Computer chips have changed the world
Part Three of Three: Albuquerque tried to catch the wave from Silicon Valley, but those dreams have now faded
April 29, 2016
By Carroll Cagle
Beginning in the 1980s, New Mexico’s largest metropolitan area began having dreams of being a part of an emerging new frontier of high technology in America and the world.
Some in Albuquerque and Rio Rancho even dared to dream of a “Silicon Mesa,” an inland version of California’s emerging and exciting Silicon Valley -- the Santa Clara Valley just east of San Francisco.
It was there that companies producing integrated circuits on silicon wafers were springing up everywhere, expanding rapidly, and creating thousands of high-paying jobs for engineers and skilled production workers.
Not only were there clear economic development benefits of becoming a Silicon Mesa, it seemed cool to think that the Albuquerque metro area -- nestled in the Rio Grande Valley below the Sandia Mountains to the east – might be part of the wave of emerging technologies that were sweeping, and transforming, the world.
The prospect of being part of this wave was not only stimulating, but seemed a reasonable strategy as a way for metro Albuquerque to move beyond, or at least add to, its long-standing reliance on federal defense spending, tourism, serving as a regional center of commerce, and as a travel hub where east-west and north-south interstate highways intersected.
The anchor tenant for a possible Silicon Mesa vision arrived in 1980, when Intel Corporation -- the originator and reigning royalty of the brand-new, rapidly growing Silicon Valley – chose a long expanse of land on the west bluff overlooking the Rio Grande Valley as the site for a new manufacturing plant as part of its exhilarating pace of expansion.
Although said to be in Rio Rancho, the site actually was just outside the Rio Rancho line in Sandoval County, and benefitted from the issuance of industrial revenue bonds (IRBs) by that county – not government funding, but a way to make private financing more viable.
Intel as a company had originated only nine years earlier, in 1971, after its founders devised ways to jam 2,300 transistors (tiny electrical switches) onto a single piece of silicon the size of a fingernail.
The most recent Technology Quarterly of The Economist notes that on that pioneering computer chip, known as integrated circuits, or, more precisely, as microprocessors, “the gap between each transistor was 10,000 billionths of a meter in size, about as big as a red blood cell. The result was a miracle of miniaturization.”
The article then demonstrates how unbelievably fast the industry – also known commonly as the semiconductor industry because silicon is a “semi” conductor of electricity -- has grown since that first now-almost-quaint chip came off the assembly line:
“Perhaps 400 billion transistors were churned out in 2015 alone. That works out at about 13 trillion a second. At the same time, they have become unimaginably small: millions could fit on the full stop at the end of this sentence.”
Intel’s own relentless pace in getting more transistors onto the tiny chips is described in this additional section of the Technology Quarterly:
“A modern Intel processor contains around 1.75 billion transistors—half a million of them would fit on a single transistor from the (original 1971 chip) —and collectively they deliver about 400,000 times as much computing muscle.”
Intel in Rio Rancho grew rapidly as did the parent company, eventually employing 5,200 well-paid employees and thousands more as contractors.
Yet, Intel in Rio Rancho eventually came to be passed over for the installation of successive waves of cutting-edge production equipment capable of fabricating the newest, most powerful integrated circuits.
That is why the N.M. site has steadily seen its workforce reduced, and is vulnerable to eventual closure.
Nor is the faded grandeur of Intel-Rio Rancho the only indicator that those 1980s dreams of a Silicon Mesa have not proved durable.
Another computer chip giant, Philips Semiconductors, headquartered in The Netherlands, closed its plant along North I-25 in Albuquerque at the end of 2003. It had once employed 2,500.
A Japanese-owned company, Sumito Sitix Silicon, provided ultra-pure silicon wafers to the chip companies like Intel and Philips. Also located in north Albuquerque, it, too, is gone.
And, another high-tech giant of the time, Motorola, ultimately closed its manufacturing plant in north Albuquerque. At its peak, it employed 5,000. Other smaller companies drifted away, including Lasertechnics and Cardinal, a biotech company.
Newer, much-smaller entrepreneurial tech companies with promise now are beginning to sprout up in metro Albuquerque, but it seems an unrealistic prospect that their collective employee headcount will come near that of the multinationals that once thrived along the central Rio Grande.
Perilous state of Intel in New Mexico: Clues that could have been seen
Part Two of Three: N.M. plant weakened by failure to invest, and sweeping changes in global tech sector
April 27, 2016
By Carroll Cagle
As we reported in Part One earlier this week, the latest round of company-wide job cutbacks by Intel Corporation may impact the company’s big plant in Rio Rancho – even to the point that it might end up being shut down, even if that does not happen immediately.
Whether the drastic announcement out of corporate headquarters in Santa Clara, California, will mean a death sentence, painful deep job cuts, or only a glancing blow to Rio Rancho, there have been clues out there for some time that revealed vulnerabilities.
One clue is industry-wide and global, the other Rio Rancho-specific.
First, the big picture: The technology sector in general – not just the mighty semiconductor, or computer-chip, part of which Intel has long ruled – has been, and continues to be, shook up by two mighty waves of change.
One is the blatantly obvious shift from reliance on personal computers, or PC’s, by both individual consumers and companies, worldwide. The other is the rise of what is called “cloud computing.”
A headline in The Wall Street Journal about the seismic shifts summarizes it this way: “Mobile and Cloud Shifts Slam Tech’s Old Guard.” The article notes that Intel is only one of several once-reigning tech giants now responding to the shock waves of the shift toward mobile and the cloud, others including IBM, EMC, Microsoft and Hewlett-Packard.
All were too slow to grasp and respond to the phenomenal rise of mobile devices, as well “a slowdown in spending by companies that install and operate their own computing hardware, as technology spending shifts from corporate data centers to off-premise cloud services (where the servers are run by others, for a fee),” the newspaper states.
As reported by The Oregonian where Intel also has a big fabrication complex, is that “Intel is fighting a prolonged decline in the PC market, which accounts for more than 60 percent of its revenue.”
Silicon Valley’s must-read San Jose Mercury News observes that the new Intel cutbacks are emblematic of problems faced by “Silicon Valley's iconic but older tech giants (due to) the accelerating trend toward mobile devices and cloud computing. Intel's cuts are the deepest since another valley legend, Hewlett-Packard, shed tens of thousands of jobs in a restructuring last year.”
The Mercury News adds that “global PC shipments dropped 9.6 percent from the first quarter of 2015, research firm Gartner reported last week. It was the sixth straight quarter of PC shipment declines.”
The second clue is Rio Rancho-specific.
Those driving past the sprawling complex of massive buildings arrayed on the southeast edge of Rio Rancho might be forgiven for not having noticed any decline, other than fewer cars in the acres of parking lots.
The buildings still look the same. But the semiconductor industry is noted for its incessant replacing of manufacturing equipment inside the buildings. What was state-of-the-art only two or three years previous is typically swapped out with ever-newer, ever-more-costly equipment capable of making insanely smaller, faster integrated ciruits.
“This equipment typically makes up two-thirds of the cost of a new fab,” says one report.
And the costs keep piling up thereafter with the relentless upgrades.
But Intel in Rio Rancho, although upgraded in its first years of existence, missed out on later cycles, so it steadily fell behind, and now is producing lower-margin chips that have become commodity items. Thus it looks vulnerable to having the ax fall in terms of a total closure – even if not in this downsizing round -- as Santa Clara looks to consolidate its far-flung empire, looking for renewed profitability and relevance in the era of mobile devices and cloud computing.
In Part Three, we will describe the dramatic, rapid rise of computer chips in the world, and also show that the decline of Intel in Rio Rancho has been only part of a bet on giant tech companies that has not worked out too well for the Albuquerque metro area.
Is Intel a “dead plant walking?”
Part One of Three: The rise and gradual decline of N.M.’s crown jewel of high tech
April 25, 2016
By Carroll Cagle
Since Intel Corp. first opened a then-cutting-edge plant to manufacture integrated circuits – popularly known as computer chips – on a bluff overlooking the Rio Grande Valley in Rio Rancho in 1980, the ever-growing facility has been a crown jewel of New Mexico’s private-sector economy.
Since then, the original plant became scarcely discernible as massive buildings were continually added to what became a sprawling complex of buildings devoted to ever-more-sophisticated manufacturing.
