Categories
Public Comments and Testimony

Paul Gessing’s Testimony on the economic impacts of Medicaid expansion: Before the Health and Human Services Committee New Mexico Legislature, Santa Fe

Good morning Sen. Ortiz y Pino, Rep. Espinoza, and members of the committee. I am Paul Gessing, president of the Rio Grande Foundation, an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico.

I appreciate this opportunity to provide my organization’s perspective on whether the benefits of Medicaid expansion in New Mexico outweigh the costs and whether a “multiplier effect” exists by which increased federal dollars will generate increased economic growth in our state.

Introduction

Before discussing the economic and multiplier impacts of Medicaid expansion, I feel it is important to discuss the impact of Medicaid on actual health care outcomes. Supporters of free markets and skeptics of the efficacy of government programs are are often accused of being callous or uncaring to the poor, but we actually want government spending to be used in ways that have proven, positive results.

There is no question that Medicaid expansion is a massive expansion of a health care entitlement. According to Congressional Budget Office, between 2014 and 2022, expanding Medicaid will cost American taxpayers at the combined federal and state levels $1 trillion. Before discussing the economic impact on New Mexico, it is important to ask what kind of health care we getting for that money.

For starters, the inspector general of the Department of Health and Human Services found that over half of providers no longer accept Medicaid patients. Of doctors who do accept Medicaid, the provider networks are narrow and nearly one-third face wait times of over a month.

Last year, The Wall Street Journal profiled Farmington family physician Holly Abernethy, who

has turned away all newly eligible Medicaid beneficiaries because she can’t sustain her practice expenses if her proportion of Medicaid patients grows much beyond her current 13%.

For a moderately complex office visit, she is paid about the same as [a] nurse practitioner: about $80 from Medicaid and about $160 on average from commercial insurance.

Says Dr. Abernethy, “I would love to see every Medicaid patient that comes through my door.” “If you give people coverage, they should be able to utilize it.” But making it work would extend her workday, and “I have three small children and I miss them.”

Moving from anecdotal to empirical evidence, it is worth considering Oregon’s experience. In 2008, a total of 29,835 Oregonians were given the opportunity to apply for the state’s Medicaid program out of almost 90,000 people on the waitlist. About 30 percent of those who were selected from the waitlist both chose to apply for Medicaid and met the eligibility criteria. Because it examined a unique, real-world experiment complete with a randomly selected control group, the study of Oregon’s Medicaid expansion is considered the “gold standard” in health-care research.

The study’s results have been published in academic journals, including The New England Journal of Medicine and the The American Economic Review in 2013. Its conclusion was that “Medicaid increased health care utilization, reduced financial strain, and reduced depression, but produced no statistically significant effects on physical health or labor market outcomes.”

The Oregon study is not alone in casting a skeptical light on Medicaid’s health benefits:

• A 2010 study of 1,231 patients with cancer of the throat, published in the medical journal Cancer, found that Medicaid patients and people lacking any health insurance were both 50 percent more likely to die when compared with privately insured patients—even after adjusting for factors that influence cancer outcomes. Medicaid patients were 80 percent more likely than those with private insurance to have tumors that spread to at least one lymph node.

• A 2010 study of 893,658 major surgical operations performed between 2003 to 2007 published in the Annals of Surgery found that being on Medicaid was associated with the longest length of stay, the most total hospital costs, and the highest risk of death. Medicaid patients were almost twice as likely to die in the hospital than those with private insurance. By comparison, uninsured patients were about 25 percent less likely than those with Medicaid to have an “in-hospital death.”

• A 2011 study of 13,573 patients, published in the American Journal of Cardiology, found that people with Medicaid who underwent coronary angioplasty (a procedure to open clogged heart arteries) were 59 percent more likely to have “major adverse cardiac events,” such as strokes and heart attacks, compared with privately insured patients. Medicaid patients were also more than twice as likely to have a major, subsequent heart attack after angioplasty as were patients who didn’t have any health insurance at all.

• A 2011 study of 11,385 patients undergoing lung transplants for pulmonary diseases, published in the Journal of Heart and Lung Transplantation, found that Medicaid patients were 8.1 percent less likely to survive 10 years after the surgery than their privately insured and uninsured counterparts. Medicaid insurance status was a significant, independent predictor of death after three years—even after controlling for other clinical factors that could increase someone’s risk of poor outcomes.

In all of these studies, the researchers controlled for the socioeconomic and cultural factors that can negatively influence the health of poorer patients on Medicaid.

So why do Medicaid patients fare so badly? Payments to providers have been reduced to literally pennies on each dollar of customary charges because of sequential rounds of indiscriminate rate cuts. As a result, doctors often cap how many Medicaid patients they’ll see in their practices. Meanwhile, patients can’t get timely access to routine and specialized medical care.

All that being said about the most important issue, the impact of Medicaid on health outcomes, I am primarily here to discuss the financial impact of Medicaid expansion on New Mexico’s economy and state budget.

In the current fiscal year, New Mexico will spend more than $5.5 billion on Medicaid, with state revenue covering just under $900 million of the total. By 2017, fully a third of the state’s population will be on Medicaid. At a time when revenue is dropping from the decline of the oil-and-gas sector, the program is seriously jeopardizing the state’s ability to balance its budget. By 2020, it is estimated that the state’s bill for covering newly eligible Medicaid recipients will be $163 million.

A Flawed Theory

The “multiplier effect” is the theory that government spending stimulates jobs creation and income growth. Many proponents of Medicaid expansion claim that since it is largely funded with “free” money from Washington, it is an economic-development tool. But, as Harvard economist Robert Barro explained in a September 2009 National Bureau of Economic Research paper, “it is wrong … to think that added government spending is free.” The money Washington is sending to New Mexico for Medicaid must come from either taxes or borrowing.

The national debt is currently $18.6 trillion. At least in the short term, the burden is sure to grow. Unfunded liabilities for Social Security and Medicare are estimated to be in the hundreds of trillions of dollars. This level of debt-creation will not continue. New Mexico, a state uniquely dependent on Washington appropriations, cannot count on an endless spigot of federal cash, for Medicaid or any other program. A reckoning is coming. It is likely to be very ugly for taxpayers in the Land of Enchantment.

