Wednesday, March 18, 2015

Tracking Corporate Welfare? In New Mexico? Check this Out

The massive scale of the corporate welfare state in America is such that we are no longer shocked.  Subsidies are often given in the name of job creation, but in New Mexico large scale corporate welfare has had a bad track record, as Eclipse, Mesa del Sol, and other projects have gone sour, and as word leaked out that subsidies to the film industry were being badly abused. Subsidy Tracker version 3.0, software from Good Jobs First, has updated its data base, assembling records of over 160,000 awards doled out from 137 federal programs.  To download the tracker, click here.  For a pdf copy of its latest findings, click here.  The software allows you to track subsidies to corporations, broken down by state, time period, size of subsidy, company name, and many other variables.  For the first time the tracker names names and dates.  A guidebook to using the data base can be found here.

First Glance Key findings:  Still shocking but no longer surprising

1.  Corporate welfare tends to go to large corporations.  Out of $68 billion in federal grants and allocated tax credits, almost $46 billion (67%)  went to a group of 586 large companies.  Of these, 21 firms received half a billion or more, and six received over $1 billion.

2.  As we have learned from other sources, the huge banks got most of the bailout money after 2008.  In the Trillion dollar club we have four mega-banks, including Bank of America ($3.5 trillion), Citigroup ($2.6 trillion), Morgan Stanley ($2.1 trillion) and JP Morgan Chase ($1.3 trillion).  A dozen foreign and domestic banks slurped up 78% of the face value of loans, loan guarantees, and bailout assistance.  Twenty seven of the largest 50 bailout recipients were foreign banks.

3.  Many large federal contractors also receive corporate welfare checks of one kind or another.  Forty nine of the largest 100 federal contractors in FY 2014 have received loans, loan guarantees, or bailout assistance in addition to their contracts.

4.  Several of the top bailout recipients have paid hundreds of millions to regulators to settle allegations of such things as investor deception, facilitation of tax evasion by clients, and sanctions violations.

New Mexico: see also here from Subsidy Tracker

Intel in New Mexico has gotten over $2.5 billion in state and local subsidies since 2000.  This is almost half the total amount of state and local subsidies Intel receives from the five major states it operates in, surpassed only by Oregon.  In spite of the New Mexico subsidies Intel expended its plant in Chandler, Arizona (not Albuquerque), where subsidies are only about $82 million.

Forest City Enterprises, from Cleveland, Ohio, is second, with subsidies of half a billion in state land to develop Mesa del Sol, thanks to the TIDD program.  Forest City has recently been trying to sell its share of the project.

Third is Schott, a German solar company, at $132 million, part of the Mesa del Sol project.  In 2012 the plant closed down, leaving the state stuck for $16 million in taxpayer money.

Lions Gate Entertainment, at $99 million, mostly in grants and low-cost loans.  New Mexico has subsidized Lions Gate more than any other state.  New Mexico was paying back 25% of local expenses to out-of-state film, with no accountability.

Eclipse Aeroscape got over $99 million in New Mexico before going bankrupt.

Official New Mexico has little experience with entrepreneurship and the track record, not auspicious, suggests there is more politics in the concoction of these schemes than hard-headed business analysis.
The creation of a first-rate education system in New Mexico, a long-term project, would do more to attract business and produce jobs than another few billion spent on these high profile, low-return projects.

For other sources of information along these lines, see Influence Explorer

Saturday, March 14, 2015

(Not) Much Ado About Nothing: Thoughts After a Saturday Afternoon at the Session

The biggest media stories of the week--the resignation of Sen. Phil Griego and the non-confirmation of Matt Chandler--had little to do with the future well-being of New Mexico.  Rejecting Chandler as a regent of the flagship university had less to do with his vision of the future of higher education in New Mexico than it did with his partisan past, the partisan milieu at this point in the session, and resentment about the way the confirmation was handled by the administration.  The mild support AG Balderas and attorney (and former candidate for Lt. Governor) Brian Colon offered Chandler (in what appears to be a relatively benign non-partisan move) itself became something of a non-news gossip issue, giving rise to pointless speculation about possible political motives and consequences for such support.