In a seemingly relentless pattern, the complex grew, to feed he insatiable appetite of the fast-growing personal computer market, of which Intel’s chips most often were the tiny but powerful “brains.”
Intel-Rio Rancho eventually was bustling with more than 5,000 full-time employees, and thousands more contractors working as individuals or as employees of companies supplying specialized services.
Moreover, these people got paid quite handsomely -- usually far above the incomes to which most New Mexicans were accustomed
Many were engineers – both electrical and chemical engineers, as the chip-making process requires both disciplines. Other top-dollar experts oversaw the relentless improvements of installing new equipment, laying out and managing the manufacturing processes, and maintaining pathologically compulsive levels of quality control within the “fabs” –fabrication facilities, as the plants are known.
Even now, far below its peak, the economic impact Intel has on New Mexico annually is $832 million, according to Albuquerque Business First.
But now, Intel-Rio Rancho’s days may be numbered.
Last week, Intel CEO Brian Krzanich announced plansto cut 12,000 jobs, or about 11 percent of the tech giant’s 107,000-person workforce. Although no site-specific cutbacks were announced, Intel in Rio Rancho is frail and vulnerable, compared with a number of other fabs.
There were some unofficial indicators from within the company that theRio Rancho plant would not be closed – yet. But another round of layoffs there, coupled with the plant’s continually missing out on equipment upgrades to keep it relevant, mean it might be a “dead plant walking” – hanging on, and waiting till the inevitable end.
The warning signs have been slowly but steadily mounting, for years -- both for Intel itself and specifically for the N.M. plant.
One warning sign for the Rio Rancho site has been the relentless drip-drip-drip of job cutbacks.
Only ten years ago, the place was bustling with 5,200 employees and 2,500 or so contractors. But the headcount by 2013 already had shrunk to 3,300. Then in just the three years since then, it proceeded to shrink by an additional 42 percent -- down to only 1,900 when the global jobs cutback announcement came out of corporate HQ in Santa Clara, California, earlier this week.
Over time, there have been other ominous clues as to Rio Rancho’s gradual fall from grace, other than its steady reductions in headcount.
The clues – one big-picture relating to the entire tech sector, and one site-specific vis-à-vis Intel Rio Rancho – have been fairly obvious to semiconductor veterans, but easily missed by others, including New Mexico’s leaders.
In Part Two, we will reveal those clues about the changing industry – both globally and in Rio Rancho.
The worst hoarders are the federal and state governments
Laws and regulations pile up, year by year
April 20, 2016
By Carroll Cagle
Some television viewers get a morbid fascination in viewing programs depicting the pathologically unhealthy nature of “hoarders” -- people who cannot restrain themselves from collecting untold amounts of things and bringing them home.
These poor souls never remove anything while continually adding, so the stacks keep growing, and every nook and cranny ends up being crammed with things.
Too bad there are no TV programs depicting the worst hoarders of all – the state and federal governments.
Year after year, decade after decade, these governments pass new laws. Then the tentacles extend farther as numerous regulations are issued to make those laws much more specific.
"There is no one in the United States over the age of 18 who cannot be indicted for some federal crime," said John Baker, a retired Louisiana State University law professor who has also tried counting the number of new federal crimes created in recent years. "That is not an exaggeration,” Baker was quoted as saying in a 2011 Wall Street Journal article which tried unsuccessfully to figure out how many federal criminal laws were on the books.
The problem extends far beyond criminal laws. The proliferation of all manner of laws from Washington and all 50 state capitals, combined with the further exponential growth of regulations issued as a result of those laws makes individual hoarders seem almost healthy.
Worse, “regulators seldom examine the effects of existing rules to see whether they are working as intended,” reports the Administrative Law Review.
Just how many regulations are there, from the federal level alone? RealClearPolitics attempted to get a handle on the issue, observing that there were about 19,000 pages in the CFR in 1949; 23,000 in 1960; 71,000 in 1975. By the year 2000, here were 138,000, and 175,496 at the end of 2013.
“Pages were added at a rate of 2,490 a year during the Bush administration, 3,504 during each of the first five years of the Obama administration.” the report adds.
These entangling regulations are not only ludicrously numerous, they act as a drag on the economy. The same RealClearPolitics report cited a 2010 Small Business Administration study pegging the cost of complying with federal regulations as being $1.75 trillion a year, and a 2013 study by the Competitive Enterprise Institute as $1.9 trillion.
An attempt to figure out the regulatory costs to individual industries and sectors has been made by the National Association of Manufacturers.
“Were it not for the drag imposed by regulations adopted since 1949, GDP in 2011 would have been more than three times larger, estimate economists John Dawson and John Seater. Median household income would have soared,” says the RealClearPolitics article
The index alone of the Code of Federal Regulation is 1,170 pages.
There do not seem to be any reports on the number of laws and regulations at the state level, but taking a look at the number of state laws enacted and signed just this year, and the number of state-level regulations promulgated just last year give an idea of the magnitude of hoarding in Santa Fe.
Time for an intervention followed by some industrious house cleaning?
Washington’s habit of using plastic to pay for overspending could squeeze the flow of federal $$$ into N.M.
Part Two: The $19 trillion national debt is becoming impossible to ignore
April 12, 2016
By Carroll Cagle
When average citizens run up a big credit card debt, they can easily expect to be on the receiving end of mail and increasingly nasty phone calls reminding them that repayment is expected — soon.
Individual debt may be hard to ignore, but the debt the federal government in is something that those same ordinary citizens often do not give much thought to.
Worse, the national debt Washington — even though now at a towering $19 trillion – also customarily causes those who could do something about it to avert their gaze.
But the increasingly worrisome size of the debt can be expected to force long-overdue steps to begin to bring it to more reasonable proportions.
If so, Washington’s inability to keep spending so freely could bring down some serious hurt on the New Mexico economy — the second part of a double whammy, along with the pain already being caused by the current weakness in the state’s oil and gas sector.
Although “the national debt” seems like a vague concept only economists and budget committee members need to think about and deal with, the debt is quite real, continues to grow, and it affects everyday people
Just how big is our national debt? The number that most Americans are familiar with is $19 trillion, which is the “gross debt.” But there is also another concept called the “debt held by the public,” which is mostly used by economists and government agencies like the Congressional Budget Office (CBO).
That number is around $13.9 trillion. Here’s the difference: The gross debt is a measure of all outstanding bonds, including money the federal government owes to other parts of the federal government, such as the Social Security Trust Fund, for example.
But if we exclude what the federal government owes to itself, we get the debt held by the public, which is about $5 trillion lower than the gross debt.
Nevertheless, the bottom line is that our national debt is large and growing unsustainably. According to CBO projections, our debt held by the public, which is about 75 percent of our economy (the gross domestic product, or GDP), will grow to about 86 percent by 2026 – more than doubling the 50-year historical average – and will exceed the size of our economy within the next 20 years.
The consequences of a debt this large are far from abstract. They are real. High levels of debt will continue to harm our standard of living and retirement security – and the massive influx of federal funds into New Mexico that we mentioned in Part One of this report.
Large amounts of debt mean higher interest rates on everything from credit card payments to student loans and mortgages. According to analysis by the nonpartisan Campaign to Fix the Debt, a typical American will lose $250,000 in income over a 40-year career due to the high national debt.
Not to mention that fact that every dollar we spend to finance our debt is a dollar not available to spend on many things including the federal facilities in New Mexico and the social programs which cause our state to be near the top of a list of the 50 states in terms of dependence on federal funding.
Some free-spending elected officials might like to say that a debt that is 75 percent of the GDP is not so worrisome. Yet, a benchmark of debt at 60 percent of GDP is internationally recognized by organizations such as the European Union and the International Monetary Fund.
The grievous effects of too much debt are obvious to anyone by looking at the woes from previously free-spending, poorly managed governments in Europe. Among the worst, reports The Economist, “are Italy and Greece, the EU member states with the heaviest public debts (133 percent and 179 percent of GDP respectively).” Any halfway-informed American knows now bad the economies are there, and how hard life is for the citizens of those countries.
Thoughtful New Mexicans might want to ponder all this, and ask that federal-level officials and candidates offer plans, rather than continue to ignoring the problem. Putting off solutions can lead to drastic results and the kind of pain being felt in Italy, Greece and elsewhere. The sooner corrective steps are taken, the more manageable the problems are.