The ‘Medicaid Multiplier’ Exposed

On the issue of the multiplier itself, after conducting a survey of the economic literature, Valerie Ramey, an economist at the University of California, San Diego concluded: “For the most part, it appears that a rise in government spending does not stimulate private spending; most estimates suggest that it significantly lowers private spending.” Studies by many others, including economists at the International Monetary fund, concur with Ramey’s finding.

In an effort to better understand the alleged “multiplier effect,” the Rio Grande Foundation recently examined economic performance in the 24 states that expanded Medicaid in January 2014, comparing it with the 20 states that did not. Despite tens of billions of “free” money flowing into expansion states with no state match required until 2017, the percentage of job growth in the two groups was essentially the same, with a slight edge to the non-expanding states:

The absence of a Medicaid “multiplier” is particularly stark in New Mexico. Residents continue to leave our state, the labor participation rate is falling, and unemployment is rising. Our state has yet to recover the number of jobs it had during its employment peak, more than seven years ago. The state’s extensive matrix of welfare programs is surely an incentive to remain on public assistance rather than seek opportunities in the job market.

There are many weaknesses in the claim that Medicaid expansion creates jobs for the workers needed to treat newly eligible beneficiaries. While employment in New Mexico’s health-services industry is rising, it is not at all clear that Medicaid expansion is causing the growth. The sector has been adding jobs for many years, and even increased its employment during the Great Recession.

Even if it were the case that Medicaid expansion creates healthcare jobs, in the assessment of Harvard scholars Katherine Baicker and Amitabh Chandra,

(e)mployment in the health care sector should be neither a policy goal nor a metric of success. The key policy goals should be to achieve better health outcomes and increase overall economic productivity, so that we can all live healthier and wealthier lives. Our ability to ensure access to expensive but beneficial treatment is hampered whenever health care policy is evaluated on the basis of jobs. Treating the health care system like a (wildly inefficient) jobs program conflicts directly with the goal of ensuring that all Americans have access to care at an affordable price.

One penalty of Medicaid expansion that its proponents consistently avoid addressing is the impact it has on those with non-government coverage. Broadening the program imposes “a hidden tax on … people with private insurance. Expanding Medicaid leads hospitals and doctors to shift costs onto patients with private insurance thus making private insurance less affordable and contributing to the vicious cycle of increasing the number of people without insurance.” Prices for insurance premiums are rising—not falling, as Obamacare supporters claimed – and Medicaid expansion is a likely contributor to the cost of private coverage.

In Conclusion

Prior to the enactment of this new health care law, Medicaid provided New Mexico with 70 cents on the dollar with little evidence that it “stimulated” New Mexico’s economy.

Perhaps the worst aspect of Medicaid expansion is that, like so many federal programs, it relied on the promise of “free money” to the states. If any welfare program is worth enacting or expanding, it should be the taxpayers of New Mexico that support paying into a program for the benefit of their friends and neighbors. After all, we all do want better health care outcomes.

A cash-grab based on long-discredited Keynesian “stimulus” theory with little or no health benefits isn’t just unwise, it’s immoral. Think of what else we could do with $1 trillion.

In the short term, New Mexico should work with other states to press the federal government for the flexibility required to fix a badly broken and irresponsibly unsustainable program.

Medicaid desperately needs a sweeping overhaul. Reforms must be consumer-oriented, permitting beneficiaries to obtain private coverage in a competitive marketplace. Time limits similar to those imposed under the creation of the Temporary Assistance to Needy Families program in the 1990s, are also worth consideration.

In the long term, aggressive implementation of proven economic-development strategies will create the prosperity that will enable New Mexicans to obtain private insurance, either through their employers or purchased individually. The way to gauge successful healthcare policy in New Mexico is to track how many people are leaving, not joining, our population of Medicaid enrollees.

Thank you for your time today.

Categories
Economy Energy and Environment Public Comments and Testimony

Rio Grande Foundation Comments on Economically-Damaging “Venting and Flaring” Rule: Please Join Us and Submit Yours!

If you haven’t heard the news, the Federal Bureau of Land Management (BLM) recently held a well-attended public hearing in Farmington on the issue of “venting and flaring” of methane from natural gas wells. Droves of Four Corners residents came out in opposition to the costly new regulations being considered by the Obama Administration.

This is a huge issue for Farmington, NM, in particular, as the city saw the biggest jump in unemployment last year among 387 US cities. The San Juan basin is a major producer of natural gas and, while “venting and flaring” are not optimal for the industry, the amount of “venting and flaring” in recent years has declined.

The BLM is currently accepting comments and will do so until April 8, 2016. The Rio Grande Foundation has submitted the following comments and encourages you to submit comments (click here to do so) (or at the email or mailing address below) in opposition to the proposed “venting and flaring” rule.

February 17, 2016

U.S. Department of the Interior, Director (630)
Bureau of Land Management
Mail Stop 2134 LM
1849 C St. NW.,
Washington, DC 20240

OIRA_Submission@omb.eop.gov.
Attention: OMB Control Number 1004-AE14

To Whom it May Concern:

I am the president of a free market policy research organization called the Rio Grande Foundation. We are based in Albuquerque. Our research focuses on New Mexico’s economy which is uniquely-challenged among US states. Our unemployment rate has been the highest in the nation for two months running. Our poverty levels are among the highest in the nation. As a state, New Mexico is the third-most dependent on the oil and natural gas industries as a percentage of our budget.

Given that the Bureau of Land Management controls 13.5 million of New Mexico’s surface acreage, approximately 2 million fewer acres than are occupied by the State of West Virginia, federal regulations have a tremendous impact on New Mexico’s economy.

On a statewide basis:

 There are 54,457 operating oil and gas wells in New Mexico
 The oil and gas industry employs 69,000 people in New Mexico;
 The average salary is $71,500 compared to the overall state average salary of $39,660
 56% of the oil and 63% of the natural gas is produced from Federal (BLM leases)
 In fiscal year 2014 the industry provided $2.1 billion of the state of New Mexico’s $6 billion general fund revenues (35%)

I should also note that while my organization is based in Albuquerque, we study the entire New Mexico economy. A recent report from the US Department of Labor labeled the Farmington area as suffering “extreme economic duress,” noting that it had the largest increase in its unemployment rate among 387 metropolitan areas nationwide in 2015 .