Reasons given by James Koch for resigning from the UNM Board of Regents in protest of what happened to Chandler strain every sliver of credibility:  that a hard-bitten and crafty political operative, fully at home in the darkly-lit backrooms of campaign money and deals, and whose exceptionally long tenure at UNM itself was certainly not the product of earnest, wide-eyed innocence during the Richardson and Martinez administrations, would be so shocked, (shocked!) by the presence of politics (politics!) in the selection of a regent that he would have no option but to resign in protest, should earn this whopper first prize for the title of Fib of the Session.  Nominations for second prize, anyone?

The Griego demise was painful for Senate members.  They forced one of their own to resign.  And the emotional drain it produced hung over the hallways this afternoon like the stale, last day of a three-day rainy afternoon.  But in the end they did it right:  they got him to resign.  Yes, there were political and partisan motives for the timing:  this has been brewing a long time.  But they did the right thing, quietly, without the glare of klieg lights or pious self-congratulation.  Does this mean every conflict of interest in the future will be punished?  No.  Nor are there robust institutional mechanisms in place to deter other types of temptation.  But this time they did the right thing.

But what about the larger scheme of things?  What legislators and observers of all stripes seem to agree on is that this session doesn't make any difference.  Very little on the agenda has anything to do with effective governance.  Confirmation of an appointee, the fate of drivers licenses for immigrants, the fate of right-to-work, gimmicks and all--none of it will do a thing to move New Mexico out of the 49th-place stuck-in-the-mud mode we have suffered for many years.  The stomach, ambition, for serious change, is absent.  As BB King said once, "the thrill is gone." The passion displayed this year is for weakly symbolic issues that taste like warmed-over beans from last week's leftover dinner.  

This week is a case in point, and the criticism here is as much for those of us who pretend to cover the news as it is for those with official responsibility:  What we know this week is that Sen. Candelaria felt threatened by the administration over Chandler, and he told it to the press.  We know that Chandler was treasurer of a PAC that spent money against Rep. Garcia Richards; that some attorneys in Clovis are not fond of Chandler.  We know that the support Balderas and Colon offered to him was a "double eyebrow opener," whatever that means.  In fact we know more about the possible non-academic motives Balderas and Colon might have for endorsing Chandler, than we do about what record Chandler might have established as a board member or his views about where UNM should aspire to be 20 years from now. And none of us picked up on a remark made by Rules Chair Sen. Linda Lopez, who questioned why our flagship university would not reflect the ethnic diversity of the state in its composition of the 7-person governing Board of Regents.  If you need symbolic juice, is that not more important than Chandler's participation in a PAC?

What kind of leadership will we see in the final five days? Where will it come from?  It does make a difference.  Stay tuned.

Wednesday, March 11, 2015

SunZia: Another Out-of-State-Owned Scam in NM at Taxpayer Expense? An Evening in Deming

Said to be one of President Obama's top five renewable energy priorities, the SunZia $2 billion project to string up two giant 500 kv (extra-high voltage) transmission lines through some of the most pristine desert land left in the US was fast-tracked through the BLM and, since some of the swath goes through state lands, was headed for fast-tracking by previous Land Commissioner Ray Powell.  Then Aubrey Dunn was elected Land Commissioner.

As the SunZia Railroad Express was rounding what appeared to be its last curve on the track, Dunn brought the whole train screeching to an awkward stop, at least for the moment.  This action, which took guts, now puts the spotlight on him:  SunZia cannot build on state trust lands without authorization from the Land Office.

Last night Dunn sponsored a citizen's forum (one of several) in Deming, where about 100 New Mexicans, many of them ranchers, gathered to listen to presentations by SunZia Project Manager Tom Wray, BLM environmental coordinator Dave Goodman, and Renewable Energy Transmission Authority (RETA) director Jeremy Turner:  all three were proponents for the project, and each one, in subtle ways, wittingly or not, conveyed "it's a done deal, folks, get on board, we're just going through the motions here."  That backfired.

