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Economy Notable News Research Top Issues

Santa Fe’s fake “Guaranteed Minimum Income” experiment

According to the Albuquerque Journal, The City of Santa Fe is among about 25 U.S. cities that will be experimenting with universal basic income as part of a pilot program funded through the Mayors for a Guaranteed Income project.

The concept of a “Universal Basic Income” (UBI) that replaces traditional, top-down welfare programs with a government-provided “basic income” has been around for decades and even received support from free market adherents like Milton Friedman and Charles Murray.

Of course, while there are “UBI” supporters on the political right, the idea is to REPLACE other government welfare programs with a “basic” income. Santa Fe’s plan fails right away on that point. In fact, the COVID pandemic has been a bit of an experiment with “real world” UBI. As millions of Americans lost work, government stepped in with “stimuli” and supplemental unemployment payments that have gotten many people used to the idea of government cutting you a check regardless of whether you work or not.

A second big flaw in this “experiment” is that the money will come from voluntary sources, not taxpayers. Funding will come from Twitter co-founder Jack Dorsey, a group called Mayors for a Guaranteed Income project, and the Santa Fe Community Foundation. Having “free” money pay for a new welfare program may SEEM like what the government is doing now, but we are seeing the cost via inflation. Donor-driven UBI as in Santa Fe is just a nice gesture by donors.

Finally, the third major inherent issue is that the money is being targeted to help 100 people under age 30 who have children and are attending Santa Fe Community College.

Targeting certain groups to receive $400-$500 a month is a nice idea, but it’s obviously NOT “universal.”

The problem with UBI is that when it gets through the political process, it will not resemble the theory supported by Friedman and Murray. Among other problems will wind up supplementing, not a replacing other welfare programs.

 

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Economy Legislature Notable News Research Tax and Budget Taxes Top Issues

A brief Rio Grande Foundation Analysis of PFM report on New Mexico’s tax structure (Part 2)

Yesterday we said we’d get an analysis of the PFM report on New Mexico’s tax code. As indicated in that post, there is some good information in the report even though we disagree with many of its findings. One of the best points made is the following which is taken directly from the report:Too often the only “equity” discussion that takes place is over “progressive” or “regressive” taxation. The PFM report acknowledges that New Mexico’s gross receipts tax is unfair to competing businesses within the same industries. As the text above points out this bias assists bigger firms and penalizes smaller ones.

Overall, the analysts seemed concern about the gross receipts and specifically argued for NOT raising rates on that tax. Unfortunately, that’s where the restraint went out the window. The report FAILED to mention New Mexico’s heavy (existing) tax burden (7th-highest as a percent of income) and bloated and inefficient government, yet it included numerous MAJOR tax hikes and NO tax cuts. The tax hikes mentioned included:

  • Higher marginal rates at higher income levels.
  • Eliminating the capital gains personal income tax exemption.
  • Re-institute an estate tax.
  • Increase the gas tax rate.
  • Establish a structure for taxing recreational marijuana (we support the policy, but of course this is still more government revenue).
  • Broaden the gross receipts tax base to include food and, for lower income taxpayers while enacting a revenue neutral refundable personal income tax credit.
  • Continue to expand excise taxes to align with new forms of goods or services, such as vapor products.
  • Consider a carbon tax or so-called “market-based approaches.”

While there are elements of some of these ideas that could be part of a broad-based, revenue-neutral tax reform plan, including “shifting greater local funding responsibility to property taxes and away from gross receipts taxes” the report is WAY too focused on generating more money for the State and focuses far too little on spurring economic growth and job creation.

Finally, although the overall report is lacking, one additional bit of good news is that PFM specifically calls out film subsidies. Again, the full text is below directly from the report:

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Economy Local Government Notable News Research Top Issues

RGF President on Cato Institute Podcast: Economics of Shuttered Military Bases (as seen from Roswell/Walker AFB)

Closing military bases can disrupt economies, but those closures can present opportunities for local economics, as well. Paul Gessing of the Rio Grande Foundation details cases of military base closures in New Mexico. Our full policy paper on the issue discussed in this podcast can be found here.