The northwestern New Mexico city saw its unemployment rate rise 2.1 percentage points last year, to 7.3 percent. The last thing New Mexico’s Four Corners area needs is a new set of costly federal regulations that negatively impact the region’s economy.

Methane Emissions are the object of the proposed regulations

 Venting and flaring of large amounts of methane represents lost profits to industry. While it is sometimes unavoidable, there are efforts already under way within industry to curtail the amount of emissions.

 Methane is both a product and by-product of oil and natural gas production. Onshore oil and natural gas operators are becoming more efficient at capturing methane emissions, and at reducing methane emissions from production activities. The national trend of methane reduction is supported by GHG reporting data, and it holds true despite a historic increase in oil and gas production over the past several years.

 Without regulations overall greenhouse gas emission in the San Juan Basin have decreased from 10.7 million metric tons in 2007 to 7.3 million metric tons in 2014.

 Vented methane emission in the San Juan are down due to cost effective and efficient practices including:

o Better operating practices that are decreasing the number and duration of venting events.
o Reduced pneumatic device emissions by reclassifying, removing, replacing and retrofitting high-bleed pneumatic devices.

Good Regulations vs. Bad Regulations

 Good regulation practices:

o Single and appropriate entity responsible for regulation;
o Effective in meeting public policy goals: environmental, health and safety;
o Based on science;
o Cost effective: the overall benefit of regulation is greater than the cost.

 The proposed venting and flaring rule is bad regulation for the following reasons:

o Redundant and contradictory with other federal regulations and state regulations;
o Requires extensive capital and operating expenses with little or no additional benefits;
o Not based on science and in fact, locks in operating and technology solutions that have been shown to be inferior;
o Cost prohibitive especially in era of low community prices will force existing wells to be plugged with the loss of future production, jobs, taxes and other revenues.

 What are weaknesses in the BLM’s approach?

o The BLM has attempted to understand economic impacts of these rules in isolation and has overestimated the benefits and underestimated the costs;
o We believe the cumulative economic impacts of the proposed changes should be considered in total across all their proposed rules;
o As proposed, these changes are significant and will have major impacts on investments in new and existing projects on federal and Indian lands, with the potential for job losses, premature well closures and significantly lower federal and tribal revenues;
o The BLM should conduct a more thorough economic impact analysis rules in isolation and has overestimated the benefits and underestimated the costs should be considered in total across all their proposed rules.

I am very concerned with the proposed BLM rule because as currently drafted it will lead to wells being prematurely plugged and devastating loss of jobs and needed economic activity in the Four Corners region and New Mexico as a whole.

Categories
Economy Health Care Public Comments and Testimony

Paul Gessing’s Testimony on The Economic Impacts of Medicaid Expansion: Before The Health and Human Services Committee New Mexico Legislature, Santa Fe

Good morning Sen. Ortiz y Pino, Rep. Espinoza, and members of the committee. I am Paul Gessing, president of the Rio Grande Foundation, an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico.

I appreciate this opportunity to provide my organization’s perspective on whether the benefits of Medicaid expansion in New Mexico outweigh the costs and whether a “multiplier effect” exists by which increased federal dollars will generate increased economic growth in our state.

Introduction

Before discussing the economic and multiplier impacts of Medicaid expansion, I feel it is important to discuss the impact of Medicaid on actual health care outcomes. Supporters of free markets and skeptics of the efficacy of government programs are are often accused of being callous or uncaring to the poor, but we actually want government spending to be used in ways that have proven, positive results.

There is no question that Medicaid expansion is a massive expansion of a health care entitlement. According to Congressional Budget Office, between 2014 and 2022, expanding Medicaid will cost American taxpayers at the combined federal and state levels $1 trillion. Before discussing the economic impact on New Mexico, it is important to ask what kind of health care we getting for that money.

For starters, the inspector general of the Department of Health and Human Services found that over half of providers no longer accept Medicaid patients. Of doctors who do accept Medicaid, the provider networks are narrow and nearly one-third face wait times of over a month.

Last year, The Wall Street Journal profiled Farmington family physician Holly Abernethy, who

has turned away all newly eligible Medicaid beneficiaries because she can’t sustain her practice expenses if her proportion of Medicaid patients grows much beyond her current 13%.

For a moderately complex office visit, she is paid about the same as [a] nurse practitioner: about $80 from Medicaid and about $160 on average from commercial insurance.

Says Dr. Abernethy, “I would love to see every Medicaid patient that comes through my door.” “If you give people coverage, they should be able to utilize it.” But making it work would extend her workday, and “I have three small children and I miss them.”

Moving from anecdotal to empirical evidence, it is worth considering Oregon’s experience. In 2008, a total of 29,835 Oregonians were given the opportunity to apply for the state’s Medicaid program out of almost 90,000 people on the waitlist. About 30 percent of those who were selected from the waitlist both chose to apply for Medicaid and met the eligibility criteria. Because it examined a unique, real-world experiment complete with a randomly selected control group, the study of Oregon’s Medicaid expansion is considered the “gold standard” in health-care research.

The study’s results have been published in academic journals, including The New England Journal of Medicine and the The American Economic Review in 2013. Its conclusion was that “Medicaid increased health care utilization, reduced financial strain, and reduced depression, but produced no statistically significant effects on physical health or labor market outcomes.”

The Oregon study is not alone in casting a skeptical light on Medicaid’s health benefits:

• A 2010 study of 1,231 patients with cancer of the throat, published in the medical journal Cancer, found that Medicaid patients and people lacking any health insurance were both 50 percent more likely to die when compared with privately insured patients—even after adjusting for factors that influence cancer outcomes. Medicaid patients were 80 percent more likely than those with private insurance to have tumors that spread to at least one lymph node.

• A 2010 study of 893,658 major surgical operations performed between 2003 to 2007 published in the Annals of Surgery found that being on Medicaid was associated with the longest length of stay, the most total hospital costs, and the highest risk of death. Medicaid patients were almost twice as likely to die in the hospital than those with private insurance. By comparison, uninsured patients were about 25 percent less likely than those with Medicaid to have an “in-hospital death.”

