img 0255 edited 1Paul Gessing of the Rio Grande FoundationBy Mary Alice Murphy

Before the featured speaker was introduced, Silver City-Grant County Chamber of Commerce members made announcements.

Gila Regional Medical Center Chief Executive Officer Taffy Arias reported that two new physicians would begin their practices in June. Dr. Rosser, general surgeon, has plans to open a GERD clinic to address the gastrointestinal issue. Dr. Worrell is a pediatrician. They will have offices in the buildings across from the hospital.

Karen Beckenbach of the Grant County Community Concerts Association said the organization would hold a free concert at 3 p.m. Sunday, June 30, 2019, featuring the 44th Army Band, performing popular, rock and mariachi music.

Paul Gessing was introduced as the featured speaker. He runs the Rio Grande Foundation, a non-partisan think tank addressing economic issues. He said, although he doesn't have a crystal ball, he sees trends and expects some things to happen in the next year or two.

"We have good news for 2018," Gessing said. "The state saw production of 250,000 barrels of oil. Oil is the dominant economic factor for the state of New Mexico. Oil is booming in the Permian Basin. Production has tripled since 2012. It is expected to double again by 2021. But suddenly in October through the holidays, the price of oil fell off a cliff. Gas prices always go up in the summer, but this year, we may see them continue to drop. The price of oil has been in a downward trajectory. Today (the day of the meeting), it's $52.65 a barrel, down from $66 a month ago. Supply and demand drive production. Higher prices bring more production; lower prices, less production. New Mexico is third to Texas and North Dakota in oil production."

In talking about the state of the New Mexico economy, he said the general fund budget stayed around $6 billion from 2008-2017. "Now the budget is $7.5 billion. No state has seen higher economic growth since the Trump election than New Mexico. He has staked his claim on energy."

Gessing presented several slides from a Legislative Finance Committee report that show the state has a growing dependency on direct revenues from oil and gas. In FY 2019, the direct revenue impact of oil and gas was up 35 percent, after being up 26 percent in 2018.

"There was a lot of conversation at the legislative session this year about diversifying the economy," Gessing said. "A tax increase was passed to try to diversify the economy. The view of most economists is that a state diversifies its economy by bringing in new businesses and collecting the taxes from those businesses, not by levying new taxes. Businesses will deal with only so much in taxation before they leave the state.

"New Mexico is the No. 1 state most dependent on the federal government," Gessing said. "With the federal deficits and debts spiraling out of control, it's a concern. President Trump hasn't shown any inclination to address the deficit or debt. At some point, the federal government will have to pay its bills. It may come with an interest rate spike, which may make the deficit more challenging."

He asked and gave some reasons why New Mexico is growing more slowly than its neighbors.

"The state has seen some job growth year over year, but the ones around us are doubling or more their job growth rate, especially in metropolitan areas," Gessing said.

He noted the New Mexico population growth is below the 50-state median over the past decade, about on par with Kentucky. "People are flocking to Texas, Colorado, Arizona and Oklahoma. Going back to 1950, Arizona has septupled its population. I believe people move for job opportunities and if the weather is nice, that's great. We have the beautiful scenery, the nice weather and great outdoor recreation opportunities."

Scott Terry, president and director of the Chamber, noted that at a recent meeting, statistics showed that the population of Grant County has gone down from 32,000 to 28,000 and Silver City may be below 10,000 over the past decade. "The 2020 census will be really, really important."

Gessing said that population tends to follow economic opportunity. "We're also seeing trends of people moving from rural areas to urban areas. We're seeing it in spades in New Mexico. It is not a homogeneous group moving in and out. Younger people are leaving the state and retirees are arriving. The older population will have more options in urban areas for doctors and the availability of airports to visit their family."

Frost McGahey said she was recently in Santa Fe, and the outlet there has been dying for years. "But there is a new restaurant and high-end bakery in the place where another restaurant used to be. I talked to the owner. She said she had been in the location for about three months, but it took her 11 months to get a permit."

