Categories
Economy Legislature Notable News Tax and Budget Taxes Top Issues

RGF President Paul Gessing’s testimony on HJR 5 Taxpayers Bill of Rights

Paul Gessing Testimony on HJR 5

This testimony was given before the House Consumer & Public Affairs in the New Mexico Legislature on February 4, 2020. The bill which was sponsored by Rep. Rod Montoya (R-San Juan County) was unsurprisingly tabled (killed) on a party line vote

What should the Legislature do with the ongoing oil surplus? That is arguably the single most important question to be asked in the 2020 legislative session.

In New Mexico the tendency of the Legislature has been to spend the money. Some of it goes to various permanent and “rainy day” funds, but when considered relative to its neighbors, New Mexico government spends far more per person than its neighbors. Colorado in particular is a neighboring “blue” state that spends much less than we do here in New Mexico. In FY 2019, before the oil and gas boom really got rolling, New Mexico state and local governments combined to spend 23% of personal income while Colorado spent just 15%.

Not coincidentally, according to the Federal Reserve Bank of St. Louis, the average per-capita personal income in Colorado is $58,500 while the average income is New Mexico is $41,600. Colorado has achieved this success in large part by strictly limiting government spending growth since 1992. That state’s Taxpayers Bill of Rights limits annual spending growth to the combined rate of inflation and population growth. Voters have the final say on all government spending above that limit or any tax hike.

HJR 5 is a New Mexico version of Colorado’s tax and spending limit. It is more lenient in that it limits state spending to a combined rate of the percent increase in population growth + 3.6%. Furthermore it imposes a 3/5ths legislative majority requirement for the Legislature to keep revenues above that amount or raise taxes. Finally, surplus revenues above the limit would be split 50/50 between rebates to average New Mexicans and public education.

Based on calculations from the Rio Grande Foundation, if Rep. Montoya’s bill had been in place upon the departure of Gov. Susana Martinez in 2018, the citizens of our State and the public education system would have split over $1 billion in rebates or approximately $260 for each man/woman/child from the State over the past two years. That’s $260 returned to the hard-working citizens and taxpayers of New Mexico to invest for their own futures or put a down payment on everything from a new business venture to a new car.

Of course, the education system would be in line to see additional funding to the tune of at least $500 million as well.

Gov. Lujan Grisham talked about Colorado in her State of the State address. New Mexico does compete with our neighbors to the North. And, while we may have a tentative lead in the short term, over the last decade Colorado’s population grew by over 12.6%, one of the fastest rates of growth in the nation. New Mexico on the other hand grew by 1.8% which placed it 38th nationally in population growth.

Whether you support marijuana legalization as I do and the Rio Grande Foundation does (or not), it is Colorado’s limits on government spending that set it apart from New Mexico economically.

Finally, when it comes to raising taxes and spending increases, this Amendment’s 3/5ths requirement is extremely important. We shouldn’t have bare majority votes on whether to take more money out of hard-working New Mexicans’ pockets. Oklahoma, another faster-growing neighbor of ours, has a 3/4ths (75%) requirement for the passage of tax hikes. The requirement in this amendment would be 3/5ths of 60% of the Legislature.

This is not a retroactive bill. New Mexico government spending is likely to increase significantly this session although at a somewhat lower rate than last year. But, if the oil boom continues or economic growth continues to at its current pace, we believe that average New Mexicans should be direct participants and beneficiaries in it. We are our own unique state with its own unique needs, but limiting government spending will do great things for New Mexico as it has done for Colorado.

 

Categories
Economy Legislature Notable News Tax and Budget Top Issues

Stars have aligned for needed pension reform

The following appeared in the Santa Fe New Mexican on Saturday, January 25, 2020.

Over the last few weeks leading up to the 2020 legislative session, an all too rare alignment has occurred in New Mexico—the Governor, legislators from both parties, labor and taxpayer representatives, plan managers and other stakeholders in Santa Fe all agree that it is time to reform the state’s largest public pension system.