• A 2011 study of 13,573 patients, published in the American Journal of Cardiology, found that people with Medicaid who underwent coronary angioplasty (a procedure to open clogged heart arteries) were 59 percent more likely to have “major adverse cardiac events,” such as strokes and heart attacks, compared with privately insured patients. Medicaid patients were also more than twice as likely to have a major, subsequent heart attack after angioplasty as were patients who didn’t have any health insurance at all.

• A 2011 study of 11,385 patients undergoing lung transplants for pulmonary diseases, published in the Journal of Heart and Lung Transplantation, found that Medicaid patients were 8.1 percent less likely to survive 10 years after the surgery than their privately insured and uninsured counterparts. Medicaid insurance status was a significant, independent predictor of death after three years—even after controlling for other clinical factors that could increase someone’s risk of poor outcomes.

In all of these studies, the researchers controlled for the socioeconomic and cultural factors that can negatively influence the health of poorer patients on Medicaid.

So why do Medicaid patients fare so badly? Payments to providers have been reduced to literally pennies on each dollar of customary charges because of sequential rounds of indiscriminate rate cuts. As a result, doctors often cap how many Medicaid patients they’ll see in their practices. Meanwhile, patients can’t get timely access to routine and specialized medical care.

medicaid-expansion-101-b

All that being said about the most important issue, the impact of Medicaid on health outcomes, I am primarily here to discuss the financial impact of Medicaid expansion on New Mexico’s economy and state budget.

In the current fiscal year, New Mexico will spend more than $5.5 billion on Medicaid, with state revenue covering just under $900 million of the total. By 2017, fully a third of the state’s population will be on Medicaid. At a time when revenue is dropping from the decline of the oil-and-gas sector, the program is seriously jeopardizing the state’s ability to balance its budget. By 2020, it is estimated that the state’s bill for covering newly eligible Medicaid recipients will be $163 million.

A Flawed Theory

The “multiplier effect” is the theory that government spending stimulates jobs creation and income growth. Many proponents of Medicaid expansion claim that since it is largely funded with “free” money from Washington, it is an economic-development tool. But, as Harvard economist Robert Barro explained in a September 2009 National Bureau of Economic Research paper, “it is wrong … to think that added government spending is free.” The money Washington is sending to New Mexico for Medicaid must come from either taxes or borrowing.

The national debt is currently $18.6 trillion. At least in the short term, the burden is sure to grow. Unfunded liabilities for Social Security and Medicare are estimated to be in the hundreds of trillions of dollars. This level of debt-creation will not continue. New Mexico, a state uniquely dependent on Washington appropriations, cannot count on an endless spigot of federal cash, for Medicaid or any other program. A reckoning is coming. It is likely to be very ugly for taxpayers in the Land of Enchantment.

The ‘Medicaid Multiplier’ Exposed

On the issue of the multiplier itself, after conducting a survey of the economic literature, Valerie Ramey, an economist at the University of California, San Diego concluded: “For the most part, it appears that a rise in government spending does not stimulate private spending; most estimates suggest that it significantly lowers private spending.” Studies by many others, including economists at the International Monetary fund, concur with Ramey’s finding.

In an effort to better understand the alleged “multiplier effect,” the Rio Grande Foundation recently examined economic performance in the 24 states that expanded Medicaid in January 2014, comparing it with the 20 states that did not. Despite tens of billions of “free” money flowing into expansion states with no state match required until 2017, the percentage of job growth in the two groups was essentially the same, with a slight edge to the non-expanding states:

medicaid_logo

The absence of a Medicaid “multiplier” is particularly stark in New Mexico. Residents continue to leave our state, the labor participation rate is falling, and unemployment is rising. Our state has yet to recover the number of jobs it had during its employment peak, more than seven years ago. The state’s extensive matrix of welfare programs is surely an incentive to remain on public assistance rather than seek opportunities in the job market.

There are many weaknesses in the claim that Medicaid expansion creates jobs for the workers needed to treat newly eligible beneficiaries. While employment in New Mexico’s health-services industry is rising, it is not at all clear that Medicaid expansion is causing the growth. The sector has been adding jobs for many years, and even increased its employment during the Great Recession.

Even if it were the case that Medicaid expansion creates healthcare jobs, in the assessment of Harvard scholars Katherine Baicker and Amitabh Chandra,

(e)mployment in the health care sector should be neither a policy goal nor a metric of success. The key policy goals should be to achieve better health outcomes and increase overall economic productivity, so that we can all live healthier and wealthier lives. Our ability to ensure access to expensive but beneficial treatment is hampered whenever health care policy is evaluated on the basis of jobs. Treating the health care system like a (wildly inefficient) jobs program conflicts directly with the goal of ensuring that all Americans have access to care at an affordable price.

One penalty of Medicaid expansion that its proponents consistently avoid addressing is the impact it has on those with non-government coverage. Broadening the program imposes “a hidden tax on … people with private insurance. Expanding Medicaid leads hospitals and doctors to shift costs onto patients with private insurance thus making private insurance less affordable and contributing to the vicious cycle of increasing the number of people without insurance.” Prices for insurance premiums are rising—not falling, as Obamacare supporters claimed – and Medicaid expansion is a likely contributor to the cost of private coverage.

In Conclusion

Prior to the enactment of this new health care law, Medicaid provided New Mexico with 70 cents on the dollar with little evidence that it “stimulated” New Mexico’s economy.

Perhaps the worst aspect of Medicaid expansion is that, like so many federal programs, it relied on the promise of “free money” to the states. If any welfare program is worth enacting or expanding, it should be the taxpayers of New Mexico that support paying into a program for the benefit of their friends and neighbors. After all, we all do want better health care outcomes.

A cash-grab based on long-discredited Keynesian “stimulus” theory with little or no health benefits isn’t just unwise, it’s immoral. Think of what else we could do with $1 trillion.

In the short term, New Mexico should work with other states to press the federal government for the flexibility required to fix a badly broken and irresponsibly unsustainable program.

