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Economy Energy and Environment Legislature Notable News Top Issues

What’s wrong with the ETA?

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.

 

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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

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.

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

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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Economy Education Legislature Notable News Tax and Budget Taxes Top Issues

RGF report on UNM/NMSU sports teams generates coverage

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:

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Economy Education Legislature Notable News Research Top Issues

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

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.”

 

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

Legislative analysts agree: Film subsidies are money-loser

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.

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

 

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Economy Legislature Notable News Top Issues

National Unemployment Rate Hits 50 Year, 27,000 Able-Bodied New Mexicans Without Dependents Remain on SNAP

(Albuquerque, NM) – The US unemployment rate just hit 50 year lows last week, but an estimated 27,000 Able-Bodied New Mexicans without Dependents Remain (ABAWDs) on the federal food stamp (SNAP) program.

New Mexico remains one of four states with full statewide waivers in place.

New Mexico’s current statewide unemployment is 5.1% — almost half of the 10% threshold set in the food stamp statute to trigger waivers. That’s one of the lowest unemployment rates in State history. Eddy County and Los Alamos County have unemployment rates of 3.2%, but are still waived.

NM has more than 27,000 ABAWDs on the program, per the state’s Employment & Training state plan.

According to federal data, 75% of ABAWDs in New Mexico do not work at all.

New Mexico employers have nearly 30,000 open jobs posted online, per the Conference Board.

New Mexico employers experience nearly 104,000 job openings per year, according to the New Mexico Department of Workforce Solutions.

While data show that New Mexico’s children suffer from worst-in-the-nation hunger problems, elimination of the waiver would only impact able-bodied adults without children.

As Rio Grande Foundation president http://www.errorsofenchantment.com/wp-content/uploads/2019/05/5-3-19-SNAP.pdf, “Limited resources should be targeted at real problems like alleviating childhood hunger, not allowing able-bodied adults without children to avoid getting back to work. It is time for Gov. Lujan-Grisham to end this waiver so more New Mexicans can get back to work.

 

 

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Economy Legislature Local Government Notable News Top Issues

Failure of local right-to-work measures unfortunate, unsurprising

The following article appeared in The Hill on April 27, 2019. 

In the space of one month, the governors of New Mexico and Illinois ratcheted back worker freedom and local control in their states. On March 27, New Mexico Gov. Michelle Lujan Grisham, a Democrat, signed a bill prohibiting local counties and cities from allowing workers to choose whether they had to pay a union just to keep their jobs. On April 12, Democratic Gov. J. B. Pritzker of Illinois signed a similar bill.

With Democrats replacing Republicans in the governors’ mansions in those two blue states, policy was bound to change rather dramatically.

Among the top priorities of ascendant progressive political leaders in both states in 2019 is the passage of laws banning local governments from enacting right-to-work laws. In both states, local governments had adopted such laws in recent years, only to have those laws quashed by political allies of big labor when they took office.

Right-to-work simply means a union cannot get a worker fired for not paying its union dues.

Local elected officials in 10 New Mexico counties and in Lincolnshire Township in Illinois felt emboldened to adopt right-to-work laws, thanks to the example of Kentucky, where counties have adopted such laws. Their actions were a prelude to the Bluegrass State coming under total Republican rule in the 2016 election and Gov. Matt Bevin signing a statewide right-to-work law shortly after taking office in 2017.

Unfortunately, Democratic governors this year replaced the Republicans in place in Illinois and New Mexico, and now will work with Democrats in their legislatures to overturn local right-to-work ordinances.

While New Mexico and Illinois are very different in some ways, they face similar problems: poor economic policy environments and stagnant economies relative to their neighbors. Any comparison of New Mexico with its economically freer (albeit not always red-state) neighbors shows that something is wrong there.

One recent report, “Rich States/Poor States,” produced by the American Legislative Exchange Council, ranks New Mexico’s economic performance over the past decade as 47th overall, with cumulative gross domestic product (GDP) growth 46th in the nation and non-farm payroll employment growth at 48th in the nation.