N.M. economy faces perils not just from oil and gas slowdown – but from over-reliance on federal funding
Part One: Both defense and social programs account for the influx
April 6, 2016
By Carroll Cagle
What’s already happening is that the New Mexico economy is experiencing problems due to the downturn in one of its biggest sectors, oil and gas. But there is another looming cloud on the horizon, too.
The drop in oil prices is causing harm in two ways: One is to the companies and employees in the drilling business, primarily in southeastern New Mexico. The other is to the state government budget, which is heavily dependent on oil and gas taxes. Thus schools, colleges, public safety, public health and all manner of services are feeling the squeeze.
As if the oil and gas downturn were not problem enough, New Mexico has reason to worry about problems from another direction — the serious prospect of reductions in the flow of federal dollars into the state.
Both oil and gas and the federal government have long been cash cows that the state relied on.
In fact, New Mexico is more federally dependent than almost every state. A recently released report shows New Mexico is the second most dependent, behind Mississippi. Last year N.M. was THE most dependent.
The report, by the financial website Wallethub, compares the total amount of taxes paid into the IRS from N.M. with the flow of federal funds back into the state to operate federal facilities and institutions, to pay benefits to individuals via Social Security and medical providers via Medicare and Medicaid.
The Albuquerque Journal’s report last year when N.M. was ranked the most federally dependent among the 50 states highlights the two main reasons why the state get such a high ranking:
One reason is the long-familiar presence of big-budget federal institutions that require hundreds of millions of dollars each year. These include Los Alamos and Sandia National Laboratories, White Sands Missile Range, and Kirtland, Holloman and Cannon Air Force Bases, what Vanderbilt University professor David C. Parsley called “areas that are centers of federal employment.” Parsley added: “This last creates incentives for our congressional legislators to try and direct federal spending to their states.”
The massive bases with thousands of federal employees and dispersing millions of dollars in contracts to companies are obvious, visible centers of federal spending, and success in protecting and expanding that funding has indeed been a priority for members of congress for decades.
The second way federal funds flow to New Mexico in abundance is not so obvious because the money does not go to sprawling bases, but instead often goes in smaller amounts — but the aggregate totals also are massive.
The Vanderbilt professor said N.M. is a natural for social-category federal spending because it is an “area with high poverty and elderly.” The Albuquerque Journal report puts it this way: “New Mexico looks like a sweet spot for federal spending on social programs like Medicare, Medicaid and Social Security. At 21.9 percent, New Mexico had the second-highest poverty rate in the country in 2013.”
The recent expansion of Medicaid in New Mexico (part of a state deal with Obamacare) is both an indicator of the state’s poor economy, and a cause of the increased federal spending in the social welfare category. The number of Medicaid beneficiaries is drawing close to one-half the state’s total 2 million population, and total Medicaid spending in 2017 predicted to be $6 billion, mostly federal.
In Part Two, we will examine how the federal dollars into New Mexico, for all purposes, might be facing increasing jeopardy because of pressures from the growing federal debt.
Enough about Trump – who votes for him, and why?
Part Two of Two: Is a class war going on?
March 18, 2016
By Carroll Cagle
In this unsettled election year, new forces are emerging. In Part One we noted that Trump and Sanders supporters – starkly different in many ways – have surprising commonality in terms of political policy beliefs.
In this posting, we offer some observations that the riptides so hard for establishment political leaders and journalists to understand arise not from pent-up conservative political ideologies, but rather from resentment about the “ruling class” or “establishment” – whether in Wall Street or Washington or both.
The big swath of America that listens to radio commentator Rush Limbaugh recently heard this as a reason for the rising movements against the ruling elites: “… the arrogant condescension that the ruling class has for average, ordinary Americans.”
Limbaugh adds that “people who think this is a personality cult (around Trump) also misunderstand what's going on,” and then summarizes:
“The upper class wants nothing to do with anybody else. They mock, openly make fun of the people who make this country work. And the people who make this country work are aware of it and know it. This is not a phase; this is not temporary. This is the end of patience, the end of faith. People in the middle class have finally figured out that the so-called betters are screwing everything up.”
A similar view of what is going on recently was expressed by Peggy Noonan, a former speechwriter for Ronald Reagan, who put forth a far different – and more sympathetic – view of Trump supporters than that of many of her colleagues at The Wall Street Journal:
“There are the protected and the unprotected. The protected make public policy. The unprotected live in it. The unprotected are starting to push back, powerfully.
“The protected are the accomplished, the secure, the successful—those who have power or access to it. They are protected from much of the roughness of the world. More to the point, they are protected from the world they have created. Again, they make public policy and have for some time.
“I want to call them the elite to load the rhetorical dice, but let’s stick with the protected.
“They are figures in government, politics and media. They live in nice neighborhoods, safe ones. Their families function, their kids go to good schools, they’ve got some money. All of these things tend to isolate them, or provide buffers
“Because they are protected they feel they can do pretty much anything, impose any reality. They’re insulated from many of the effects of their own decisions.
“You see the dynamic in many spheres. In Hollywood, where they make our rough culture, they are careful to protect their own children from its ill effects. In places with failing schools, they choose not to help them through the school liberation movement—charter schools, choice, etc.—because they fear to go up against the most reactionary professional group in America, the teachers unions. They let the public schools flounder. But their children go to the best private schools.
“This is a terrible feature of our age—that we are governed by protected people who don’t seem to care that much about their unprotected fellow citizens.”
Enough about Trump – who votes for him, and why?
Part One of Two: Don’t think of them as conservatives
March 17, 2016
By Carroll Cagle
The media coverage of Donald Trump’s campaign has been lavish since its launch less than a year ago – far more than for any other presidential candidate.
But what is known about those who have voted for Trump, or want to when the primaries cycle around to their states?
Much less is known about his supporters than about The Donald himself. Oftentimes there is are shorthand references to these voters being “angry” and, in condescending putdowns, dismissed as blue collar workers without college degrees – as if those were disqualifiers.
That such shallow descriptors suffice reveal that the political and journalistic mavens perched high still don’t “get” the tidal wave sweeping the nation. The Trump voters see these reactions of mystified condescension by the higher-ups as proof that they have been, and continue to be, ignored and treated with condescension.
In this analysis we focus on the Trump supporters, although there are similarities with the millions who also support other insurgents like Republican Ted Cruz and democratic-socialist Bernie Sanders.
Although too scarce, there has been some thoughtful commentary about Trump Nation: David Frum in The Atlantic dispenses with the notion that Trump supporters are conservatives:
“They aren’t necessarily superconservative. They often don’t think in ideological terms at all. But they do strongly feel that life in this country used to be better for people like them—and they want that older country back.”
Looking back at the origins of the Tea Party movement in 2008 and 2009, Frum quotes a study led by a Harvard political scientist as finding: “Tea Partiers judge entitlement programs not in terms of abstract free-market orthodoxy, but according to the
perceived deservingness of recipients. The distinction between ‘workers’ and ‘people who don’t work’ is fundamental to Tea Party ideology.”
In fact, Trump voters have beliefs in common with the both unyielding Cruz-supporting conservatives and the young liberals flocking to the socialist themes of Bernie Sanders: “White Middle Americans express heavy mistrust of every institution in American society: not only government, but corporations, unions, even the political party they typically vote for—the Republican Party of Romney, Ryan, and McConnell, which they despise as a sad crew of weaklings and sellouts.”
While Cruz incessantly describes D.C. power-brokers as the “Washington cartel,” Sanders scares his followers around the “feel the Bern” campfire with stories of Wall Street capitalist greed – the Trump battalions are irritated at both the public and private-sector upper crusts, and much else besides.
Here’s support of that assertion from Frum’s Atlantic article: “A substantial minority of Republicans—almost 30 percent—said they would welcome ‘heavy’ taxes on the wealthy, according to Gallup. Trump Republicans were not ideologically militant. Just 13 percent said they were very conservative; 19 percent described themselves as moderate.”
Next: Is a class war going on?
State government is in the middle of a squeeze play
March 9, 2016
By Carroll Cagle
The needs keep growing – and their price tags too.
Yet, the income is slowing – just when it is needed most.
This squeeze play is occurring in state government.
Some may enjoy the idea that “state bureaucrats” and “politicians” are finally learning how many households live.
Even for those with such a temperament, a problem can arise because state government actually provides a vast array of services and programs – some adored by big-spending social progressives, some by hard-nosed conservatives, and some by almost everyone.