New Mexico’s Public Employees Retirement Association (PERA) has amassed over $6 billion in unfunded pension liabilities and has become vulnerable to volatile investment markets. The Governor’s PERA Solvency Task Force recognized the growing unfunded liability problem and acknowledged the need to fully pay for state promises by making PERA a fully funded system within 25 years a top priority. The resulting task force recommendations mainly increase contributions and address a broken cost-of-living-adjustment policy that served more as annual pension bonuses than it did a protection against inflation.

The proposed reforms are a great first step towards addressing the debt currently looming over the state budget. However, there remains more work to do, as the current legislation would do little to address the systemic assumptions and policies that led to debt accumulating in the first place, mainly a lack of protections against market volatility, overly optimistic actuarial assumptions, and letting the political process—not actuarial math—determine annual pension contribution rates.

Consider that while passing the proposed legislation would generate a one-time reduction in unfunded liabilities by an estimated $700 million, in fiscal year 2019 alone the unfunded liability increased by $600 million due mostly to underperforming investments and insufficient contributions.

While the legislature continues to reject plan actuary recommendations and rely on bureaucratic statutes to determine its contribution to PERA, assets will continue to depend on high market returns to make up for subtle dips and losses. The debt is also still likely to grow due to PERA maintaining market assumptions that even PERA forecast only give a 60% chance of coming to fruition. Some more long-term market forecast view PERA’s chances at less than 50/50.

If there’s a future where market returns may not be as rosy in the past, we need to plan for it now by saving more and adopting more conservative assumptions. Otherwise, PERA will continue to accrue unfunded liabilities to be borne by tomorrow’s taxpayers and public employees since both are ultimately responsible for making the contributions needed to ensure that accrued benefits are fully paid to retirees. If contributions are not increased today, even higher increases will be required tomorrow.

It’s no wonder why public employers are struggling to attract top talent away from the private sector. New Mexico promises retirement benefits at the end of a full career then neglects to fund those benefits at adequate levels to where unfunded liabilities grow. This trend can produce rising debt payments and stagnant wages as limited state budget resources are reallocated to meet immediate needs.

The proposed reform aims to prevent that dynamic from persisting, or at least start the process. As important of a first step towards shoring up PERA’s long-term solvency the proposal is, to avoid growing state pension debt in the future will require both PERA and Educational Retirement Board (ERB) stakeholders to work towards adopting more conservative actuarial assumptions, pay down pension debt faster, and create attractive retirement plans for what is likely to be an increasingly professionally-mobile future workforce.

Reforming a broken cost-of-living-adjustment and increasing contributions are great ways to begin addressing the PERA unfunded liability. The legislature can also harness this rare bi-partisan cooperation to strengthen the task force recommendations by also addressing the systemic risk associated with high investment expectations and statutory contribution policies that will continue to generate unfunded liability unless reformed.  The Governor, legislative leaders and numerous stakeholders are all right, the time to reform PERA is now.

Gessing is president of New Mexico’s free market think tank, Rio Grande Foundation and Gilroy is vice president for government reform at Reason Foundation, a think tank focusing on free minds and free markets

 

Categories
Economy Legislature Notable News Tax and Budget Top Issues Videos

Gov. sets out ambitious 2020 legislative agenda (RGF responds in KOAT 7 Story)

In the wake of 2019’s disastrous legislative session, 2020’s 30-day session has the potential to be a return to sanity. But, as this KOAT Channel 7 story notes, Gov. Lujan Grisham has outlined an ambitious agenda. The Foundation was given an opportunity to respond to various aspects of the Gov.’s program for the news story.

There are some elements of agreement (like pension reform), but overall the Foundation has big concerns about the amount of spending she is proposing as well as the prospects for “free college” and using marijuana legalization as a cash cow. Check out the full story by clicking here or the picture below:

Categories
Economy Legislature Notable News Tax and Budget Taxes Top Issues

Newspaper article: Lujan Grisham’s budget highlights contrast between New Mexico/Colorado

The following appeared in the Ruidoso News on January 14, 2020.