Considering New Mexico’s motto, “Land of Enchantment,” and its prime location in the fast-growing American Southwest, this performance is abysmal.

Every neighboring state consistently outperformed New Mexico; Arizona, Utah, Texas, Colorado and Oklahoma are among the top states in the nation for economic performance during the past decade. New Mexico could, and should, be among the fastest-growing states, but its poor economic policies hold it back. Local governments outside progressive cities such as Albuquerque, Santa Fe and Las Cruces tried to break free from those policies, taking the local approach to economic reform, but they were quickly shut down.

Illinois is in much the same situation. While no one will confuse Rust Belt Illinois for New Mexico, the “Land of Lincoln” ranked 46th according to the ALEC index for economic performance over the past decade. The state’s cumulative GDP growth from 2007-2017 ranked 34th,  and non-farm payroll growth ranked 41st. But like New Mexico, Illinois trails behind its faster-growing (and with the exception of Missouri), right-to-work neighbors.

Both New Mexico and Illinois are, in other words, blue islands of economic unfreedom within their respective geographic areas. New Mexico — with an economy driven almost entirely by resource extraction (mostly oil production) and the myriad federal installations located there — also happens to be in the relatively libertarian American Southwest. It is notably worse off than its neighbors on nearly all economic and even social indicators (such as crime and education).

Pushing for free-market policy change in deep blue states is hard. With Americans increasingly sorting themselves into states that already reflect their values, it appears that New Mexico and Illinois face the prospect of worsening public policy in the near term. Something has to give. We just don’t know what will happen and when.

Paul J. Gessing is the president of New Mexico’s Rio Grande Foundation, an independent, nonpartisan, tax-exempt research and educational organization that promotes the principles of limited government, economic freedom and individual responsibility. Follow him on Twitter @pgessing.

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What’s next for What’s next for New Mexico economy and politics?

The following appeared in the Farmington Daily-Times on April 19.

Image result for farmington daily times

We at the Rio Grande Foundation have not been shy in our critiques of the 2019 legislative session. Economic freedom lost big during the session while higher taxes, more government regulations, and bigger government won.

In the long-run such moves will inevitably result in slower economic growth and reduced wealth for New Mexicans. Low economic freedom New Mexico has consistently lagged behind all of its neighbors in terms of population growth and economic prosperity.

Unfortunately, for someone who wishes that politicians and the public immediately saw the impacts of these policies, New Mexico has recently benefited from economic forces that are beyond the Legislature’s control.

As Bloomberg News noted in late 2018, “New Mexico’s economy leads other states in job and wage gains since President Donald Trump’s inauguration in January 2017.” For a variety of reasons, not the least of which is his pro-energy policies including faster permitting for oil and gas leases on federal lands, the Trump Administration has been especially good to New Mexico.

Pro-energy policies won’t do much if there is a glut. When it comes to natural gas, prices remain depressed due to oversupply, but in the oil markets New Mexico has benefitted from both booming production and relatively strong prices.

Oil production in New Mexico has tripled since 2012. That production contributed greatly to the $1 billion surplus that the Legislature was able to spend during 2019. And, while the price per barrel reached a high of $75 a barrel in October 2018 and then dropped to the low $40s by the end of 2018, prices have risen once again and now hover in the $60 range and are likely to rise through the summer.

If production and prices remain at these levels New Mexico government will remain flush with cash. Of course, the fruits of the oil boom will not be evenly distributed throughout New Mexico.

Because of the sheer scope of the Permian Basin’s oil production that region will remain in hyper-drive.

Unfortunately, the opposite is true in the Four Corners where natural gas production is declining due to the age of the basin and depressed prices. Worse, the shutdown of the San Juan Generating Station (and the mine which feeds it) which was ensured by the Legislature this session will result in the elimination of hundreds of jobs and large chunks of the region’s tax revenues over the next few years.