Schools and universities typically consume the largest proportion of state government spending. Although often expanded, or at least protected, this year the universities saw their budget amounts cut back some, due to the squeeze play we mentioned.
One line-item that is getting more money is that for salaries for prison guards and other corrections staff. This seems to be coming just barely in time – and maybe too late. The prisons are crowded; the jobs are highly stressful and dangerous. Here is a summary of the problem from the Albuquerque Journal:
“New Mexico (prisons are) at 98 percent of capacity. At the same time, one in three officer jobs is open. In the two most understaffed prisons, half the jobs are open. With starting pay of $13.65 an hour and little chance of a raise, most New Mexico officers leave within three years.”
Far bigger bucks may be found in the rapidly growing Medicaid program, whose recipient ranks have grown by 260,000 and with total spending in 2017 predicted to be $6 billion.
A well-researched article in The New Mexican provides dramatic context:
“That is twice as much as the state spends on all its public education services, including colleges and universities, and almost as much as the $6.2 billion general fund budget for all government services. But only a portion of Medicaid money comes from state coffers. The federal government contributes about 79 cents of every dollar spent on primary and specialty care, hospital services, counseling, treatment, case management, enrollment, outreach and administration.
“Still, as the Medicaid rolls have swelled to 850,000 people in New Mexico (out of a total population of only 2 million), New Mexico has to spend more of its own money just to sustain the same level of services.”
An advisory panel is grappling for ways to deal with the Medicaid cash crunch in the fiscal year that begins July 1. The Human Services Department is concerned it cannot cut enough, quickly enough – but the staff director of the Legislative Finance Committee warns against hoping that the 2017 legislative session will have any “new money” to throw at the problem.
The biggest unknown facing Santa Fe – as well as the world’s economy – is how long oil prices will stay low. They have now fallen by more than two-thirds since the middle of 2014. The longer they stay low, the less tax money for state government.
Not long ago, it seemed that the OPEC countries plus Russia and Venezuela might be able to limit production and thus get oil back up to $50-$60 barrel.
While once that would’ve almost guaranteed the desired higher prices -- not now, as MSN notes:
“Excluding Iraq and Iran (would) limit the freeze’s effectiveness, as both countries have been racing to increase their output.
“An Iranian official (said) the country would consider oil-production caps only after the country’s output rises back to the levels before the West imposed sanctions over its nuclear program. Now that those sanctions have been lifted, Iran is trying to increase production by as much as 1 million barrels a day this year.
“Iran may increase oil production by another 500,000 barrels to about 3.9 million barrels per day by August…”
Thus it is that world affairs and the global economy affect things like prison guards and Medicaid recipients in far-away New Mexico.
Out on the High Wire: Americans and New Mexicans step out into the unknown
March 1, 2016
By Carroll Cagle
Sometimes, American presidential elections are a ho-hum affair, sometimes a regrettable choice between the lesser of two evils.
Things are much more intense this year, and downright scary for some voters.
As big chunks of delegates to the Democratic and Republican conventions are being chosen today, Super Tuesday, Americans head farther out onto high wires above the chasm below – and New Mexicans are right there with them.
It is not too far-fetched to compare this year’s presidential contest with those high-wire acts that rivet attention and strike fear into the hearts of the observers.
Everyone has heard of the Flying Wallendas, of whom the most extreme daredevil is Nik Wallenda, described by Wikipedia as “the first aerialist to walk over the Little Colorado River Gorge at the Grand Canyon. He used a 2-inch wire and made the journey without a harness or safety net. The canyon is 1,400 feet wide and 1,500 feet deep.”
Voters this year are asked to choose among several high wires, following various candidates already moving out ahead of them.
One option Democrats have is to embark on the wire featuring democratic socialist Bernie Sanders, already attracting throngs of enthusiastic young liberals who embrace the idea of whacking Wall Street moguls while getting a free college education for themselves. Others hang back, fearful a Bernie White House would lead the country into even deeper debt than the $19 trillion the U.S. already owes.
Or, the Democrats could choose Hillary Clinton, a familiar face with many items on her resume.
Yet, numerous polls show she does not inspire trust or confidence among many voters. That includes the “Feel the Bern” types. The New Mexican quotes Paul Gibson, coordinator of the Santa Fe for Bernie organization this way: “‘Frankly, I think it’s a big mistake to commit to Clinton at this point.’ Gibson said he’s worried about the FBI investigation into Clinton’s use of a private email server during her tenure as secretary of state. And he said fears that the enthusiasm from younger voters and other newcomers Sanders has attracted to the political process will be squandered if Clinton is the nominee.” Gibson did not even mention the Benghazi attacks nor the connection between Clinton’s State Department and the Clinton Foundation.
Yet, all four Democratic members of congress from New Mexico plus a majority of the state’s “super delegates” already have headed out onto that wire behind Hillary.
Some political seers think Sanders will fare so poorly in the multiple primary states today that he will have to drop out, leaving Democrats who have not stepped out onto either the Clinton or Sanders wires to choose among Clinton, staying on terra firma, or – dare it be said? -- going for the volatile billionaire Donald Trump, if he, like Clinton, virtually nails down the nomination today.
New Mexico’s Republican governor, Susana Martinez, has not publicly stated whom she prefers. She might be glad that she is now the chair of the national Republican Governors Association (RGA) and could portray that as a reason to not tilt either way.
It is complicated, because New Jersey Gov. Chris Christie, who once held the RGA chairmanship himself, and with whom Martinez has had a friendly political relationship, has now shocked everyone by endorsing Trump. And, Trump adversary Marco Rubio not long ago floated the name of the N.M. governor as a potential V.P. pick if he gets the nomination.
Some think Trump is engaged in a hostile takeover of the Republican party; others see his effort as a leveraged buyout because he is shrewdly advantaging the fact that the many non-Trumps prevented a majority vote against him.
Yet others think Trump is a basically an independent running under the flag of the Republican party, already planning beyond his nomination by the G.O.P. to attract anti-establishment Democrats and independents who cannot tolerate the idea of either a Clinton or Sanders administration.
This is all playing out in an environment where large numbers of voters are aghast that Trump has gotten this far and could end up in the White House. The Economist, an international magazine from the U.K. sums up Trump this way: “His enemies say he inherited a fortune and built upon it an empire of defaults and exaggeration. To others Mr Trump is a mere celebrity playing a dangerous political game: a cross between Mussolini and the Kardashian clan.”
The magazine adds he is known for “explosive outbursts and unpredictable behavior. ‘He’s not stable. He has a nuclear temper, says a former top executive at the Trump organization.”
Another leading business publication, The Wall Street Journal, might at first glance be expected to favor a billionaire from New York, but far from it.
One of the newspaper’s Washington reporters, Kimberley Strassel, writes that the legion of ardent Trump supporters have it all wrong.
“The Nevada entrance polls show the billionaire won voters who are angry with the federal government, who want an ‘outsider’ in the office and who want ‘change.’ They don’t care about policies. They want someone to ‘stick it to the man.’
“And therein lies Mr. Trump’s vulnerability. Because, you see, Donald Trump is the man. An outsider to the elite society that Washington inhabits? An avenging angel of a faltering working class? Laugh. Out. Loud. This is the man who was born to a silver spoon, who self-selected a life strictly in the company of the rich and powerful, and who built a fortune by using his connections and sticking it to the little guy.
“Of all the Republicans on the stage, he is the only insider.”
If, after Super Tuesday today, the November contest looks as if it will be between Trump and Clinton, many will want to think long and hard about which high wire they want to venture out onto – or whether they will stay on the solid ground, peering apprehensively outward to the spectacle on the high wires through tiny gaps in hands clasped over their eyes.
What 2016 Legislature Did (and Didn’t) Do
Part Two of Two – Issues aside from the budget
February 24, 2016
By Carroll Cagle
Just as compromise among otherwise-feuding parties resulted in a budget deal this session, so also was the case in other issues, some of which we highlight here:
Business and economic development
Some astute business people might feel it is just as well that a crimped budget, although painful for legislators with big spending appetites, kept such expansionist notions in check this year.
It being a 30-day “short” session that is supposed to focus on the budget, there were not nearly as many business bills as there typically are in the “long” 60-day session, which will crop up again next January.