Ruidoso News

Gov. Lujan Grisham recently released her budget to be considered by the Legislature in the upcoming 30 day session. As expected, there is a lot of new spending thanks to the continued growth of oil and gas production in the Permian Basin.

After a 12 percent boost in General Fund spending last year, the Gov. is requesting yet another big increase. This year she’s asking for 8.4 percent.

According to news reports, the nearly $7.7 billion spending plan includes a proposed 4% salary increase for New Mexico teachers and more money for school districts with a large number of “at risk” students.”

The budget would provide for “free” college and expand funding for child-care assistance and pre-Kindergarten programs statewide. “Another $320 million would be spent to set up a new early childhood endowment fund.”

All of this spending seems destined to please, but New Mexico is a poor state. Many of its social ills are the result of poverty. We at the Rio Grande Foundation believe that the best anti-poverty program is a job.

That’s why when it comes to government spending we look at Colorado as a model. That State which continues to see strong growth (albeit minus the “boom” in oil and gas) is giving taxpayers a break in 2020. As reported by Fox 31 Denver, Colorado’s income tax rate will be dropping from 4.63% to 4.5% this year (thanks to that State’s Taxpayers Bill of Rights which was recently affirmed at the ballot box).

With the passage of HB 6 last year in New Mexico, our top income tax rate will soon rise to 5.9 percent while Colorado’s drops to 4.5 percent. This may not seem to be a big difference but it is one of the big reasons that Colorado is one of the fastest growing states in the entire country.

In fact, over the last decade, according to Census data released at the end of 2019, Colorado was the 3rd-fastest growing state in terms of population at 12.7 percent. Only Utah and Texas which also neighbor New Mexico grew faster. And where did New Mexico rank in population growth between 2010 and 2019? The answer is 38th-fastest at 1.8 percent, a bit faster than Ohio, but not quite as fast as Kansas.

Colorado and New Mexico both have little in the way of rivers and surface water, they have good weather although New Mexico’s is much better, and New Mexico is in the midst of an unprecedented oil and gas boom. They also both happen to be “blue” states.

Colorado’s “secret sauce” is that it strictly limits spending growth and taxation. As a percentage of GDP (the overall state economy) Colorado state and local governments spend 14.8 percent. New Mexico spends 23.39 percent. Of the states surrounding New Mexico, “blue” Colorado has the smallest government while New Mexico has by far the largest.

What does this mean? Simply put it means that the tax hikes (HB 6) passed last year were totally uncalled for and unnecessary. It means that in the upcoming 30 day session, we the voters of New Mexico need to hold the Legislature accountable. Rather than growing the government even more, we need real reforms to the State’s broken and regressive gross receipts tax. We need to eliminate taxation of Social Security. And finally, the Legislature simply needs to stop the accumulation of new government spending programs that may not survive the next economic downturn or the next decline in oil and gas prices.

Colorado’s is not the only economic model worth following. People are moving in large numbers to Utah and Texas (the fastest and 2nd fastest growing states) as well as Arizona (the 7th). New Mexico can learn lessons from each of them, but the simple truth is that new government spending is not the way to make New Mexico (or any other state) more economically attractive.

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 Legislature Notable News Tax and Budget Top Issues

What RGF will be working on in the 2020 Session

The 2020 session is “only” 30 days long, but as we saw in 2019, a lot of damage can be done in a relatively short time. Considering the “progressive” makeup of the Legislature, there are issues (like Right to Work and Davis/Bacon reform) that simply will not be put forth, but there are plenty of opportunities for bi-partisan economic reform in 2020. We’ll be working to make them happen while also recognizing that there are plenty of bad ideas that could be adopted in 2020.

