Category: Legislature

No Need for New Permanent Fund in New Mexico

Post author By Paul Gessing
Post date September 20, 2019

The following appeared in the Las Cruces Sun-News on September 15. While there are a number of bad ideas being put forth in Santa Fe to use a portion of the oil and gas surplus, the idea of creating a new permanent fund

Budget analysts in New Mexico expect the Legislature will have an incredible $907 million of so-called “new money” when they convene in January. A vast majority of that money comes from the boom in oil and gas production in the Permian Basin.

With nearly $8 billion available in 2020, the general fund budget will be up nearly 27% over just two years. Even fans of bigger government have to be concerned about the rapid rate of government expansion in such a short period of time.

What should be done to solve this very nice problem to have?

Recently, some, including powerful Finance Committee Chairman Sen. John-Arthur Smith, discussed the creation of another New Mexico permanent fund, this one to finance early childhood programs. Smith’s support is noteworthy for two reasons. The powerful Finance Committee’s approval would be required for such a fund. And, of course, Smith has long stood in the way of efforts to tap the Land Grant Permanent Fund to finance a new pre-K/early childhood programs. Smith’s approval of a new fund would move it a long way toward adoption.

Would such a fund be a good idea for New Mexico? Permanent funds (be it the $20 billion Land Grant fund or the somewhat smaller Severance Tax fund) are also known as “sovereign wealth funds.” By definition these funds involve governments investing in businesses and other tools meant to generate a rate of return.

We should all be concerned about government investing in big business. But, the most important reason is that it makes government less accountable to the people.

How? Normally, if government needs to raise money from taxpayers, it has to work to please taxpayers and convince them to pay taxes and possibly pay even more taxes if revenues are inadequate. But when government entities are given dedicated revenue streams (without much legislative oversight or a need to show relevance), who is there to keep them accountable or demand changes as technologies and conditions evolve?

The Land Grant Fund has numerous beneficiaries that receive millions of dollars annually from the fund. A vast majority of that money goes to K-12 and higher education, but New Mexico’s Schools for the Blind/Deaf, the Boys’ School, the Miners Hospital of New Mexico, and State Hospital are all mandated to receive money from the Permanent Fund each year regardless of what is needed and with little outside oversight.

We are not criticizing any of these programs, but merely pointing out that permanent funds further reduce the already-limited ability for citizens and elected officials to impose accountability and oversight. The best means of providing accountability involves individuals in a competitive free market using their own hard-earned money to pay for goods and services. This is why the best use of the impending surplus would be to return it to the citizens of New Mexico.

If government must come in to play, at least legislators and the annual appropriations process combined with elections offer better oversight than would another permanent fund.

Instead of creating yet another avenue for government spending, we continue to advocate for long-overdue reform of New Mexico’s job-killing gross receipts tax. These reforms don’t necessarily mean big revenue cuts for government, but the available money can act as a cushion against revenue uncertainty as changes are adopted.

Once that is done the Legislature should consider returning a significant portion of this surplus to the people of New Mexico. Ideally this would be in the form of tax cuts, but even one-time rebate checks would be a welcome boon to the bottom lines of New Mexico families.

New Mexico needs to diversify and strengthen its economy and this can best be done through tax reform. Another spending binge (whether that’s done through the current budget process or creation of another “permanent fund”) is not what we need.

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

Constitution and Criminal Justice Legislature Notable News RGF Events Videos

Christina Sandefur’s Albuquerque presentation: “The Importance of Private Property Rights”

Post author By Paul Gessing
Post date September 20, 2019

Christina Sandefur was in Albuquerque recently to share the importance of private property rights. She touched on a number of interesting topics including New Mexico’s successful reform of civil asset forfeiture and eminent domain.

Thanks to Danny Seymour for recording this video!

Economy Education Legislature Notable News Tax and Budget Top Issues

NM spends 2nd most in nation on higher education ALREADY

Post author By Paul Gessing
Post date September 19, 2019

With Gov. Lujan-Grisham having proposed “free” college, it is worth noting that New Mexico already spends more per $1,000 of personal income than any other state in the nation beside Wyoming.

What results have those dollars generated? Will “free” college make a big difference in those economic and educational outcomes?

Education Legislature Notable News Top Issues

Post author By Paul Gessing
Post date August 30, 2019

The following appeared at KRWG.org on August 29, 2019.