The appropriations process, itself, will result in potential business for some in the construction industry. Lawmakers approved $166 million for new building projects and upgrades and $186 million for infrastructure projects.
A chance to invest in overdue highway improvements via a phased-in gasoline tax increase never got off first base, however.
Otherwise on the business front, lawmakers finally improved a bad situation, although they failed to fix it outright. Many business people have been really hot under the collar because the workers’ compensation system allowed benefit payments to workers who were injured on the job even if they were stoned or drunk. Although this session did not flat outlaw the inexplicable benefit, it did order a reduction in benefits if alcohol or drugs contributed to injury or death.
Right-to-work failed again – of course, in the killing fields of the state senate, and specifically the public affairs committee.
There was a bill that would be listed under “education” but many business people have been advocating for its passage, due to their problems in finding young people well-prepared for jobs. This one was stopped for the sixth year in a row: a measure the governor and her education secretary have been tirelessly advocating that would have ended the so-called practice of “social promotion,” whereby third-graders who cannot pass a reading test can still get moved on up to the fourth grade for “social” reasons.
Law and order
Due to an ungodly string of murders (including two police officers), carjackings, and other high-profile crazy criminal acts, there was a lot of desire on the part of some legislators to take strong remedial action. The public certainly seems to be hollering for changes.
Some reforms did get through – but not all.
One that did not also inexplicably got little media attention was an effort to clear up a massive, years’ long backlog of rape kits in the state laboratory.
Two legislators proposed spending $1.2 million, two others proposed $2 million, and one suggested a study of the problem. None of the measures went anywhere. It is hard to imagine why a crime as brutal and heinous as rape would be passed up when it came to funding a simple way to bring justice to a good many of the victims, some of whom have been waiting many years for the simple but critical step of rape-kit DNA testing to be done.
What did pass, though, was a bill allowing rape victims to get permanent restraining orders against the offenders.
The legislators also failed to enact a law allowing local governments to impose curfews for youths under age 16 – despite the fact that a growing number of them have been running wild and committing criminal acts, including murder, with abandon.
Nor did the lawmakers okay a so-called “three strikes and you’re out” bill, although there has been a public outcry about the tide of violent crimes committed by offenders who seem to cycle in and out of prison rapidly, to the detriment of public safety. Senate Majority Leader Michael Sanchez, a criminal defense attorney himself, blocked this, saying “mass incarceration” plans have been “discredited.”
Even so, the session okayed a proposed constitutional amendment that will allow judges in some cases to hold those charged with violent crime without bail. Even this proposed amendment – which the voters will have a say on in November -- was a compromise, however, because it also purports to let out some who have been charged without bail at all, if they are broke.
Driver’s license reform
As everyone knows, a compromise resulted in the state finally getting its act together to meet compliance with the federal REAL I.D. Act. Outright repeal of a 2003 state law allowing illegal/undocumented immigrants from getting N.M. licenses – as ardently pushed for by Governor Susana Martinez – never made it past the legislature five different times. This time, when the federal hammer was coming down, a compromise of sorts was enacted.
On the one hand, it will require all new undocumented immigrants to submit to fingerprinting -- but not those who already hold licenses. And, the measure also creates an awkward two-tier license option whereby even long-time residents have the option of joining undocumented immigrants in getting a driver’s permit card that is not REAL I.D. compliant.
This could cause many people a lot of consternation on down the road when they realize too late that they really do need a REAL I.D.-compliant license to board an airline flight, or to enter some federal facility such as the big employers at White Sands, Sandia, Los Alamos and the three air force bases.
What 2016 Legislature Did (and Didn’t) Do
Part One of Two – The budget
February 22, 2016
By Carroll Cagle
Legislators from all around the state have left Santa Fe, concluding a 30-day session marked by a newfound ability to compromise, among themselves and with the governor.
The two biggest examples of compromise were the appropriations bill – the main reason for the even-numbered-year “budget sessions” like this one – and a long-overdue measure that everyone is hoping will get New Mexico’s driver’s license system into compliance with the federal READ I.D. Act.
While these two high-profile measures did indeed come about because of compromise, it is not as though the Roundhouse suddenly was overcome with an Era of Good Feelings.
Instead, both the general appropriation bill and the REAL I.D. Act fix were the result of intense, irresistible pressure from the outside.
In the case of the REAL I.D. Act, the U.S. Department of Homeland Security made it clear to New Mexico that it was fed up with years of delay, and began clamping down – hard, rejecting N.M. driver’s licenses as acceptable I.D. at some key installations, and warning that before too long New Mexicans would not even be able to board airlines with the current licenses as I.D.
The general appropriations act, as big as it is at more than $6 billion, also was the product of outside pressure that could not be ignored. The spending bill was cut back sharply from earlier plans due to sharply falling tax revenues from New Mexico’s oil and gas sector, a usually reliable source of seemingly endless cash flowing into the state treasury.
Here are some basics on the appropriations act and related budget measures. In our next newsletter we will report on non-budget measures that did or did not pass.
The Albuquerque Journal neatly summarizes the financial doings this way:
“PASSED:$6.2 billion budget shaving overall spending, but including increases for public schools, Medicaid, prison guards and state police officers; $166 million for state and local capital improvements funded largely through severance tax bonds; $186 million for infrastructure projects funded by general obligation bonds; transferring $130 million from various government accounts to shore up budget; allowing use of lodger’s tax to underwrite airline service to communities.”
Aside from those basics, there is the context of the lagging state economy. Here is how an analysis in The New Mexican newspaper of Santa Fe puts it:
“The budget problems that state legislators confronted during the 2016 session again show the fragility of a New Mexico economy that is largely dependent on oil and (the federal) government.”
The New Mexican observes that the legislature’s most powerful budgeteer, Senate Finance Committee Chair John Arthur Smith of Deming, had been sounding warnings about impending shortfalls for months. Many probably preferred to studiously ignore the bad news. But as the session began, and as state revenue forecasts began slumping along with the price of oil, Smith’s committee began cutting $125 million in spending to maintain balanced budgets for this year and next.
“But even that may not be enough,” the newspaper reported. “Legislators and Gov. Susana Martinez crafted the $6.2 billion state budget based on oil selling for $38 a barrel, a mark that would help meet revenue projections. On Friday, oil in the regional market was at $29.65 a barrel.
“To compensate, lawmakers have tapped into reserves and used almost $130 million from dozens of unspent accounts and reserves, sending contingency funds to the lowest levels since 2009.”
Next: Part Two will analyze non-budgetary matters.
Crunch time in Santa Fe: Tax revenue dries up and is forcing some hard, hard, decisions
February 15, 2016
By Carroll Cagle
Oh for the good old days when tax revenues flowed easily and in abundance into the state government general fund.
Funding for state agencies and the public schools seemed assured, and the state even agreed to a large-scale expansion of the Medicaid program under the assumption that revenues would not just stay stable, but increase.
That was then.
Legislators are now staring down a deficit that the top State Senate finance chairman, John Arthur Smith, a Deming Democrat, says might be as big as $100 million.
Whether to cut spending or raise taxes, or a bit of both, are the big questions — and the answers must come by noon this Thursday, February 18. The New Mexico Constitution requires that be the end time of the 30-day session. It also requires that the budget be balanced; deficit spending is not allowed (unlike the situation in Washington where the federal government’s spending appetites have resulted in a cumulative debt of $19 trillion).
Neither Republicans nor Democrats, neither the legislative or executive branches, seem keen on major spending cuts. But increasing taxes is an option resisted by Republican Gov. Susana Martinez and the Republican-controlled House.
The New Mexican newspaper’s state capital reporter provides some sobering details:
“Just eight months ago, the general fund reserves stood at more than $700 million, almost 12 percent of spending.
“Reserves since have been spent down and are estimated to be only 6 percent by the end of June. If revenues don’t stabilize, the House budget bill would give the governor authority to take another $63 million without calling lawmakers back for a special session. That would essentially reset reserves at 4 percent to 5 percent of the operating fund, half of what Martinez herself has said is desirable.”
Senator Smith, the chairman of the Senate Finance Committee and acknowledged as the most knowledgeable and powerful “money guy” in the legislature, “doesn’t think the reserves alone will be sufficient without another $100 million in either spending reductions or one-time revenues from unspent fund balances that can be transferred into day-to-day operations.”