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Economy Energy and Environment Notable News Research Top Issues

Rio Grande Foundation Policy Brief: On Balance Evidence Points to Appointed Public Regulation Commission

(Albuquerque, NM) – New Mexico’s Public Regulation Commission (PRC) has been at the center of a number of momentous and controversial issues (particularly the Energy Transition Act) in recent years. But bi-partisan momentum exists for reforming the powerful regulatory body and a Constitutional Amendment will be on this November’s ballot which will transform the PRC into a three member body appointed by the Gov.

Is this a good move? What evidence exists from other, similar regulatory agencies? In his new Issue Brief “Should the Governor Appoint PRC Commissioners?” which analyzes the issue and brings evidence from other states into the discussion, the Rio Grande Foundation’s Adjunct Scholar Kenneth Costello discusses the issue and offer his recommendations.

Ultimately, Costello concludes, “While it was not a “slam dunk,” the finding of this brief is that a three-member PRC appointed by the Governor, with input from the nominating committee, would be best for New Mexico.

His arguments in favor of the Constitutional Amendment include: the current Commission size of five commissioners is too many, moving to an appointed model would lead to better-qualified members on the Commission, and appointed commissions have a bigger pool of applicants than the relatively limited number who would run for office.

At the Rio Grande Foundation we expect to disagree regularly with the measures taken by the PRC (the decision to adopt a 100% “renewable” electricity portfolio is only the latest). However, those are often philosophical issues handed down by the Legislature for the PRC to more fully vet and implement.

Ultimately, given the choice between a five member elected PRC and a three member appointed body, the three member commission is the most sensible.

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Economy Notable News Research Top Issues

The Challenge and Potential of Base Closure as Viewed from Roswell, New Mexico

The Loss of a military base can be a traumatic experience for any community. Roswell experienced this phenomenon a little over 50 years ago when Walker AFB was shuttered.

In the new Rio Grande Foundation policy paper, Roswell and Walker AFB Closure: History, Analysis, and Lessons Learned,”authors Paul Gessing along with Raul Ayala and Colin McGlinchey study the Base Realignment and Closure (BRAC) process and how Walker AFB was closed (preceding the creation of the BRAC process by nearly two decades).

In addition to BRAC, the analysts look at how Walker AFB transitioned to the Roswell Air Center (RAC) and how that process has gone. They also compare that transition and its impact to BRAC processes in other rural areas. Finally, the report offers a few thoughts on the current situation at RAC as well as considerations for state and local policymakers and considers the impact that the dramatic slowdown in air travel due to COVID 19 is having on RAC and its prospects for success.

The study offers a robust overview of the history of base closures dating back to the closing of Walker AFB and how the Vietnam era spate of base closings ultimately led to the Base Realignment and Closure (BRAC) process that is in place today.

The authors acknowledge the pain and challenges that the loss of Walker AFB caused the Roswell community. Nonetheless they argue that the BRAC process is arguably the greatest federal spending reduction effort of all time. And, if the BRAC process had been around when Walker closed (and the relevant federal programs made available), it might have benefitted the Roswell community.

The completely unexpected COVID 19 crisis which has had a devastating toll on the global airline industry has actually boosted the viability of the Roswell Air Center and its repair/maintenance operations.

Ultimately, the authors conclude, rural areas like Roswell inherently face more challenges than urban ones in recovering from a base closure. Big urban areas have numerous advantages including a “critical mass” of businesses and population, a demand for “prime real estate,” and proximity to supply chains. That being said, changing the relatively business-unfriendly policies of the State of New Mexico would help communities like Roswell attract businesses that would put facilities like Walker AFB (now the Roswell Air Center) to more economical use in the long-term.

