and “you can’t put the brakes on health care costs.”

New Mexico’s budgetary outlook is indeed bleak as total Medicaid expenditures are projected to rise to $5.5 billion with state taxpayers kicking in nearly $1 billion of that annual total. It has been the fastest growing item in the budget and with the State paying an increased share of the program’s expansion costs, that growth rate will rise rapidly in the years ahead. This at a time when New Mexico’s budget is expected to be stagnant as oil and gas prices remain depressed.

Unfortunately for New Mexico, the “stimulus” effects of having the federal government pay 100% of the cost of Medicaid expansion are nowhere to be found. The Rio Grande Foundation examined job growth in the expansion and non-expansion states and found that the 20 states that turned down the “free” money by not expanding Medicaid saw slightly faster overall job growth than the expansion states.

How could “free” money not stimulate New Mexico’s economy? There are many explanations, but one is that welfare programs like Medicaid provide yet another reason for workers to drop out of the work force.

Another explanation is that much of the money doesn’t actually do anything to improve health care. It may result in additional hiring in the health care industry, but these are “paper-pushers” and relatively unproductive bureaucrats. Their productive labor is consumed by a wasteful bureaucracy rather than being put to work in the private sector economy.

Again, these are just two potential reasons why Medicaid expansion may not have “stimulated” New Mexico’s economy or the economy of other states that expanded Medicaid with temporarily “free” money.

New Mexico has long been reliant on federal dollars. As federal spending is increasingly consumed by entitlements (as opposed to research labs and military bases), we are seeing that this reliance has not been healthy.

A new Rio Grande Foundation report sheds some light on the negative side effects of federal dependency. The report shows that federal dollars increase state and local government spending by 99 cents for every federal dollar. Bloated state government makes it harder for businesses to operate in our State. In other words, those “free” dollars come with economically-harmful strings attached.

Rather than trying to jump-start New Mexico’s economy by pilfering more money from Washington, New Mexico’s leaders should embrace basic economic reforms. Taxes, occupational licensing,and labor reforms like “right to work” and repeal of the State’s “prevailing wage” law can positively impact the economy right away.

Longer-term, policymakers must improve the education system (and thus the viability of our workforce) through dramatic expansion of educational choice.

There’s no such thing as a “free” lunch and so-called “free” money is not the road to prosperity.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility

Categories
Energy and Environment

Obama’s Proposed BLM Regulations to Increase Costs/Harm Economy

 



Watchdog.org
By Paul Gessing | Watchdog Opinion

The Bureau of Land Management (BLM) looms large as a land manager in the American West. Total surface acreage maintained by the BLM in my home state of New Mexico comes to 13.5 million acres. That’s more than twice the size of the state of Maryland or nearly as much land as the entire state of West Virginia.

Under the Obama Administration the BLM has become far more difficult for the oil and gas industries to deal with. An indicator is that since 2009, oil production on federal lands is down by 6 percent and natural gas production is down 28 percent. At the same time, oil production on non-federal lands is up by 61 percent and gas production on non-federal lands is up by 31 percent.

Unfortunately, a slew of new and proposed regulations will only make things more challenging. Combined with lower prices, these regulations could bring oil and gas drilling on BLM lands to a halt. This may be the goal of many in the Obama Administration. It is certainly the desired outcome of many of the President’s activist environmentalist supporters.

Proposed changes to Onshore Order No. 3 would dramatically alter the metering of production on federal leases, most likely forcing industry to install new meters on thousands of wells.

These changes may slightly improve the accuracy of royalty payments, but the increased cost of compliance will lead to the premature abandonment of wells that cannot be economically updated. Significant revenue losses will be traded for minuscule changes to the accuracy of royalty accounting. A few years ago (when this same change was debated and then abandoned by BLM), New Mexico’s State Land Office conservatively estimated that the state could lose $1 trillion in revenue over a decade under this regulation.

Another costly new BLM regulation expected to be formally proposed in the near future will address venting and flaring. The rule, submitted to the Office of Management and Budget for review in September, aims to reduce the amount of methane released into the environment.

A recent report from the Environmental Defense Fund (EDF) claims that $330 million worth of natural gas is “lost” on federal lands due to “excessive” venting and flaring. But like much of what passes for “energy analysis,” this figure is calculated by comparing estimates in two different time periods. In the meantime, the EDF conveniently ignores the increasing amount of actual data that gradually shows reductions in methane emissions by industry action.

Photo by: Shutterstock

This new venting and flaring rule is expected to require the twice yearly inspection of all gas-producing wells with special, costly cameras. In northwest New Mexico alone, where there are over 20,000 active wells, the annual cost would be over $24 million a year not including administrative costs.

Ironically, the BLM’s own slow permitting process is a leading cause of flaring. When permits for rights of way for gathering systems are delayed, natural gas flaring times are often extended. This is a case of a bureaucracy-induced problem that has greatly impacted the industry in recent years.

Another proposed BLM rule involves “fracking” on federal and Native lands. The BLM rules would require oil and gas companies to reveal the chemicals they inject, to meet construction standards in drilling wells and to safely dispose of produced water. This all sounds great, but “fracking” regulation has traditionally been done at the state level.

According to Obama’s own EPA, states have been doing a good job. The EPA has never definitively identified a case where the fracking process itself resulted in water contamination.

Colorado Attorney General Cynthia Coffman in April joined North Dakota, Utah and Wyoming in arguing that the feds overreached and intruded into an area where state rules control.

Said Coffman, “It makes no sense that there would be two sets of regulations — one from the state and another conflicting one from the federal government that would apply to the same activity — especially when the state of Colorado has been responsibly regulating oil and gas in our state for decades.”

U.S. District Court of Wyoming Judge Scott Skavdahl agreed with Coffman. In late September he issued a preliminary injunction blocking federal land managers from regulating fracking on public lands until the legal case is resolved.

These are just three of the Obama Administration’s major new regulations being imposed on the oil and gas industries. Other regulations impacting Indian lands as well as mining rules relating to streams on BLM lands are in the works.

These costly regulations will reduce tax revenues and jobs on lands managed by the federal government with negligible positive impact on the environment.

Categories
Local Government Top Issues Transportation

Time to Prioritize at Albuquerque City Hall

In the wake of two recent shooting tragedies and ongoing negative attention for the city of Albuquerque, Mayor Richard Berry has asked New Mexico’s Legislature to make changes to the pension system in order to allow police to return to the workforce. The Albuquerque Police Department says 135 officers need to be hired to fully flesh out the local police force.

Earlier this year, the mayor proposed spending an additional $4.7 million to comply with the U.S. Department of Justice’s reform demands at APD. We can all agree that public safety is the first and most important role of government. Unfortunately, there are always infinite wants and limited means to provide those, and it seems like local governments and the local citizenry have been unwilling to prioritize. Over the years, this has led to higher taxes and real economic harm.

At the start of the 2000s, Albuquerque’s gross receipts tax (GRT) rate stood at 5.8125 percent. Currently, it’s 7.1875 percent — an increase of 23.7 percent. That rate will further jump to 7.3125 percent when the recently-passed ABQ BioPark tax hike is in place, a nearly 26 percent increase since 2000. All those tax hikes of a “fraction of a penny” have added up over the years to real money.

Today, our city has 17,100 fewer jobs than at its pre-Great Recession employment peak in March 2007. Yes, New Mexico’s economy remains weak, but its largest city is not helping.

Unfortunately, we’re just getting started. For more than a year now, Berry and a majority on city council have been promoting a costly and unnecessary bus rapid transit system along Central Avenue.