Another report in The New Mexican says: “With state government revenue forecasts sliding by the week, state Rep. Luciano “Lucky” Varela offered a bill to eliminate tax breaks for 43 businesses and groups, including railroads, airlines, lottery retailers and racetrack jockeys. But the Republican-controlled committee defeated his bill Thursday on a 7-4 vote, saying a more comprehensive review of tax exemptions is necessary.”
Smith himself had introduced one tax-increase measure but at this writing it had gone nowhere even in the senate. The bill seeks to take advantage of current extra-low prices of gasoline at the pump to increase the state road tax gradually, beginning at 17 cents a gallon and going up in the year 2025 to 27 cents. Smith said upon introduction that the state’s highway infrastructure has declined and now is the time to begin overdue improvements.
Another portion of the Santa Fe newspaper’s report starkly shows how the N.M. economy’s weakness is affecting state government spending options:
“Revenue tracking continues to show money coming into the state has fallen off a cliff compared with a year ago.
“The total recurring revenue collected for November is down 25 percent from 2014, while gross receipts tax receipts from July through November are down 11 percent. The total dollars that flow into the State Land Office for the fiscal year through January are down 32 percent from a year ago.
“State Treasurer Tim Eichenberg reported that cash on hand for the general fund is down 17.5 percent from a year ago.”
How John Arthur Smith sees the big picture should reveal just how hard the decisions are going to be between now and Thursday noon:
“We’re in a free fall right now with state revenues. This is not something I’ve ever experienced, and I’ve been here 28 years.”
Mystery in Santa Fe: The Case of the Missing Fingerprints
February 10, 2016
By Carroll Cagle
What happened to the fingerprints – and why?
The possibility that the current legislature will enact a plan dealing with the matter of driver’s licenses for non-citizen immigrants now hinges on whether fingerprinting will be required, or not.
A bill requiring fingerprinting for those non-citizens (variously called illegal immigrants or undocumented immigrants) passed the Republican-controlled state house of representatives.
But when the bill emerged from its first hearing in the Democrat-controlled state senate, the fingerprinting requirement had disappeared.
We take you behind the scenes to help understand why.
The federal government in 2005 passed the REAL I.D. Act as an anti-terrorism measure (See more on this below). It requires that all states upgrade their driver’s license procedures as protection against terrorists using previously-lax systems to get a license, which could then be used to board airline flights or enter federal facilities and thus cause death and destruction.
Immediately upon passage, that federal law was poised to collide with a state law enacted in New Mexico only two years prior, in 2003, allowing illegal or undocumented immigrants to get N.M. driver’s licenses.
When this legislative session began, it seemed that the state senate might finally agree to a house measure that would make New Mexico REAL I.D. compliant.
When the senate stripped the fingerprinting requirement for the undocumented, the reason likely was not the fingerprinting, per se – but that the fingerprints could, and would, be checked on national databases to find out if the person were wanted anywhere, including some other state, for crimes.
In the legislature, a number of key power players have day jobs as lawyers defending people charged with crimes – otherwise known as criminal defense attorneys. The most notable is Michael Sanchez of Belen, the most powerful senator as senate majority leader.
The fact that criminal records might turn up is never mentioned as a reason for opposing the fingerprinting requirement – only the indignities of requiring such a thing.
Going even deeper into the case of the disappearing fingerprint requirement, consider this: the original house version in N.M. requiring fingerprinting was borrowed directly from how Utah does it.
Applicants in Utah who are wanted in other states have their names and fingerprints referred to those other states. Recently, the FBI stopped cooperating with Utah, claiming that fingerprint references couldn’t be applied to driver’s license applicants.
This is an entirely new policy, as the FBI has had working agreements with most state law enforcement agencies across the country – and previously did not ask the source of the referred fingerprint checks.
The FBI is part of the Justice Department, where the new attorney general is on board with the Obama Administration’s executive orders shielding millions of immigrants from deportation. These executive orders have been challenged in federal court as an unconstitutional abuse of power, and have experienced setbacks as the challenges work their way through the courts.
Aside from the state senate effort to delete the fingerprinting requirement, the senate version also allows any New Mexican – including lifelong U.S. citizens – to “opt –out” of the proof-of-identity requirements imposed by the federal REAL I.D. Act.
This opt-out provision is likely to cause many legal residents to foolishly choose a non-REAL I.D.-compliant driver’s license because it has a lower requirement for proof of identity, only to later discover they can’t board an airplane in 2020.
Once again, to provide the relevant background:
The federal REAL I.D. Act of 2005 was enacted in response to a recommendation made by the 9/11 Commission, which stated:
Secure identification should begin in the United States. The federal government should set standards for the issuance of birth certificates and sources of identification, such as driver’s licenses. ……. At many entry points to vulnerable facilities, including gates for boarding aircraft, sources of identification are the last opportunity to ensure that people are who they say they are and to check whether they are terrorists.
The REAL I.D. Act prohibits federal agencies and departments from accepting driver’s licenses and state issued identification documents that do not meet standards set by the U.S. Department of Homeland Security (DHS).
After all these years, that still means those of us in New Mexico.
Medicaid dreamers jarred awake by the noise of falling oil prices
January 26, 2016
By Carroll Cagle
When a number of Democratic state senators sat out in front of Republican Governor Susana Martinez last week, sporting socks that were intended as a brash and rude reference to the governor’s holiday pizza party problems, it was apparent that the relationship between the two political parties had sunk to new depths.
The ungentlemanly display occurred during the governor’s state-of-the-state speech opening this year’s legislative session.
The Republican executive branch and Republican house are bracing for intense battles with the Democractically controlled Senate over contentious issues such as the driver’s license mess and tough-on-crime bills.
The G.O.P. anti-crime plans will be opposed by a many Democrats including especially the criminal defense attorneys in their ranks. Democrats resist the idea of taking driver’s licenses away from illegal immigrants because the pro-license forces might bring more votes for Democrats in the future, and because they think doing so would be mean-spirited (even though federal anti-terrorism law says: no citizen, no license).
Forgotten in all this acrimony was a shining moment in 2013 when Governor Martinez – a conservative on most spending matters — decided to accept the carrot of vastly expanded federal funding for Medicaid expansion. Her decision cheered the same Democrats who can find little to like in the governor’s initiatives.
Accepting the Medicaid funding carrot from Washington in 2013 has resulted in thousands more New Mexicans signing up for the medical program for low-income families, and thus also resulted in a gusher of federal cash for Washington’s share.
The big problem this legislative session is that what used to be other gushers — those of tax dollars from oil production — are sputtering at the same time.
While the oil taxes are only a share of N.M. state government’s tax revenues, they are a large-enough part that when oil prices plummet as they are now, Santa Fe feels it.
Not so long ago, the executive and legislative branches were contemplating how much “new money” they would have to divvy up this session, but now they are faced with having no new money and even a possible need to cut back.
Both the executive and legislative budgets were prepared late last year with the idea that the price of oil would be about $50 a barrel – already way down from $100 a barrel only a year or so earlier but still enough to allow some new spending dreams. But last week, oil dropped briefly below $30 a barrel, and the taxes will go down correspondingly.
This creates a problem for Medicaid funding, since the program expanded by the deal with Washington resulted in 100,000 additional New Mexicans signing up. The current total of Medicaid recipients in N.M. is 822,000 people. During the 2017 fiscal year for which this legislature must budget, Medicaid enrollment in New Mexico is projected to go up even further, to 922,000 – about half of the state’s entire population.
Medicaid is, and always has been, jointly paid for by the federal and state governments. With Washington paying 70 per cent.
Under the deal dangled by Washington as part of the rollout of Obamacare, states like New Mexico that agree to expand Medicaid initially get 100 per cent of the extra costs paid for by the federal government.
But that ends for the 2017 year now being budgeted for. At this point, the federal share drops to 95 per cent. In 2020, the federal share is set to drop to 90 per cent.
Therefore, the administration is requesting from the legislature an increase of $85 million for next fiscal year — to a total in state funding level of $1 billion. Will the money be there now because of the slowdown in tax revenues coming in?
Even the Republican’s top finance chair in the state house of representatives, Larry Larranaga of Albuquerque, the house’s top appropriations chairman, calls the Medicaid funding situation a “runaway train.”
New Mexico is not the only government to see reduced tax revenues from oil starting to crimp spending.