Like all New Mexicans, we at the Rio Grande Foundation want to see an improved K-12 system in place. I have two daughters in traditional public school. While concerned about the quick turnover at the top of the PED, we are optimistic about the hiring of Dr. Ryan Stewart.

Stewart comes to us from the Philadelphia area where he worked with an education reform organization called Partners in School Innovation. According to news reports he is relatively young (38) but has impeccable credentials (degrees from Stanford and Harvard).

The Albuquerque Journal reports that he has a 9 year old son. This is notably mainly because the son attends a “private Quaker school” in Philadelphia. In other words, Stewart and his family are financially in a position to pursue his own form of “school choice.” His “choice” is one that would be beyond the financial capability of most New Mexicans. The Rio Grande Foundation found three different Quaker schools in Philadelphia ranging in annual tuition from $16,000 to $30,000.

We don’t begrudge him the ability to make the best decision for his child, but it is important that a child’s access to a quality education not be determined by parental incomes or the ability to move into a wealthy school district. Thus, we have long advocated for and supported choice whether that is in the form of charters, private, home, virtual, or other forms of schooling. And, according to new polling data from the University of Chicago, school choice is especially popular with African-Americans and Hispanics.

Unfortunately, “choice” is not so popular for many who have direct stake in the status quo. This attitude is especially prevalent among the unions who so strongly support his boss, Gov. Lujan-Grisham. They don’t want competition. They advocate for ever more money to be poured into the same broken education system that has proven so difficult to turn around.

Of course, the unions and others fail to acknowledge that according to the most recent US Census Bureau data, New Mexico spends more than any of our neighbors on K-12 education, but our results are worse. That data does not include the recent legislative session during which more money was been poured into the system and the previous administration’s accountability regime were been pushed aside.

New Mexico’s school choice options primarily consist of publicly-funded charter schools which faced the threat of a moratorium from Democrats in the Legislature in 2019 and home schooling which can be undertaken by anyone with the time and wherewithal to manage a child’s education at home.

New Mexico can and should offer private school choice options, especially tax credits and other options. These programs could specifically be targeted to assisting children from needy families or who go to school at low performing schools. In the recent past such legislation has been put forth on a non-partisan basis, but those efforts have consistently and stridently been opposed by the unions and thus killed.

We look forward to Dr. Stewart getting started in New Mexico. We know our education remains deeply challenged and that it is in need of aggressive and courageous leadership. With the recent influx of new spending, the argument that spending is“inadequate” is not going to cut it. New Mexicans expect improved results.

Welcome Dr. Stewart and good luck, my daughters and thousands of New Mexico children are counting on you!

Economy Energy and Environment Legislature Notable News Top Issues

What’s wrong with the ETA?

Post author By Paul Gessing
Post date August 6, 2019

The following appeared in the Santa Fe New Mexican on August 3, 2019. More details on Mr. Costello can be found here.

I have written and studied electricity markets and regulations for almost 40 years. As a New Mexico resident, I have some deep concerns about the Energy Transition Act, which passed the Legislature this year and is now being implemented.

The San Juan Generating Station in the Four Corners will be shut down in 2022 and hundreds of megawatts of natural gas electricity generation will be shut down in the years ahead as part of an effort (under the legislation) to be 50 percent “renewable” by 2030.

Instead of the ETA, what New Mexico needs is a rational dialogue on new technologies. This discussion has not taken place because politically powerful interest groups including environmentalists, unions and the Public Service Company of New Mexico — the “iron triangle” — got together to stick it to ratepayers who don’t have a real voice in Santa Fe.

One example is those groups that regard anything less than a maximum effort to address climate change as morally objectionable and a social injustice. This obsession with climate change can threaten other policy objectives, like reasonable and stable rates, economic growth and reliable electric service. We should not be dumbfounded if this happens in New Mexico.

What we know for sure is that the ETA won’t have any detectable effect on climate change. No state action — even in California, let alone in New Mexico — would accomplish much in reducing global temperature. This means that politicians and other ETA advocates are asking — more accurately, forcing — New Mexicans to squander their money on something that would have almost next to zero benefits from reducing climate change.

Surely we can find better ways to spend our money. Supporters of the ETA talk about social justice in terms of our obligation to future generations to combat climate change. What about the obligations to the current generation? Especially troublesome is the effect on low-income households that will be forced to pay higher electricity prices and suffer less reliable electricity service because of a government action pushed by those who want to promote their agenda.