Medicaid desperately needs a sweeping overhaul. Reforms must be consumer-oriented, permitting beneficiaries to obtain private coverage in a competitive marketplace. Time limits similar to those imposed under the creation of the Temporary Assistance to Needy Families program in the 1990s, are also worth consideration.

In the long term, aggressive implementation of proven economic-development strategies will create the prosperity that will enable New Mexicans to obtain private insurance, either through their employers or purchased individually. The way to gauge successful healthcare policy in New Mexico is to track how many people are leaving, not joining, our population of Medicaid enrollees.

Thank you for your time today.

Categories
ART Constitution and Criminal Justice Local Government Public Comments and Testimony Top Issues Videos

Talking Asset Forfeiture, Bus Rapid Transit, & The NM Economy on Morning Brew

Recently, Paul Gessing sat down with Dan Mayfield of the Morning Brew to discuss several issues the Foundation is working on. Specifically, we talked about an event the Foundation put on relating to civil asset forfeiture. And, while that event has come and gone, several of the issues discussed remain relevant and topical in advance of the 2016 legislative session.

Categories
Open Government Public Comments and Testimony

Footage of NM Civil Asset Forfeiture Reform Press Conference

Recently, Gov. Martinez signed the nation’s strongest protections for civil asset forfeiture. The Rio Grande Foundation, ACLU of New Mexico, and Drug Policy Alliance held a press conference on the issue. The full conference can be seen below:

KOAT TV also covered the press conference although they focused heavily on the DUI provisions that have been enacted by some cities and which may or may not conflict with the new legislation.

Categories
Open Government Public Comments and Testimony

New Mexico Governor Signs Historic Property Rights Protections into Law

FOR IMMEDIATE RELEASE

CONTACTS:

Micah McCoy, (505) 266-5915 x1003 or mmccoy@aclu-nm.org
Paul Gessing, (505) 264-6090, pgessing@riograndefoundation.org
Emily Kaltenbach, (505) 920-5259 or ekaltenbach@drugpolicy.org

SANTA FE, NM—Today, Governor Susana Martinez signed HB 560 into law, ending the practice of civil asset forfeiture in New Mexico. Civil asset forfeiture, also known as “policing for profit,” allows law enforcement officers to seize personal property without ever charging—much less convicting—a person with a crime. Property seized through this process often finds its way into the department’s own coffers. HB 560, introduced by NM Rep. Zachary Cook and passed unanimously in the legislature, replaces civil asset forfeiture with criminal forfeiture, which requires a conviction of a person as a prerequisite to losing property tied to a crime. The new law means that New Mexico now has the strongest protections against wrongful asset seizures in the country.

“This is a good day for the Bill of Rights,” said ACLU-NM Executive Director Peter Simonson. “For years police could seize people’s cash, cars, and houses without even accusing anyone of a crime. Today, we have ended this unfair practice in New Mexico and replaced it with a model that is just and constitutional.”

“With this law, New Mexico leads the nation in protecting the property rights of innocent Americans,” said Paul Gessing, President of the Rio Grande Foundation. “Convicted criminals will still see the fruits of their crime confiscated by the state, but innocent New Mexicans can now rest easy knowing that their property will never be seized by police without proper due process.”

“New Mexico has succeeded today in reigning in one of the worst excesses of the drug war,” said Emily Kaltenbach, State Director for Drug Policy Alliance’s New Mexico office “Like other drug war programs, civil asset forfeiture is disproportionately used against poor people of color who cannot afford to hire lawyers to get their property back. This law is an important step towards repairing some of the damage the drug war has inflicted upon our society and system of justice.”

“New Mexico has shown that ending policing for profit is a true bipartisan issue with broad public support,” said Lee McGrath, Legislative Counsel for the Institute of Justice. “America is ready to end civil asset forfeiture, a practice which is not in line with our values or constitution. This law shows that we can be tough on crime without stripping property away from innocent Americans.”

Bipartisan legislation has already been introduced in both houses of Congress that would dramatically reform federal civil asset forfeiture laws. The Fifth Amendment Integrity Restoration (FAIR) Act has been introduced in the Senate by Sen. Rand Paul (R-KY), Sen. Angus King (I-ME) and Sen. Mike Lee (R-UT). In the House, Rep. Tim Walberg (R-MI), Rep. Scott Garrett (R-NJ), Rep. Tony Cárdenas (D-CA), Rep. Keith Ellison (D-MN) and Rep. Tom McClintock (R-CA) introduced an identical version of the FAIR Act.

Categories
Economy Public Comments and Testimony

Gessing Provides Expert Testimony as “Right to Work” Bill Passes First House Committee in Bi-Partisan Vote

Today in the House Business and Employment Committee, HB 75 which would make New Mexico the 25th state in the nation to adopt “right to work” legislation, passed with bi-partisan support. Rio Grande Foundation president Paul Gessing provided expert testimony which can be seen below. Next up is House Judiciary Committee:

Thank you for the opportunity to testify on the issue of whether to make New Mexico a “right to work” state. I believe that this is the most important single issue being addressed during the 2015 legislative session and I am pleased to be here.

Before I get started telling you what “right to work” is, I’d like to share with you what it is not.

“Right to Work” is not anti-union. Such laws simply restore individual choice over whether to join or not join a labor union. Moreover, federal law does not obligate unions to represent non-members. The National Labor Relations Act allows unions to sign “members’ only” contracts that apply only to dues-paying members. In 1938, the Supreme Court expressly upheld union’s ability to negotiate only on behalf of members. As William Gould, chairman of the NLRB under President Clinton, wrote, “the law now permits members-only bargaining for employees” — unions can exclude non-members from their contracts.

The second thing that “right to work” is not is that it is not an economic panacea. Supporters of the law hope that by adopting such a law New Mexico will be more economically-competitive. There is ample data to show that businesses, especially those providing high-paying jobs for skilled workers, tend to locate new facilities in “right to work” states far more often than they do in non-RTW states.

How do we know this? There are reams of data showing that RTW states create more jobs, are seeing faster population growth, and are experiencing faster personal income growth than their non-RTW brethren. And, while median incomes are higher in non-right to work states, once the cost of living is factored in, median incomes in RTW states are about $5,000 higher than in non-RTW states.

I’m happy to go into that data with the Committee in detail, but let’s look at real-world businesses and the site selection professionals who help businesses locate for a living.