In Russia, President Vladimir Putin “…expanded social spending to improve Russian living standards,” but Putin now says, in an echo of N.M.’s situation, “that the price of $50 per barrel of crude used to calculate Russia’s 2016 budget was too optimistic, and ministers have in recent weeks warned of spending cuts….”
Another major oil producer, Venezuela, is causing some international bankers to even worry that the country might default on its debts.
New Mexico’s reliance on petroleum is not nearly as great as those two nations, but even so, there is a definite squeeze play now between the need to come up with more money for Medicaid, at the very time that the revenues (not just from oil but other sectors across the economy) are looking increasingly anemic.
Legislative money analysis: Part two of two
What the oil price slump might mean to the funding of state programs
January 20, 2016
By Carroll Cagle
When it comes to spending decisions, the 30-day legislative session that began yesterday has hanging over it the cloud of reduced tax revenue coming in from the state’s oil industry.
We provided details of that drastic downturn in yesterday’s post. Today we look at how fears about income (revenue from taxes) are affecting plans for outgo (spending — known in the legislature as appropriations).
One clear indicator is a proviso in the proposed budget put forth by the Legislative Finance Committee (LFC), the powerful entity made up of members of both house and senate, and both parties, that dominates the legislature’s spending decision-making process.
It is true that the LFC, like the executive branch, proposes a slight increase in funding for next fiscal year – but its spending notions are coupled with a big “maybe.” The LFC’s budget says this:
“… $77.6 million of (the proposed increase in spending) intended for compensation increases (i.e. a tiny pay increase for all state employees) is contingent on the state generating as much general fund revenue as projected, a caution reflecting the significant risk to the revenue forecast posed by depressed oil and natural gas prices.”
Another indicator of how both the legislature and the executive are casting a wary eye on revenue from the oil patch of southeastern New Mexico is reflected in this coverage of the revenue-estimates picture from the state capital newspaper, The New Mexican.
“Hall's [the LFC’s] co-chairman, state Sen. John Arthur Smith, D-Deming, said the consensus revenue forecast put together by the Legislature and economists for Gov. Susana Martinez calls for $230 million in new money for fiscal year 2017. But that forecast was put together in early December — and oil prices have declined significantly since then.
“With oil and gas drilling and exploration being such a large economic sector in New Mexico, a $1 decline in the price of crude oil cuts an estimated $10 million from the government’s treasury.
“Smith expects the forecast for new money to be cut by $80 million to $100 million during the 2016 session.”
As we mentioned in yesterday’s post, the term “new money” is used in the capitol building to refer to revenue to state government (in the form of taxes) coming in at higher amounts than the previous year. “New money” is like a raise, and there never seems to be any shortage of ideas about what that extra cash from the taxpayers should be spent on — in the form of expansion of existing programs, starting new ones, or taking care of alleged “unmet needs.”
That there should be any “new money” at all this session – whether it is the $230 million thought recently to be available, or it ends up being $100 million less than that –is somewhat surprising given the steep decline in global oil prices seriously affecting New Mexico’s oil industry, and an overall New Mexico economy that is flat at best. (The LFC says a revenue decrease is detectable not just from the petroleum sector but more broadly, with broader gross receipts taxes down 13 per cent in the first three months of the current fiscal year which began last July 1.)
But seeing as how the overall appropriations level is going to be about $6.5 billion, a “mere” $100 million of new money is not a big deal in the capitol, in proportion to the total.
Every year, including this one, the fights over money in the Roundhouse are not over the big picture, but around the margins.
The LFC has a budget proposal and so does the administration of Governor Susana Martinez, via the Department of Finance and Administration (DFA).
Although the LFC wants to give all 20,000 state employees a one percent raise, the governor and her team want to focus on raises for the state police and prison guards, as well as $4 million in targeted tax cuts.
For teachers, the executive does not want to spread the extra money – such as it is – around to all, but rather to increase the starting pay for new teachers from $32,000 to $34,000 and to reward teachers measured as “highly effective” with modest amounts of extra income.
Aside from the tax-and-spend matters mandated for the lawmakers by the state constitution in this session, the vital and highly contentious matter of getting agreement on driver’s licenses that can meet the anti-terrorism needs of the federal government is going to dominate time and energy as well.
Then, in addition to the license issue struggle and the financing, this promises to be a “Law and Order — Santa Fe” episode. Expect several bills in response to an upsurge of violent, crazy lawlessness by repeat offenders and drunk drivers during 2015.
(No finance bills can be considered if the governor authorizes them via a “message” to the legislature.)
All this must happen before the required adjournment time of noon on February 18.
Legislative money analysis: Part one of two
Legislators find their spending appetites curbed by far-off China and Saudi Arabia
January 19, 2016
By Carroll Cagle
The 112 legislators who show up in Santa Fe today from all around New Mexico are there for the every-other-year budget session.
But they are finding that the fun of spending “new money” for new programs and expansions of existing favorite ones has pretty much evaporated.
The party poopers include countries half-way around the world, China and Saudi Arabia.
What we mean:
1. The legislative sessions in even-numbered years like this one are for 30 days only and are limited to money issues – i.e., decisions on income (revenues from taxes) and spending (appropriations). Spending recipients include the public schools and universities, Medicaid, transportation, health services, state police and prisons, and a myriad of others.
2. “New money” is how legislators describe projected increases in revenue from taxes, over the previous year’s amount.
3. A major source of tax revenue flowing into Santa Fe always comes from the oil and gas industries in SE and NW New Mexico.
4. But that tax influx will be seriously crimped by a precipitous decline in oil prices — with key reasons being a sharp slowdown in the massive Chinese economy coupled with the unexpected refusal of major oil producer Saudi Arabia to curb its production. As past price slumps began, the Saudis customarily would cut production, so as to limit oil availability and thus keep prices from falling too much. But not this time.
If anyone doubted that there is such a thing as a global economy, the dynamics cited just above show clearly that there is — and that oil pricing is not set by our own New Mexico producers but, rather, by supply and demand throughout the world. And finally, that those faraway events by distant nations affect both our state’s petroleum industry – and the teachers, Medicaid recipients, state police officers, etc, whose funding is affected by petro taxes.
Even grizzled oil patch veterans who experienced the big price bust of the 1980s probably did not expect plunging oil prices of the magnitude felt in recent months.
The Wall Street Journal’s industry reporter puts it this way:
“Oil prices have tumbled from more than $100 a barrel in mid-2014 to just above $30 a barrel (last week) as a global glut of crude and concerns about demand weighed on the market.”
How long will this oil-industry price slump continue is a big question, too. The same Wall Street Journal reporter writes that“….Analysts widely expect prices to stay subdued this year….” And even more foreboding, the U.S. Energy Information Administration (EIA) comes with this sobering prediction: “Brent crude oil prices will average $40 per barrel in 2016 and $50 in 2017.”
Next: In tomorrow’s post we will lay out some specifics of how the oil price decline is affecting state government spending plans.
The real story behind the driver’s license mess – and what New Mexico must now do
January 14, 2016
By Carroll Cagle
There has been a lot of confusion – in the media and by the legislators who will have to fix the problem – about the crazy driver’s license problem in New Mexico.
One thing both the media and the politicians did get right is that New Mexicans are confused themselves -- about how did we get in such a mess, and how do we get out of it -- and also very irritated.
By the hundreds, New Mexicans have been waiting in line to get passports – just so they will be able to board airline flights, or so their businesses will have access to big customers at the air force bases and national labs.
But much of the commentary from all quarters has been wrong, and continues to be.
Everything is based on the federal REAL ID Act which Congress enacted in 2005. That law requires that no one in any state that issues its driver’s licenses to illegal immigrants may use that license to board an airline flight or access most federal facilities. Seeing as how it has been more than a decade since Congress passed that law, one might think New Mexico would have gotten ready by now, but no.
Even to this day, many Democrats in the state senate say they have a plan that will keep giving state driver’s licenses to illegal immigrants.
What is the situation right now vis-à-vis the enforcement of the federal law?
Enforcement at the airports is the final step in the last phase in a complex process. Why? Because it is by far the most difficult operational change in the entire enforcement plan.
The Transportation Security Agency (TSA) wanted two more years to have time to train their personnel, and to begin promoting awareness among the traveling public. According to U.S. Department of Transportation data, there were 900 million passengers who boarded domestic airlines in 2014.
While some passengers flew multi-leg trips, with only a single ID check at the first airport, about 450 million passengers went through the TSA security checks familiar to frequent fliers.