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Education Legislature Notable News Research Top Issues

New RGF brief debunks LFC report on pre-K: Why Expanding New Mexico State Pre-K Won’t Help the Children Who Need Help the Most

Today’s Albuquerque Journalcontained a report which discussed in glowing terms New Mexico’s expansion of pre-K programs. The reality is not nearly so compelling as Katharine Stevens argues in her new policy brief “Why Expanding New Mexico State Pre-K Won’t Help the Children Who Need Help the Most.”

The question of how to expand “early childhood” programs in New Mexico has long been one of the most contentious public policy issues in the state. Recently, the Legislative Finance Committee produced a new report “Prekindergarten Quality and Educational Outcomes,”The report makes multiple positive claims about the effectiveness of pre-K that Katharine Stevens addresses in her new policy brief, “Why Expanding New Mexico State Pre-K Won’t Help the Children Who Need Help the Most.”

In her brief, Stevens discusses several, glaring flaws in the LFC report.

  • Correlation vs. Causation:The LFC report assumes that improved results among students who participated in pre-K programs is the result of those programs. The reality is that participation is voluntary and motivated parents are the ones who will enroll their children in such programs and take the time to ensure they get to school every day. It is no surprise that parents who value the program the most have children who perform better than average.
  • Failure to ConsiderRigorous, Randomized Studies of Pre-K Programs: One of the serious challenges of social science is the relative lack of randomized control groups. There are, however, two important studies of pre-K that use randomized control groups (unlike the LFC or other New Mexico reports). One such study cited by Stevens is from Tennessee and another involved Head Start.

New Mexico has dramatically expanded pre-K spending over the last decade, which provides the opportunity to add to the evidence on pre-K’s effect on academic achievement. Stevens notes, however, that even as New Mexico has invested hundreds of millions of dollars into pre-K its test scores on the National Assessment of Educational Progress (NAEP) have remained stagnant.  

  • Finally, the LFC misuses the concept of Cost-Effectiveness. In public policy, Stevens writes, “cost effectiveness does not mean showing that the benefit of an intervention outweighs the cost. It means comparing various interventions to determine which ones yield the greatest benefit for resources spent to accomplish a particular policy goal.”

As Stevens concludes: “The fight for pre-K, however well intended, is the wrong fight for children who need our help the most. If New Mexico’s goal is to expand the school system and provide free pre- school to wealthier parents who otherwise have to pay for it, adding a pre-K grade to the public schools makes perfect sense. If the state’s goal is to improve the life chances of the most disadvantaged children, however, it is a deeply misguided approach.”

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Legislature Notable News Research Spaceport Top Issues

New Rio Grande Foundation Analysis: Myth vs. Fact on New Mexico Spaceport Budget

(Albuquerque, NM) – Immediately prior to the 2020 New Mexico legislative session, the consulting firm Moss Adams released a study claiming that Spaceport America began producing net economic and fiscal benefits for New Mexico as early as 2013.

Danny Seymour, a policy analyst at the Rio Grande Foundation, (the Foundation is a long-time critic of the decision by then-Gov. Bill Richardson to spend hundreds of millions of taxpayer dollars in such a speculative venture) immediately went to work analyzing the study and its findings. But Seymour didn’t stop at merely deconstructing the Moss Adams report.

In his new brief, “Lost in (Sub-Orbital) Space: Financial Reality vs. and Fantasy at New Mexico’s Spaceport Authority” Seymour considers the overall financial impact of the facility as well as what it has spent and what it has brought into the State.

Seymour’s analysis, using publicly-available information in the Moss Adams report and other public documents, shows that the Spaceport America has now cost New Mexico taxpayers in excess of $275 million. This number contrasts with the project’s “original” cost of $225 million, but in the meantime there have been operational expenses as well as significant expansions and improvements made to the facility at taxpayer expense.