Below is a list of some of the top issues that RGF will be working on in 2020. Further data and background is available at the links:

1) GRT Reform: The gist of what may happen is for business to business contractors to have most taxes eliminated. This is especially important for service contractors (everything from bookkeepers to lawyers). Tax rates (which have risen dramatically in recent years) would also be reduced slightly.

2) Pension reform: New Mexico has two public employee pension systems: Education Retirement Board (ERB) and Public Employee Retirement Administration (PERA). Both are tremendously underfunded and in need of reform. Earlier this year Gov. Lujan Grisham named a task force to address PERA’s solvency by eliminating over $6 billion in unfunded liabilities over the next 25 years. The changes are significant and positive steps for PERA, but still leave some systemic challenges—namely actuarial methods and assumptions—unaddressed. We will push for further reform while acknowledging that doing something is better than doing nothing.

3) Calling “free” college into question: There so many issues with this concept including New Mexico’s “inadequate” K-12 system, the relative lack of jobs, and the likelihood of price inflation. This proposal has many problems.

4) Questioning the creation of a new “permanent fund” in New Mexico dedicated to “early childhood” education. Permanent funds are nothing but deferred spending and early childhood education (especially pre-K) is of dubious effectiveness. Pre-K programs are also questionable in their effectiveness.

5) Returning surplus money back to New Mexicans: Colorado (a “blue” state like New Mexico) is an economic juggernaut. The key to Colorado’s success is its Taxpayers Bill of Rights (TABOR) which strictly limits government spending and taxation. Colorado just reduced its income tax due to savings from TABOR while New Mexico is likely to spend its surplus. New Mexico politicians should consider returning a significant portion of the oil and gas surplus to the taxpayers.

6) Occupational licensing reform: SB 385 was a bipartisan effort to address occupational licensing problems for those convicted of certain crimes in New Mexico. It was vetoed by the Governor in 2019 after passing both houses. We will continue to support this and other needed (and broader) reforms to New Mexico’s occupational licensing laws in 2020.

Bills are being pre-filed now. To track how bills are moving in Santa Fe and how your legislators are voting (or how they voted in 2019), check out the Rio Grande Foundation’s Freedom Index. 

Categories
Economy Legislature Notable News Tax and Budget Top Issues

Each New Mexican would receive $730 refund if we had Colorado protections in place

The following appeared in the Current-Argus on December 11, 2019.

According to the latest estimates from Santa Fe the state’s general fund budget is expected to be $7.882 billion next fiscal year. When Gov. Martinez left office in 2018 the budget was “only” $6.3 billion. In two short years, New Mexico’s budget will have grown by more than $1.5 billion, a 25 percent increase.

With the current group in charge New Mexico government is going to grow fat on oil and gas revenues while average New Mexicans pay higher taxes due to hikes passed during 2019.

There’s a better way to use the surplus and we don’t have to look far to find it. Policymakers should visit Denver to see how fiscal restraint in “blue” Colorado has created that state’s booming economy. In 1992, Colorado voters approved a Constitutional amendment restricting taxes and spending at all levels of government (state, local, and schools). Under this law, taxes cannot be raised without voter approval and if revenues grow faster than the rate of inflation and population growth, the extra money must be returned to the taxpayers.

Last month Colorado voters once again affirmed that they want surplus revenues returned to them. By a rather overwhelming vote of 56-44, voters rejected a ballot measure pushed by the state’s political establishment that would have eliminated those tax refunds. Despite being a “blue” state, Coloradoans want to control government spending and they like their refunds.

If New Mexico had the same law (known as the Taxpayers Bill of Rights or TABOR) that Colorado has, it could change New Mexico’s economy for the better in short order. Rather than being spent by the worst-run government in the nation (according to 24/7 Wall Street) much of that $1.5 billion surplus would be returned to the people of New Mexico instead of growing its government. In fact, accounting for New Mexico’s slow population growth and the inflation rate (in essence giving government the same money in real terms as it had before the oil boom really started), you get just under $1.45 billion available to return to New Mexicans. If that money were divided by giving all New Mexicans (just under 2.1 million of us) an even share, that would mean a refund of $731.90 per person.