Adjusting to the new economic reality will be made even more difficult for the Four Corners and other parts of rural New Mexico as the minimum wage rate ratchets up from $7.50 an hour to $12.00 over the next few years. Outside of the Permian Basin, much of rural New Mexico is struggling. The minimum wage hike will only make it harder for unskilled workers to find work and for small businesses to stay afloat.

Moving forward it is clear that so-called “progressives” who dominate New Mexico’s major cities (Albuquerque, Las Cruces, and Santa Fe) and whose interests dominated the 2019 session, are out for more. The 30 day session will most certainly include another discussion of tapping the permanent fund for pre-K. Spending will also rise dramatically if oil and gas remain strong, but oil and gas will likely be targeted for additional regulations in ways they were not in 2019.

More profoundly, the next election will see well-funded “progressives” attempting to take out Republicans and moderate Democrats who they see as the only obstacle to total dominance. A handful of Republican senators remain in Albuquerque and Las Cruces. They will definitely be targeted electorally as will many rural Democrats in the Senate.

Booming Permian Basin oil production and stable prices mean New Mexico is fine for now, but a deep and sustained decline in oil prices could cause serious issues for our State. Combine that with the potential for “progressives” achieving total political dominance in 2020 and New Mexico is in unprecedented peril.

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.

 

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Economy Legislature Local Government Notable News Top Issues

Worker freedom is dying in NM

After only three months in office, Democrat Gov. Michelle Lujan Grisham recently signed a bill ratcheting back worker freedom and local control in New Mexico.

In March, the state legislature voted against worker freedom by explicitly prohibiting local “right-to-work” ordinances that had been adopted by almost a third of the state’s counties. These ordinances meant unions could not get a worker fired for not paying them.

Most of New Mexico’s neighbors – including Arizona, Utah, Oklahoma and Texas – have had statewide right-to-work laws on the books for years and have experienced far faster economic and population growth than New Mexico.

With no likelihood of state legislative action to pass a statewide “right-to-work” law, 10 of New Mexico’s 33 counties (including six of the top 10 in population) voted from late 2017 to early 2019 to adopt ordinances that prohibited unions from getting a worker fired for not paying them.

Simply put, the zeal with which the governor and Legislature killed local control of worker freedom is noticeably absent on other issues.

The mantra that labor laws should be made at the state level was repeated by unions and their allies in testimony on this “anti-right-to-work” legislation as it moved its way through the committee process. But the reality is that the Legislature regularly refuses to preempt other job-killing local laws and ordinances. For instance, local minimum wage bills have a disastrous effect on job prospects for low-skilled workers, but the Legislature just sits back and watches as they are enacted.

In late 2017, Albuquerque voters narrowly turned down a local ballot initiative that would have required businesses – no matter their size and including nonprofits – to offer paid sick leave to employees. The proposed ordinance would have been among the most aggressive in the entire nation.

Did politicians, who on one hand preach the need for statewide labor laws, say a word about these “local usurpations” of power rightly held by the Legislature? Of course they didn’t. If anything, they cheered them on or were even involved in the campaigns.

The back-and-forth in New Mexico over whether labor policy should be made at the state or local level brings up questions relevant to politicians in almost any state. The U.S. Constitution certainly empowers the states to decide whether to keep power in the state capital or disperse it to counties, cities and other local governments.

New Mexico has the worst of both worlds: a politically motivated hodgepodge of policies based purely on political considerations with no bright lines to guide policymakers. Instead, we get local governments pushing the envelope on policies like minimum wage and sick leave mandates.

Workers across New Mexico deserve worker freedom and the ability to get work experience. But the state Legislature is determined to stand in the way. Lawmakers are preempting counties from giving private employees the freedom to choose whether they will pay a union, while at the same time refusing to enact statewide laws to protect jobs.

In short, the Legislature has its priorities backward.

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

Vincent Vernuccio is Senior Fellow at Workers for Opportunity, the goal of which is to advance the liberty of employees across the country, ensuring full choice and the protection of their First Amendment rights.