The ETA represents classic rent-seeking, namely a “sweetheart deal” where certain groups leverage their political clout in gaining governmental favors at the expense of the general public. It guarantees PNM recovery of its costs as long as it complies with the act, and it appeases environmentalists by subsidizing wind and solar to replace fossil fuels such as reliable, affordable and abundant natural gas.

To wit, the act requires the majority of PNM’s customers to fund the advancement of social objectives through inflated electricity rates without compensatory benefits. Here we are talking about the socialization of costs for nontraditional utility activities, like assisting displaced workers or advancing technologies that are not cost-effective, that benefit only a distinct few. In a nutshell, that is the ETA.

The Energy Transition Act is also anti-consumer by eroding the authority of the Public Regulation Commission to disallow from rates PNM’s imprudent costs. This shift toward cost-plus regulation diminishes the incentives of PNM to minimize its costs in serving its customers by creating a “moral hazard” environment: PNM has little or no financial risk, yet it manages the assets and makes critical decisions that affect risk. This means less consumer protection from PNM’s monopoly power. New Mexico needs stronger consumer advocacy to protect electricity consumers from legislation like the ETA.

Energy policies generally overstate the problem being addressed, fail to recognize the role of market dynamics in mitigating the problem and understate the cost of policy initiatives — for example, the costs of mandating renewable energy and subsidies. The ETA has all of these defects, which have the effect of dragging down the New Mexico economy in the coming years.

Advocates perceive the Energy Transition Act as one of those energy acts where everyone stands to benefits and no one loses. Well, like most things, there are two sides. The side that ETA advocates shoved behind the curtain portrays a government action that not only has blemishes but warts that will likely inflict long-term harm to New Mexico.

Ken Costello is an adjunct scholar on energy policy with New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

Economy Film Subsidies Legislature Notable News Tax and Budget Top Issues Videos

New RGF video explainer illustrates failure of New Mexico’s biggest corporate welfare program

Post author By Paul Gessing
Post date July 15, 2019

The Rio Grande Foundation is constantly on the lookout for ways to educate New Mexicans about what their tax dollars are being used for and what state and local government could or should be doing better. To that end the Foundation has developed a short video, accessible to folks on the left, right, and center which explains the myriad issues with the subsidies New Mexico lavishes on one “special” industry.

If you agree with us that film subsidies are unwise and overly-generous, tell your legislators here.

Audio Economy Film Subsidies Legislature Tax and Budget Taxes Top Issues Videos

Rio Grande Foundation provides counterpoint on NBC/Universal subsidy deals counterpoint on NBC/Universal subsidy deal

Post author By Paul Gessing
Post date June 17, 2019

The Rio Grande Foundation had an opportunity to explain (again) why New Mexico’s film subsidy program is not the economic winner it is so often touted as in a number of media outlets. Click on the 1st story below for the KOAT story:

Also talked to KOB Channel 4:

Finally, sat down and talked to Bob Clark of 770 KKOB. You can listen to the podcast.

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RGF report on UNM/NMSU sports teams generates coverage

Post author By Paul Gessing
Post date May 25, 2019

The Rio Grande Foundation earned some serious news coverage recently in its critique of the “major” college sports programs at UNM and NMSU. In taking the position that student fees and taxpayer dollars should not be diverted to prop up sports programs we put fort the idea of combining NMSU and UNM’s money-losing (and generally uncompetitive) football programs.

Channel 13 had the following story:

Economy Education Legislature Notable News Research Top Issues

UNM/NMSU Sports: Reliant on Student Fees, in Need of Re-prioritization/Alignment with University Missions

Post author By Paul Gessing
Post date May 22, 2019

After initially suggesting a 4 percent tuition increase was needed, The University of New Mexico’s regents recently adopted a 3.1 percent tuition increase for next school year. On the heels of that the Board of Regents just announced that the University would continue subsidizing the athletic department to the tune of $1.2 million annually, a decision that Rio Grande Foundation President Paul Gessing argues is “fiscally inexcusable.”

While tuition rises (despite a big infusion of cash to higher education in 2019), both UNM and NMSU are struggling with falling enrollment. Are major college sports an unaffordable luxury?

In a new policy brief, “NMSU and UNM Sports Entertainment Expenditures Continue to Burden Academic Programs and Students” the Foundation’s education fellows William Patrick Leonard and Tristan Goodwin and organization president Paul Gessing discuss financial issues in the schools’ athletic programs and how those programs unnecessarily burden students.