We can all fantasize about what we’d do with an extra $730 lying around, especially during the holidays. More importantly, Colorado which is like New Mexico in many ways (dependent on natural resources, land-locked with few navigable rivers, but with stunning natural scenery) is an economic dynamo while New Mexico lags. Yes, the ongoing oil boom has given New Mexico a boost, but our economy trails badly behind Colorado.

For example, according to data from the Federal Reserve Bank of St. Louis, the average New Mexican earned $41,609 in 2018 while that same year the average Coloradoan earned $58,456. In other words, the average Coloradoan makes $17,000 a year more than the average New Mexican!

People notice these differences and vote with their feet. According to data from the Pew Center on the States, between 2008 and 2018 New Mexico’s population grew by 0.41%, the slowest rate of any state west of Kansas annually. Colorado, the third-fastest growing state in the nation, grew by 1.54% annually. And of course, like interest, that number compounds annually.

Colorado’s strict limit on government spending is not the only difference between the two states. But it is rare for neighboring states to differ so starkly when it comes to overall economic conditions and population growth.

By limiting government growth Colorado has unlocked its human potential and made itself a desirable destination. New Mexico has vast untapped potential, perhaps more than any other state in the union. We may never get the kind of constitutional limits on spending that Colorado has, but if New Mexicans demand just a bit more of this surplus be returned to themselves as opposed to being gobbled up by government, perhaps we’d begin to unlock it.

Paul Gessing is the president of New Mexico’s Rio Grande Foundation. 

 

Categories
Economy Legislature Local Government Notable News Tax and Budget Taxes Top Issues

Stadiums should rely on private funding

The following appeared in the Albuquerque Journal on December 4, 2019.

Like so many in the metro area, I was impressed by the outpouring of support and high quality of play by the New Mexico United in its inaugural season. Considering the timing of United’s success, which came in the wake of UNM eliminating its men’s soccer team, it illustrates that private options are often better and more popular than publicly funded ones, even in the world of sports.

The same can be said for stadium construction. I have studied and worked on issues involving publicly financed sports stadiums since the 1990s. Economists across the political spectrum all agree that taxpayer-financed stadiums are economic losers. In a 2017 poll, 83% of the economists surveyed agreed that “providing state and local subsidies to build stadiums for professional sports teams is likely to cost the relevant taxpayers more than any local economic benefits that are generated.”

One interesting note about United’s initial effort to obtain public financing for its stadium is that it is going to the Legislature first. This is somewhat unusual because sports teams are amenities that primarily benefit the local population in terms of enhanced entertainment options.

How many people travel from Carlsbad, Clovis, Farmington or Las Cruces to New Mexico United games? I don’t know the answer to that, but it is undoubtedly a tiny fraction of United’s fan base. With that in mind, why should New Mexico taxpayers as a whole pay for a stadium used largely by Albuquerque residents?

The only logical answer to that question reminds me of the famous quote from Willie Sutton, a bank robber who, when asked why he robbed banks responded, “Because that’s where the money is.” United are heading to Santa Fe because the unprecedented oil boom is burning a hole in legislators’ pockets and the team might as well strike while the iron is hot.

I don’t blame them, but in a state that continues to lag economically and educationally while suffering from serious crime issues, is a taxpayer-financed stadium for the wealthy owners of United and their wealthier-than-average fans really the highest and best use of this oil-driven surplus?

Finally, it is worth considering a few other recent local stadium issues as this discussion gets under way. The Pit renovation – the most recent publicly funded stadium project – is widely considered to be a disaster. While some renovations were inevitable in an aging facility, the cost and scope of the changes were intended in part to draw NCAA tournament games and other major events to the facility. This has not happened.

The Santa Ana Star Center in Rio Rancho remains a marginal facility which costs that city’s taxpayers $3.2 million annually and does not have a full-time tenant.