As many as 30 percent of travelers on U.S. domestic flights already present passports or alternate IDs like TSA Pre or military IDs when going through airport security, based on news accounts. Note that TSA accepts a variety of IDs issued by the federal government as acceptable photo identification, including “green cards” issued to legal permanent residents. A large scale REAL ID awareness campaign will begin at airports in July, 2016, according to the US Department of Homeland Security (DHS).
Secretary of Homeland Security Jeh Johnson, in his statement released on Friday, January 8, highlighted five noncompliant states subject to enforcement effective today, January 11, 2016. Using Department of Transportation data again, that equates to 23 million people with driver’s licenses not acceptable as IDs to board airplanes, roughly 10 percent of all legal residents of the United States with current driver’s licenses or state issued IDs.
So that means if TSA begin to check IDs in April, 2016, as had been feared by many, one out of ten people boarding an airplane would have to present a passport or alternate form of ID.
Before today, only Minnesota (and briefly, New York State) had actually encountered enforcement. That enforcement includes national laboratories, secure federal facilities (entire areas with fencing) throughout the United States, secure federal buildings, and, effective this week, military bases.
New Mexico has enjoyed a “grace period.” That grace period ended Monday, and the military bases in New Mexico have been directed to start enforcing the alternate ID requirements today against visitors wishing to enter military bases for social visits, business, or deliveries.
Some news accounts accurately reported that enforcement at secure federal facilities started last July. Enforcement at military bases started Monday (January 11). DHS Secretary Johnson’s actual statement on January 8 identifies New Mexico as among five states and American Samoa as subject to enforcement effective now.
While the non-Defense Department federal facilities are enforcing REAL ID today – for example, national labs, secure research facilities operated by contractors and nuclear facilities – New Mexico has been able to ignore that because it had an extension followed by the 120 day grace period.
Soon, expect to hear reports of enforcement on the military bases in New Mexico with regard to which driver’s licenses are acceptable for admission, and that it will be a rocky road until consistent policies are put in place.
If the New Mexico legislators move forward to a compromise in this session, airport enforcement will be a non-event.
If they squander this opportunity, there will be a lot of problems for New Mexico residents in 2018. It is most important that REAL ID compliant driver’s licenses become available to New Mexico’s legal residents by October, 2016, when DHS will reconsider New Mexico’s status, and so that there is time for most residents to receive REAL ID compliant credentials before the October, 2020, deadline after which everyone boarding an airplane must meet the requirement.
Governor Susana Martinez understands the urgency. It is up to the public to pressure the recalcitrant senators to get on board before it is too late for New Mexico to meet the deadline. The supposed two-year “reprieve” in reality provides, just barely, enough time to finally comply after all these years of delay.
Please do not lose sight of the fact that the REAL ID Act became law in 2005 as an important way to insure identification security in the U.S. – as an anti-terrorism measure. For excellent, thorough and relevant information go to: www.idsecuritynow.org.
Have you noticed that there will be elections this year?
(Part two of two)
January 12, 2016
By Carroll Cagle
State house of representatives
Almost as watched as the state senate outcome will be the general election outcome in the house, where Republicans will fight tenaciously to retain the margin of 37-to-33 over the Democrats that they finally gained only two years ago.
Being accustomed to running things after 80 years, the Democrats are finding they really, really, do not like being in the minority and will be working hard during the 2016 re-match so that the speaker of the house in the 2017 session will blissfully once again be a Democrat – and the same goes for all committee chairmanships.
Secretary of state
A unique feature of the 2016 N.M. elections is that the secretary of state’s office will be up for grabs. That is because of the high-profile fall from grace (and power) of Dianna Duran, the first secretary of state in New Mexico’s history to resign from office.
She did this after Attorney General Hector Balderas charged her with illegally siphoning off campaign funds during her 2014 re-election bid, and apparently using the $$$ to support a growing and unhealthy addiction to playing the slots in several of the state’s many Indian casinos.
Republicans must have been dismayed – and still are – that, after Duran became the first Republican secretary of state in 80 years, that she couldn’t even make it through two four-year terms.
Maggie Toulouse Oliver, the county clerk in Bernalillo County (Albuquerque), a Democrat whom Duran defeated in 2014, says she will try again this year and vows to restore voter confidence to the operation so tarnished by Duran (who ended up facing some jail time and other requirements in addition to resigning).
Veteran politicos, for the most part, seem to think the three U.S. house of representative members from New Mexico will be sent back to Washington yet once again this year.
Members of the U.S. house serve two-year terms. The U.S. Senate features six-year terms, and neither of the incumbent Democrats, Tom Udall or Martin Heinrich, are up for re-election this year.
The New Mexico house delegation is made up of:
- Two Democrats — Ben Ray Lujan of Santa Fe and north-central New Mexico, and Michelle Lujan Grisham of the Albuquerque metro district.
- One Republican — Republican Steve Pearce of the southern district.
In addition to dealing with the many national and international problems (terrorism, and cumulative national debt approaching $20 trillion, etc), New Mexico’s congressional delegation has the familiar task of keeping money flowing to the multitude of federal institutions and programs in the state.
Federal spending in New Mexico has long been a mainstay of the state’s economy – yet, due to that big national debt and curbs on the ability of all members of congress to indulge their spending appetite, what used to be an easier task now is often harder.
Have you noticed that there will be elections this year?
(Part one of two)
January 8, 2016
By Carroll Cagle
That’s a tongue-in-cheek question in our headline, of course.
Very, very few people in New Mexico or the nation could have missed the noisy sounds coming from the 2016 presidential election campaign. All this began way earlier and more intense than previously.
Donald Trump, alone, has become a big topic of conversation in every coffee shop and supermarket checkout line around.
Plus, the attacks by Islamist terrorists in Paris and San Bernardino (among other places in the world) have sent shockwaves into the electorate and propelled national security to the top of the important-issues list.
But at the state level, the elections in New Mexico this year are important in many ways. The primary election – when voters registered in one party or another choose their nominees for the general election will be June 7, and the general election November 8.
By the time June 7 rolls around, it could be that both the abundant Republican field and the narrower Democratic contest already will be sorted out in the presidential race. So any prospect that New Mexicans might make a difference in the national race is highly unlikely (although we have been a couple of times in recent races due to nail-biting closeness of the electoral college arithmetic).
Yet, the unusual, volatile and colorful campaigning so far might still energize voters here. That will be especially true between our June 7 primary and the November 8 in general election, if a polarizing figure like Trump is either the Republican presidential nominee, or runs as an independent.
New Mexico State Senate
While the slug-fest for president captures more eyeballs — as the advertising and political professionals sometimes refer to the size of TV audiences — of more importance to New Mexicans in practical ways is what will happen in the battle for control of the New Mexico state senate.
With a couple of mild and brief exceptions, this 42-member body has been under Democratic control for more than 80 years, going back to the election of FDR and the beginnings of the New Deal in 1932.
In general, Democrats in Santa Fe tend to pass bills favorable to unions and environmentalists, and regulations and tax measures unfriendly to business. The Republicans, who tend to want to weed out entangling regulations and curb higher taxes that they say hamper job growth and a healthy economy, over time have been edging closer to majority control in the state senate.
In legislative bodies, all it takes for total control is to have one more than half of the membership in that body, in this case 22. Now, there are 24 Democrats and 18 Republicans in the senate.
Thus, it will take only a gain of five seats for the Republicans to take control. This is a big deal because in 2014 the state house of representatives finally shifted to Republican majority, after the same decades-long dominance by the D’s. With a Republican house and Republican Gov. Susana Martinez heading the executive branch, a shift to the R’s in the senate would mean all three major power blocs would be Republican, a dramatic and historical shift.
Yet, gaining five seats will be a harder job for the Republican than one might think. Many of those 24 Democrats seem to be in safe districts, and even in potentially vulnerable districts where the Republicans and other organizations make a mighty effort to dislodge an incumbent, the pro-Democratic forces will throw money and manpower into keeping them in familiar hands.
As hard as gaining five or more seats might be, the forces of change also must watch their flanks to guard against losing any in their own ranks.
How the presidential race provokes voter turnouts in either party also will be a factor.
State senators serve four-year terms and all 42 seats are up for election in 2016.
The second part of this report will focus on the state house of representatives and the secretary of state’s office.
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