The first and most famous case involves the airplane manufacturer Boeing which is primarily located in Washington State, a non-right to work state. In 2009, Boeing broke ground on a facility near Charleston, in South Carolina, which is a RTW state. The facility is expected to generate 3,800 jobs and invest $750 million over the next seven years.

Boeing’s move generated a great deal of controversy, but it was clearly a decision made in part to avoid future facility shutdowns. It is worth noting that Boeing’s employees are highly-skilled and well-paid. Boeing was not moving in search of lower wages, but to avoid having its technology and resource-intensive assembly lines beholden to frequent strikes.

Notably, Airbus, the European conglomerate and main competitor to Boeing, has 9 US facilities. As seen in Figure 1, only its Washington, DC-based government affairs division is located in a non-RTW state. Airbus could have chosen anywhere in the US to build its facilities having entered the market in 1990. It chose RTW.

They are not alone. Another foreign aircraft manufacturer, Embraer which makes regional and corporate jets, also could have built anywhere in the US. They chose RTW Florida as the location for not one, but two manufacturing facilities employing a total of 1,000 workers.

Of course, aviation is not the only manufacturing industry that favors RTW states. Even if Michigan’s shift to RTW is not included in the data, as Figure 2 illustrates, automobile manufacturing is increasingly moving to states that have RTW laws on the books.

It is no accident that manufacturers, especially those building new facilities, are choosing to locate in RTW states. After all, the people they trust to help locate their businesses also believe in the importance of RTW.

I just discussed the auto industry’s shift to RTW states. New Mexico was recently in the running for Tesla’s “gigafactory” which wound up choosing RTW Nevada for its facility. John Boyd, the principal at his namesake site selection firm said of New Mexico’s chances to lure Tesla “manufacturing companies look for reasons to scratch off states when considering where to build major facilities — and no right to work law is at the top of the list.”

Boyd also said, “I can’t underscore how critical right to work status is.” In conclusion, Boyd again reiterated the dire need for a right to work law in New Mexico saying, “New Mexico has enormous potential to become a manufacturing hub, especially if it were to adopt right to work legislation.”

Boyd is not alone. When Michigan went “right to work” in 2013, Site Selection Magazine interviewed several site selection experts on the issue. The following comments, all from professional site selectors relating to a real-world law passing indicate strong support for “right to work” laws:

Said Jason Hickey, principal of Hickey & Associates in Washington, D.C., “We believe there will be an enormous impact, especially for medium-tier companies who are poised to grow.”

Tracey Hyatt Bosman of BLS & Company in Chicago calls Michigan’s adoption of RTW “a dramatic demonstration of the state’s commitment to the transformation of their business environment.”

Bosman echoes other site consultants when she adds, “Some companies simply insist on locating in a right-to-work state. Michigan’s new legislation removes a roadblock and will bring the state’s extremely skilled work force into consideration for more projects.”

It was hard to find anyone in the site selection profession who saw a downside. Michigan’s swift reversal of decades of labor law.

Said Brent Pollina of Pollina Corporate Real Estate in Chicago, “Where it will have an effect is when there are companies who are looking for locations. Michigan will no longer be eliminated because they are not a right-to-work state. As a result, there should be a significant increase in the number of projects that Michigan receives because they are no longer being eliminated at the early stages of searches. The change also sends a strong signal to business and industry.”

As with any issue, if you look hard enough you can find those who will say RTW is “ineffective” or “not a factor” in businesses’ location decisions. However, I have never heard an economic development expert say RTW was a negative.

In conclusion, RTW costs taxpayers nothing. And, at a time when Washington is no longer a reliable base for our economy and with dramatically-reduced oil prices impacting our states’ most significant economic bright spot, there is no better or more important time for New Mexico to adopt a Right to Work law.

It is not a panacea, but a serious starting point for developing New Mexico’s under-developed private sector.

Thank you for your time and attention.

Categories
Energy and Environment Public Comments and Testimony

Rio Grande Foundation Asks EPA to Withdraw its “Waters of the U.S.” Proposal

(Albuquerque, NM) —The Rio Grande Foundation today joined with 375 trade associations and chambers from 50 states representing a wide range of industries to voice strong concerns with the U.S. Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers’ flawed proposed rule to dramatically expand the scope of federal authority over water and land uses across the U.S. and called for the proposal to be withdrawn. The effort was led by the U.S. Chamber of Commerce. The comments are available here.

The rule is simply an attempt by Washington, D.C., bureaucrats to take over the economies and the livelihoods of everyone in the western U.S. It has little to do with environmental protection, and everything to do with a political takeover of our most precious resource – making everyone in the west dependent and beholden to Washington bureaucrats.

As the groups’ comments state, “The proposed rule is really about the Agencies’ overreaching attempt to replace longstanding state and local control of land uses near water with centralized federal control. In light of the overwhelming evidence that the proposed rule would have a devastating impact on businesses, states, and local governments without any real benefit to water quality, the Agencies should immediately withdraw the waters of the U.S. proposal and begin again. The current proposed rule is simply too procedurally and legally flawed to repair.”

The comments detail several examples of the impacts of the proposed rule, including:

  • Maps prepared by EPA show the rule could expand federal jurisdiction over waters from 5 million river and stream miles to well over8 million river and stream miles;
  • The rule would make most ditches into “tributaries.”  Routine maintenance activities in ditches and on-site ponds and impoundments could trigger permits that can cost $100,000 or more;
  • These permitting requirements would likely trigger additional environmental reviews that would add years to the completion time for ordinary projects;
  • Even if a project can get a permit, firms will often have to agree to mitigate environmental “damage” with costly restoration/mitigation projects;
  • The proposal would likely also result in more stringent storm water management requirements, which would affect retailers, companies with large parking lots, “big box” stores, etc.
Categories
Economy Public Comments and Testimony RailRunner Tax and Budget

Paul Gessing’s Testimony on Free Market Criminal Justice Reforms

Testimony Before Courts, Corrections, and Justice Interim Committee
Friday, August 23rd, 9am, Room 322

Rep. Gail Chasey, Co-Chair
Sen. Richard C. Martinez, Co-Chair

Introduction

Good morning Madame and Mr. Co-Chair, members of the Committee. My name is Paul Gessing, I’m President of the Rio Grande Foundation, New Mexico’s free market public research institute or think tank. We’re based in Albuquerque, NM. Thank you for inviting me to participate in this hearing.