In his analysis Seymour contrasts the Moss Adams claims of “break-even” with a broad calculation of how much the facility has attracted to the State. Seymour finds that the facility has brought in just under $55 million to New Mexico that would have otherwise not been spent here. Even this number should not be used to calculate profit and loss as only direct lease payments could really be counted in a profit and loss statement for the Spaceport.

“Ultimately,” notes Seymour, “to be considered economically successful (let alone profitable), New Mexico’s Spaceport must become the home base for Virgin Galactic’s frequent manned commercial launches as the project was originally sold to the people of New Mexico.”

In conclusion noted Seymour, “Major government construction projects like the Spaceport often suffer from the “sunk cost” problem. It is easy to sell elected officials on the idea that the next dollar spent will make the project a success. In reality the Spaceport is a cautionary example of a State government spending taxpayer money on an extremely speculative project for which it had no expertise.”

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Economy Legislature Notable News Research Tax and Budget Taxes Top Issues

Reason Foundation and Rio Grande Foundation Release Analysis of Task Force Plans for PERA Solvency

(Albuquerque) The Rio Grande Foundation applauds Gov. Lujan-Grisham for taking on the tricky, but important issue of pension reform. In collaboration with the Pension Integrity Project at Reason Foundation, a national free market think tank, the groups have released an analysis of the preliminary recommendations of the Governor’s Public Employees Retirement Association (PERA) Pension Solvency Task Force.

The analysis which is available on the Rio Grande Foundation’s website reviews the task force’s proposals—intended to improve PERA’s solvency by eliminating over $6 billion in unfunded liabilities over the next 25 years—from an actuarial and financial perspective and finds them a positive step overall, with room in some areas to enhance solvency even further.

Rio Grande Foundation president Paul Gessing said of the Task Force, “We commend the Gov. for taking on this important issue. With massive budget surpluses available, now is an opportune time to put New Mexico’s PERA and ERB systems on sound financial footing. That said, we believe that the rising costs and financial risks New Mexico taxpayers have experienced over the last two decades are unsustainable, and the Task Force’s recommendations leave some systemic challenges—namely funding policy, actuarial methods and assumptions—unaddressed.”

Gessing went on, saying “Despite the conflict on both sides of the aisle, pension reform can and should be a bi-partisan issue. Successful reforms have been enacted in “blue” Rhode Island, politically-competitive Michigan, and “red” Utah. In fact, our Four Corners neighbors Arizona, Utah, and Colorado have all enacted major bi-partisan pension reforms in recent years. There is no reason for New Mexico not to tackle this important problem head-on while the budget is flush.”

The Reason/Rio Grande Foundation analysis walks through specific proposed solutions to New Mexico’s PERA issues including employee contributions, Cost of Living Adjustments (COLA), the 90 percent earnings cap, negative cash flow, and improving actuarial assumptions. Each of these areas needs to be addressed as part of a successful PERA reform.

Concluded Gessing, this report is part of what will be a team effort by his Foundation and the Pension Integrity Project to provide technical assistance to policymakers, educate stakeholders, and contribute to the ongoing pension reform discussion in New Mexico. We are eager to make sure policymakers of all ideologies and walks of life have an understanding of what can and should be done to fix PERA.

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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 Education Local Government Notable News Research Tax and Budget Taxes Top Issues

Comparing APS spending with other regional districts

Whether it is the push to increase education spending at the state level or the plan to raise property taxes to fund more buildings and other capital outlay projects, the push for more spending is based on the misguided belief that the schools simply don’t have enough money.

As the Rio Grande Foundation found when we looked at overall budgets for the largest school districts in the region, the idea that New Mexico’s largest school district is starved for resources relative to higher-performing districts throughout the region is simply false.

Notably, since this data was compiled APS has seen its student population continue to decline and funding has crept higher. Based on the 2018-2019 budget which states the district’s student population is down to 81,755 and total spending is up to $1,350,000,000, per-pupil spending at APS is now $16,513 annually.