As the paper notes, there are few among the top tier teams that do not need millions in student fees and university support to balance the books.

While program boosters and hard-core fans hold out hope that more budget support or some marquee recruit will turn a program’s fortunes around, this only rarely happens in basketball and virtually never happens in football (due to the dynamics of the sports themselves.”

Neither NMSU nor UNM have positively responded to the Legislative Finance Committee’s 2010 report questioning football’s role in supporting their mission statements.

Said Rio Grande Foundation president Paul Gessing, “New Mexico’s higher education leadership needs to prioritize how it spends resources. This includes the role of major college sports, especially football at both Division 1 programs.”

UNM’s leadership including Interim Provost Richard Wood say that the University remains “strapped for cash” despite the infusion of funds in the 2019 session. “If it is truly lacking in money, prioritization is a necessity” argues Gessing. “It is time to get creative or start cutting sports.”

Economy Film Subsidies Legislature Notable News Tax and Budget Taxes Top Issues

Legislative analysts agree: Film subsidies are money-loser

Post author By Paul Gessing
Post date May 17, 2019

For years the Rio Grande Foundation has attempted to educate New Mexicans on the bad economics of film subsidies. The program which actually began under then Gov. Gary Johnson was enhanced by Bill Richardson when he and the Legislature made it state policy to return 25 cents for every dollar spent in the State to the film industry.

The amount that could be spent in support of the film industry was uncapped during the Richardson Administration leading to some wild swings in annual subsidy payments. That situation was partially resolved during the Martinez Administration when a $50 million annual cap was placed on payouts, but subsidies could (and did) accumulate above that amount.

As we (and others) have pointed out, this is the single most generous business subsidy offered by the State of New Mexico. Both economically and morally it is one thing to exempt a business from taxes that would otherwise be paid (think Industrial Revenue Bonds and their long-term property tax exemptions), it is another thing entirely for government to cut checks (using our tax dollars) to fund the ongoing operations of chosen businesses.

Even LEDA which does result in tax dollars being paid out to businesses locating new facilities in New Mexico is a one-time funding mechanism.

But under New Mexico’s film program our taxes are collected and handed over to film companies doing business in New Mexico. That fact was laid bare for the public to see when, shortly prior to the 2019 legislative session, it was reported that the State owed hundreds of millions of dollars to the film industry. In the 2019 session the Legislature agreed to appropriate (up to) $250 million to pay off that “debt.”

That payment would be a sensible use of the surplus if the Legislature at the same time enacted policies to wean the film industry away from ongoing government subsidies. Instead, the Legislature in SB 2 expanded the cap to $110 million annually and also allowed film producers unlimited subsidies if they have a qualified production facility within the State.

We know this will be a boon for Hollywood filmmakers, but what about New Mexico’s economy? New Mexico’s top fiscal leaders, Rep. Patty Lundstrom, Vice Chair of the Legislative Finance Committee, and Director David Abbey recently gave a presentation in which they discussed tax and budget changes made during New Mexico’s 2019 session.

They note that “film credit changes are estimated to cost $500 million to the General Fund over the next five years (in addition to the $250 million that would have been paid out under the existing cap). Also, they note that the revised film program is “likely the most significant state investment ever in a single industry…despite evidence of about a 40 percent return on the dollar.”

To say the least, this echoes what the Rio Grande Foundation has been saying for more than a decade. We are happy to have films made here, but the policy of opening up the State’s Treasury to ANY corporation is an economic loser.

Recently, Gov. Lujan-Grisham has been in the media encouraging film productions originally-slated for Georgia to come to New Mexico. Due to the Peach State’s own generous subsidies, Georgia has attracted a number of productions, but recently-adopted abortion limits have rankled some in Hollywood who are threatening to shift production elsewhere.

Ironically, due to the money-losing economics of film subsidy policies in both states, a film boycott could be a boon for Georgia’s overall economy and an even-bigger boondoggle for New Mexico’s which could see the annual film program’s costs skyrocket. Already, as Rep. Lundstrom and Mr. Abbey point out the subsidy program will cost an estimated $150 million annually.

This largesse targeted at one industry may seem affordable at a time of billion-plus dollar surpluses thanks to booming oil production in the Permian Basin, but at some point oil prices will fall for a sustained period or the spending aspirations of New Mexico’s Legislature will grow too quickly for oil revenues to maintain.