I’ll be the first to admit that I am not an expert on criminal justice issues. That said, criminal justice issues are by definition economic issues. New Mexico’s economic policies are the bread and butter issues of my organization. Criminal justice policies impact the economy in three major ways:

1. Direct spending on the criminal justice system including everything from police to prisons;

2. Foregone revenues including everything from potential taxes paid (or not paid) by those who are incarcerated or unable to find work due to their criminal records to the economic potential to tax drugs like marijuana;

3. Lost economic growth due to crime/inadequate public safety.

While I don’t consider myself an expert on criminal justice issues, I am one of the original signatories of the Right on Crime statement of principles. This statement has now received support from 54 conservative leaders across the nation.

The basic premise is that the traditional “lock em up” mentality that has historically dominated conservative thinking on crime is too expensive and lacking in effectiveness to continue without a serious re-evaluation of the goals, tactics, and fiscal implications of our criminal justice policies.

Background

To be clear, New Mexico is historically not a state that has followed conservative criminal justice policies. Incarceration rates, for example, are far lower here than they are in most surrounding states. That does not mean that New Mexico policymakers are doing everything right or as cost-effectively as possible, it just means that “lock em up” has not been the criminal justice model in New Mexico as it has been in Texas, for example. That also doesn’t mean that policymakers in our state can’t learn something from what other states are doing on criminal justice issues.

Let’s start with some data. I have provided the Committee with a regional breakdown of the 2012 Peace Index which is put together by an organization called Vision of Humanity. The most notable aspect of this data for New Mexico is the high rates of homicides and violent crime (and relatively low rates of incarceration, lower than any state in the region besides Utah).

The crime problem in New Mexico is not limited to violent crime. According to 2011 data from the FBI’s Uniform Crime Reports, New Mexico has relatively high rates of property crime relative to the rest of the region. Notably, the entire southwest region has relatively high rates of most crimes.

Personally, as a resident of Albuquerque’s West Side, I can attest to the fact that crime can be a blot on life in New Mexico. Having lived for 8.5 years in Washington, DC and its inner-suburbs with no problems, I have witnessed a drive by shooting in my neighborhood and our car has been broken into as well. One of my former employees, Paige McKenzie was beaten within an inch of her life on the side of a road in Bernalillo.

My family and I love New Mexico and can’t see moving, but more timid souls might have simply left. This is lost talent and lost economic activity for our businesses and our economy. Worse, those people tell their friends and put their message on social media. Word spreads.

But I’m not here to say we need to spend more money on criminal justice or even that hiring more police is the answer. Rather, I think we need to re-deploy resources to improve our justice system in ways that keep violent offenders behind bars, rehabilitate those who can be rehabilitated, keep those who are not real threats in the workforce and involved with their families, and reduce contact with the criminal justice system among those who have no need to be involved in it at all.

There are some specific ways to reduce crime and/or reduce the costs of criminal justice at the same time. These have been outlined in Rio Grande Foundation policy papers including the 2009 “Criminal Justice Policy in New Mexico: Keys to Controlling Costs and Protecting Public Safety” and an opinion piece “Reforms can cut costs, improve public safety.”

1. Drug Courts: New Mexico has 853 inmates incarcerated for drug possession.

Drug courts are a proven alternative to incarceration for low level drug offenders. Drug courts offer intensive judicial oversight of offenders combined with mandatory drug testing and escalating sanctions for failure to comply. According to the National Association of Drug Court Professionals, the average recidivism rate for those who complete drug court is between 4 percent and 29 percent, in contrast to 48 percent for those who do not participate in a drug court program. Similarly, the General Accounting Office reported recidivism reductions of 10 to 30 percentage points below the comparison group.

A 2006 California study found drug courts cost less than $3,000 per participant, far cheaper than prison.12 New Mexico has 35 drug courts in 25 of 33 counties, which have processed 9,500 offenders since 1994. The recidivism rate of New Mexico drug courts is 11.9 percent. A New Mexico Sentencing Commission study of the Bernalillo County Metropolitan DWI Drug Court found graduates were one-third as likely to recidivate as comparable offenders who did not participate in the drug court.13 As recommended in the June 2008 report by Governor Bill Richardson’s Task Force on Prison Reform, New Mexico can benefit further from the expansion of drug courts.

If we assume that half of these drug possession offenders should not be eligible for diversion from prison because they had large quantities of drugs that are associated with dealing or have too many prior offenses, New Mexico could still save $13.2 million based on the state’s $31,000 annual per-prisoner cost of incarceration.

2. Another source of potentially significant savings lies in diverting from prison probationers and parolees who are revoked for technical violations of their supervision, not new offenses. In 2008, there were 413 such revocations to prison. Instead, New Mexico could use a graduated sanctions matrix that relies more on intermediate sanctions such as curfews, electronic monitoring, supervised work crews, and short periods of incarceration in county jails. If this diverted just half of this pool of offenders, it would save $6.4 million.

3. Law Enforcement Assisted Diversion (LEAD), otherwise known as pre-booking diversion:

Law Enforcement Assisted Diversion identifies low-level drug offenders for whom probable cause exists for an arrest and redirects them from jail and prosecution by immediately providing linkages to treatment and social supports including harm reduction and intensive case management. By diverting eligible individuals to services, LEAD is committed to improving public safety and public order, and reducing the criminal behavior of people who participate in the program.

4. Research has proven that treatment is effective. In Arizona which also implemented this policy more than a decade ago, a study by the Arizona Supreme Court found that 77 percent of drug offenders got clean as a result of the treatment. The national Drug Abuse Treatment Outcome Survey of 10,000 participants found that residential treatment resulted in a 50 percent reduction in drug use and 61 percent reduction in crime while outpatient treatment resulted in a 50 percent reduction in drug use and 37 percent reduction in crime. Dr. Nora Volkow, Director of the National Institute on Drug Abuse (NIDA), stated, “Research findings show unequivocally that drug treatment works and that this is true even for individuals who enter treatment under legal mandate.”