Gessing said, in Santa Fe, it is notoriously difficult to get permitting. "They have a strong NIMBY (not in my back yard) feeling. It is challenging, but no matter where you go, if you say you are from New Mexico, people say: 'Oh, Breaking Bad or Santa Fe.' The city is a unique cultural location. The state lacks economic freedom, of which permitting is just one symptom."

He said New Mexico is the least economically free state of the group it is competing with—especially Texas and Arizona. "Compared to other states, we are very economically unfriendly. In economically friendly states, the government spends less, there are fewer or lower taxes and reduced regulations. Most free states have higher income levels. It is better to be poor in an economically friendly state or city, where there is greater gender equality and higher-level medical treatments available. You don't see people building boats to go to Cuba."

Gessing said the state should repeal the Davis-Bacon Act, which raises costs of infrastructure by 10% to 25%. "Higher minimum wages may not be a big deal in Albuquerque, Santa Fe or Las Cruces, where they already have higher prevailing wages, but it will cause bites in rural areas."

"The dog that didn't bark this session was GRT reform," Gessing said. "Gross receipts tax drives entrepreneurs out. Our webmaster lived in Albuquerque and had to invoice us and pay GRT for his services. He moved to Colorado and no longer has to invoice or pay GRT."

He alleged that another issue in New Mexico is education. "We need to introduce choice and accountability in education. We could have a whole discussion about that, but we don't have time today."

Gessing said the five worst bills for economic freedom that were passed in the most recent session were: The Energy Transition bill was the worst. "Taking renewable energy from 20% to 50% will be very expensive and will be borne by the rate payers, including businesses. Another terrible bill was HB 85, which banned Right-to-Work, which allows getting a job without having to join a union or pay dues. "We had 10 right-to-work counties in the state, and this bill banned them."

"Then there's the SB 2, which increased film subsidies," Gessing said. "It's one thing to waive taxes or offer incentives, but here our taxes go to the state and they cut checks to the film industry. The LFC determined it will cost the state more than $500 million over the next five years, and that's after a study by the state that shows that for every dollar paid out, the state gets 40 cents. That is not a good investment."

The other two were the increase in the minimum, gradually up to $12 an hour, and the budget that will increase by 11 percent year-over-year.

He said his organization tracks legislators to develop its freedom index. On area legislators, District 39 Rep. Rodolopho "Rudy" Martinez voted yes on all five "worst" bills. District 38 Rep. Rebecca Dow voted against two of the bills and was absent for three. Sen. Gabriel Ramos voted yes on all five bills.

"We are seeing a decline in oil and gas prices," Gessing said. "The national economy and its indebtedness are all factors that could impact the economy."

He noted that all New Mexico Senators and House members will be up for election in 2020. "Do we in the state like the revenue from oil and gas? Progressive Democrats may have a decision to make, whether they like oil and its revenue or prefer to go with the environmental groups against fossil fuels? We are seeing the latter trend in Colorado."

Gessing gave a plug for his weekly e-newsletter and invited people to sign up for it. "I'm also a podcast fiend. I think podcasts are a great invention. Mine is the only New Mexico-centric public policy podcast."

Audience member John Sterle said he had heard the New Mexico Energy Transition Act was comparable to the Green New Deal.

"Basically, the Energy Transition is a plan," Gessing said. "It's not nearly as comprehensive as the Green New Deal. PNM, as I understand it, has a direct path to 100% renewable energy by 2040. We'll see how that shakes out."

Lee, the head of the service department at Lawley Toyota, said Arizona built up its new industries through infrastructure improvements.

"It gets back to New Mexico relying on oil and gas and the federal government," Gessing replied. "Arizona is also low tax and right-to-work."

Bruce Ashburn, chamber board member, summed it up. "We are not a business-friendly state."

The next chamber luncheon will take place on July 11, 2019, with Rep. Dow as the featured speaker and will take place at the Grant County Veterans Memorial Business and Conference Center at 11:45 a.m.

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