The renovation of Isotopes Park is by far the most successful local stadium project, but it was an on-site rebuild for a concept – minor league baseball – that had a long track record of fan support in Albuquerque. At the time there was much discussion over whether to build the facility Downtown or where the facility is and the previous facility was. Location of United’s proposed facility is going to be critical in determining the final price tag and success of this undertaking.

While United had a great first year, it is just that, a brand new minor league soccer team. What if United continues to be wildly successful and moves up to Major League Soccer? Will the proposed facility be obsolete? Or, what if the newness and excitement wear off and fans lose interest in the years ahead?

Lastly, while the challenges of playing soccer in Isotopes Park are self-evident, creative options should be considered before taxpayers are tapped. UNM has both an existing soccer facility as well as an underutilized but better-configured football stadium. Is there no way to leverage these assets for use by United?

Amenities like United are nice to have, but the oil boom won’t go on forever, and there are many issues to address in this state and city.

Categories
Economy Legislature Notable News Tax and Budget Taxes Top Issues

Santa Fe Spending Binge Kicks Into High Gear

The Legislative Finance Committee has published the requests of New Mexico government agencies for FY 2021.

Last year the Legislature increased general fund spending by a robust 12 percent, but with oil production growing rapidly and prices per-barrel holding stable, New Mexico government is planning for another year of massive growth.

In fact, (not including funding requests for public school support and from higher education institutions) agencies are looking to further increase their budgets in Fiscal Year 2021 by a shocking 17 percent.

Some of the “highlights” or low-lights if you believe in limited government include:

260 percent from the Spaceport Authority;
72 percent from the Environment Department;
58 percent from Higher Education Department (the administration, not the schools themselves);
43 percent from the Tourism Department; and
28 percent from the Secretary of State.

This is obviously just a partial list of the dozens of government agencies’ funding requests. When taken together, however, it is clear that New Mexico government is on an epic oil-and-gas-fueled spending binge.

Will anything actually improve as a result of all this new spending? It is hard to see what all of this new spending will do to improve New Mexicans’ lives considering that New Mexico’s government is already among the largest in the nation.

According to a ranking published by the conservative group Americans for Tax Reform, New Mexico’s state government is the 2nd largest as a percentage of GDP. The biggest state governments were ranked as follows:

1. West Virginia (23.3 percent);
2. New Mexico (20.8 percent);
3. Arkansas (20.3 percent);
4. Alaska (18.9 percent); and
5. Mississippi (18.5 percent).

But, according to Wallethub, New Mexico taxpayers receive the 2 nd -worst return on investment of any state in the union.

To summarize, we have very big government already. Taxpayers are getting a poor return on their tax dollars. And, fueled by oil and gas, the growth of New Mexico government is about to be turbocharged.

Will all of this money be used to improve New Mexico’s education system, improve public safety, build roads, or reform its economy? Jobs and economic growth are plentiful right now, but this is driven by oil and gas and the strong national economy.

Unless tough changes are made to the systems undergirding New Mexico’s education system and economy, it is hard to see what this spending is going to achieve.

Our neighbors in Colorado have the best known solution to the boom and bust of state budget cycles. That State’s Taxpayers’ Bill of Rights (TABOR) which is part of their State Constitution limits annual spending growth at all levels of government to inflation and population growth. Surplus government revenues are returned to taxpayers.

Better still, all tax hikes in Colorado must be voted on and approved by the citizens.

Despite resembling New Mexico as a “blue” state, Colorado’s State government was just 29th largest and consumed 10.5 percent of the State economy.

That’s less than half of what New Mexico spends as a percent of GDP (according to the Americans for Tax Reform study above).

This preserves more money for Colorado citizens who, according to the Federal Reserve Bank of St. Louis, earn $58,000 per person annually. Here in New Mexico that number is closer to $41,000. That is an incredible difference given two neighboring, similar states.

For New Mexico to succeed policymakers need to slow the growth of government.