Performance-Based Probation Funding: In December 2008, Arizona implemented performance-based probation funding. Under this incentive-based approach which has not been adopted in New Mexico, probation departments receive a share of the state’s savings from less incarceration when they reduce their revocations to prison without increasing probationers’ convictions for new offenses. The probation departments are required to reinvest the additional funds in victim services, substance abuse treatment, and strategies to improve community supervision and reduce recidivism.

Unlike Arizona, New Mexico has one unified, statewide probation and parole department. The Pew Center on the States Public Safety Performance Project recommends that a performance based probation funding system appropriate 30 percent of savings from a reduced revocation rate to the department and an additional 5 percent if the department demonstrates improvement in employment, drug test results, and victim restitution collection. Although results of Arizona’s measure are not yet available, Ohio adopted a somewhat similar funding policy called RECLAIM

(Reasoned and Equitable Community and Local Alternative to Incarceration of Minors) that gives money to counties that treat juveniles who would otherwise be incarcerated and deducts funds for low-risk juveniles who are sent to state facilities. The policy has been highly successful, as the recidivism rate for moderate risk youth placed through RECLAIM was 22 percent, compared with a
54 percent rate for such offenders in state lockups.

5. New Mexico can also join 36 other states by implementing a policy to release geriatric inmates who are no longer a danger to the public. Such inmates are even more expensive to incarcerate due to health care costs.

Based on Oklahoma’s experience, 17 infirm New Mexico inmates could be released every year on geriatric parole with savings of $844,594, which assumes a higher $50,000 incarceration cost per year that is supported by research on geriatric inmate medical costs. Geriatric inmates have a recidivism rate of less than five percent and not a single participant in Oklahoma’s model program has committed a new offense.

6. Finally, more halfway houses would provide an alternative for the 130 inmates who have been paroled but \await release because they lack housing. A halfway house costs only $25 a day, while prison is $85 a day. Assuming 120 days of time at a halfway house instead of prison, this policy would save $936,000.

7. Some other reforms would provide long-term benefits by making it more likely that ex-offenders will become productive members of society rather than career criminals going through prison’s revolving door. Currently, 41 percent of New Mexico probationers and parolees are employed. Employed ex-offenders are three times less likely to re-offend. One barrier to employment is that New Mexico employers have been held liable for negligent hiring of employees with questionable backgrounds.

The Urban Institute noted, “The high probability of losing coupled with the magnitude of settlement awards suggest that fear of litigation may substantially deter employers from hiring applicants with criminal history records.” That fear is not without basis. Employers lose 72 percent of negligent hiring cases with an average settlement of more than $1.6 million. New Mexico can address this by immunizing employers from such suits – suits should be permitted for failure to supervise but not merely for hiring an ex-offender.

8. Barriers for Nonviolent Ex-Offenders to Obtain Occupational Licenses: Under the New Mexico Criminal Offender Employment Act, even convictions not directly related to the occupation are grounds for ineligibility. One solution is to allow ex-offenders to obtain provisional licenses that are valid for a shorter period of time and subject to immediate revocation if they commit a new offense, violate a term of probation or parole, or violate a rule of the occupation. Such provisional licenses provide a positive incentive for success while still holding the ex offender accountable.

Texas lawmakers enacted House Bill 963 in 2009 authorizing provisional licenses. The legislation specifies that a provisional license becomes a permanent license after six months if the license holder is in full compliance.

The Rio Grande Foundation has done considerable work on the issue of occupational licenses. While we’d love to see a reduction in their number, scope, and expense, the very least we can do from a criminal justice standpoint is to not throw up additional barriers in front of ex-offenders.

9. Use of Private Facilities. The recent decline in New Mexico’s prison population coupled with the potential of many the proposals outlined here for controlling the demand for prison beds should render the current capacity adequate. However, to the extent new capacity is needed at some point, expanding an existing private prison would be the most economical solution. Private prisons are proven to be less costly to operate.

A Rio Grande Foundation study examined per-prisoner department of corrections budgets across 46 states and found that states with at least 5 percent of their prison population in private prisons spent about $4,804 less per prisoner in 2001 than states without any private prisons.

The study further found that cost savings increase along with the percentage of inmates in private facilities. For example, New Mexico was calculated to save more than $50 million as a result of having 45 percent of its inmates in private prisons. Similarly, a December 2007 study by Vanderbilt University researchers found that states with a higher percentage of inmates in private facilities had lower public prison costs per inmate, suggesting that competition drives efficiencies in state-run prisons.

10. On this point, I want to clarify that the views here are my own and those of the Rio Grande Foundation, not Right on Crime. According to Harvard Economist Jeffrey Miron who visited New Mexico earlier this year, completely legalizing and taxing marijuana would result in total savings/revenue increase of $52 million annually. $33 million of that would come from reduced expenditures. Were New Mexico to tax marijuana at a reasonable rate that maximized profits, it would collect approximately $19 million annually. In essence, we could pay the total operating and infrastructure costs of the RailRunner and have a few million left over for those balloon payments coming down the road.

Barring such an aggressive approach, it is certainly worth considering HB 465 as introduced by Rep. Kane and passed the House during the 2013 legislative session. The Fiscal Impact Report for the bill was inconclusive in terms of cost-savings, but they would seem to be significant.

Conclusion

I have laid out for you 10 points on criminal justice issues that could be considered by those of all political stripes when dealing with criminal justice issues.

Each of these proposals, if adopted, would:

• Reduce direct spending on the criminal justice system including everything from police to prisons;

• Increase potential taxes paid into the system;

• Reduce lost economic growth due to serious crime issues/inadequate public safety.

I hope you’ll carefully consider these ideas and consider them in a bi-partisan manner.

Categories
Energy and Environment Public Comments and Testimony

Testifying Before the Environmental Improvement Board on Haze Regulations

The Environmental Improvement Board has voted to adopt the less-stringent, less-costly haze restrictions on the Four Corners power plant. We applaud this move and hope the EPA is willing to accept the state-level regulations. Nonetheless, during the public testimony period on the issue, I made sure to add the Rio Grande Foundation’s voice in support of the more reasonable haze reduction measures.