Reform problems in the tax code like the gross receipts tax and give voters a break on their taxes. Funding another massive expansion of government with this oil surplus is not going to help our State succeed.

Paul Gessing is 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 Education Legislature Notable News Tax and Budget Top Issues

Opinion article: “Free” College Proposal Raises Serious Questions

The following article appeared in several New Mexico news outlets on September 30, 2019 including the Las Cruces Sun-News.

Gov. Lujan Grisham has put forth a plan (set for debate and possible approval in the 2020 Legislature) for “free” college for New Mexico residents. For many families this may seem like an unadulterated good thing. And, as the parent of three who is pondering (and already saving for) the college educations of his three children, I totally understand that reaction.

But, from the viewpoint of an economist or even someone who is simply concerned about New Mexico’s future, there are several serious problems with this proposal.

Currently, the Governor and Legislature are salivating at the prospect of a $900+ million surplus in 2020. That number may be even higher due to the recent uptick in oil prices. The plan is for “free” college to cost “just” $25-$35 million annually. Unfortunately, we have nothing from the Lujan Grisham Administration to justify that cost. Given the tendency of government officials to underestimate the cost of new programs (the Rail Runner and Spaceport come to mind) it would seem that the real cost even at the beginning will be much higher.

Worse, unless some cost restraints are included in this legislation, colleges and universities located in New Mexico will have no incentive to constrain costs. On the contrary, they have every incentive to grow their bureaucracies and increase spending dramatically.

Another big problem with the proposal is New Mexico’s low-performing K-12 system. By nearly all indicators New Mexico’s students in K-12 are among the lowest academic performers in the nation. Is higher education really the problem when the K-12 system is failing?

It’s worth noting here that according to the State Higher Education Executive Officers Association (SHEEO) 2018 report on higher education finance, New Mexico already spends 2nd most in the nation (as a percent of income) on higher education. If higher education spending is such a great “investment” for New Mexico, why do we remain one of the poorest and slowest-growing states in the nation (albeit with somewhat better numbers due to the Permian oil boom).

The fact that New Mexico’s already large investment in higher education hasn’t done much for our economy begs the next question: “Will there be jobs available for these expected graduates or are we training future workers in Texas, Arizona, Colorado, and other faster-growing, more economically-diversified states?”

If the Gov. does take substantive action to reform New Mexico’s economy by reforming the gross receipts tax and generally taking action to make New Mexico more economically dynamic and attractive, perhaps then we can keep more of these young, educated people in the State. However, the University of New Mexico’s falling enrollment and available population data indicate that New Mexico is losing its “best and brightest.”

Finally, as if all of these arguments are not enough, it is notable that “free college” is “regressive” in the sense that a vast majority of the benefits will go to people of higher incomes. Currently, 27% of New Mexicans have four year college degrees. Generally-speaking it is the middle and upper classes that can attain that level of education.

While the Governor’s plan may open the path to a few more needy students, how many of the bottom 25% of income earning students in the State can take the time to go to college? How many of them are academically-capable? While a middle-to-upper class parent of three stands to achieve a veritable windfall from “free” college, it is hard to align this with principles of tax fairness and “progressive” policies so in vogue in Santa Fe.

These are just some of the many problems with the plan. Hopefully the Legislature instead considers some of the many ways to improve K-12 education in New Mexico and engage in much-needed economic reforms that will make our State more prosperous and thus attractive for young workers from all walks of life.

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 Education Legislature Notable News Tax and Budget Videos

Discussing the Gov’s plan for “free” college on KOB TV Channel 4

Rio Grande Foundation president Paul Gessing sat down with KOB TV to discuss the plan for “free” college. You can check out the story below. As of Thursday afternoon, September 26, we have not received any details in terms of the estimated $25-$35 million price tag for the plan.

That said, regardless of the estimated starting price tag, there are numerous problems with this plan. I discuss a few of them in the story. More concerns are outlined here.