After a few polite comments in favor of the project by local citizens mostly suggesting jobs in poor counties justified their support for it, the negative comments began.  One after another rancher stood up; some chastised the fast-track, non-transparent decision making that characterized the process since it began six years ago; others regretted the environmental damage being wreaked on behalf of out-of-state investors; others lamented the profits would leave the state, with no income stream for the land trust fund.  Frances Williams, from Las Cruces, questioned the future market for the electricity, the use of taxpayer money for a private venture, and our lack of knowledge of who the investors were behind the screens--she got one of three spontaneous rounds of applause.  One rancher said the five-miles projected to go underground (at White Sands Missile Range) would entail digging four trenches to lay the cable, a five-foot concrete wall over the cable, and a twenty-six foot wide road for monitoring the electric activity below.  Many expressed disgust that the apparently "done-deal" decisions were made in Washington with no serious effort for input until it was too late.  Some looked straight at Dunn as they made these comments, or addressed him directly.

An environmental group (click here) in Arizona (The Cascabel Working Group) has been tracking this project, which they assert is the brainchild of a power company in Baton Rouge (Southwestern Power Group) that wants to be able to sell excess energy at its Bowie power plant in Arizona.  SWPG sold it to Obama since, according to the plan, wind and solar power generated in New Mexico will supplement the gas-powered plant.  Proponents have already spent about $1.3 million in lobby money.

Senators Heinrich and Udall are said to be for it, Rep. Pearce is against it.  When was the last time two Democratic Party tree-hugging politicians opted for an environment-damaging project funded by out-of-staters, while a lizard counter-baiter from way back sides with the tree-huggers?  There must be something more here than meets the eye.  Follow the lobby money?  Obamacharm?  The public needs to know a lot more about this project before the loco-motivated fast-tracking engine steams up again to hand over state land to a for-profit group that offers New Mexico little and hides behind a not-transparent process.  A good start can be found in Cascabel, whether you love trees or not.

Monday, March 9, 2015

Update: Presidential Hopeful Scott Walker Signs Right to Work Legislation in Wisconsin

Governor Scott Walker signed a right to work bill in Wisconsin today, making Wisconsin the 25th state to do so.  Walker is an all-but-announced candidate for the Republican nomination in 2016, polling ahead of other potential rivals.  Walker shifted in favor of signing the bill only this year, having suggested previously he was not interested in making Wisconsin a right to work state.

Right To Work: Much Ado, Little Evidence; Conservatives Split Over RTW in Kentucky

After more than half a century, the value or damage to a state's economy of enacting a so-called Right to Work provision is still being debated.  The Congressional Research Service, perhaps the closest one might get to an objective reading, in a study published two years ago, concludes (click here): 

Difficulties associated with rigorously studying the relationships between RTW laws and various outcomes are likely to continue to make it difficult to generate definitive findings about these relationships. As such, the ongoing debate on RTW may be driven by factors other than rigorous empirical evidence. 

In other words, there is a lot more political shenanigating and hot air here than there is fact-based analysis.  For a liberal view, click here:

...right–to-work” laws are associated with significantly lower wages and reduced chances of receiving employer-sponsored health insurance and pensions – are based on the most rigorous statistical analysis currently possible. These findings should discourage right-to-work policy initiatives. The fact is, while RTW legislation misleadingly sounds like a positive change in this weak economy, in reality the opportunity it gives workers is only that to work for lower wages and fewer benefits. For legislators dedicated to making policy on the basis of economic fact rather than ideological passion, our findings indicate that, contrary to the rhetoric of RTW proponents, the data show that workers in “right-to-work” states have lower compensation – both union and nonunion workers alike.

For a conservative view, here is the Heritage Foundation:

Americans overwhelmingly support right-to-work laws. Recent Gallup polling finds Americans support right-to-work laws by a 71 percent to 22 percent margin—better than 3 to 1. Independents support right-to-work laws 77 percent to 17 percent, Republicans support them 74 percent to 18 percent, and Democrats support them 65 percent to 30 percent.  Polling also shows that union members themselves support voluntary dues by an 80 percent to 17 percent margin. Voters also reward politicians who support voluntary dues at the polls. Not a single Michigan legislator who voted for right-to-work laws in 2012 lost in the next general election. Right-to-work laws remain controversial primarily among union officers—not the general public. 

Conservatives are Split in Kentucky over Right to Work

Kentucky, like New Mexico, is debating the merits of a right to work law, but conservative groups in favor of RTW legislation are split over whether to pass a RTW law through the state legislature or whether to pass the laws at the county level.  In a three-month period versions of right to work have passed in five counties, and four more counties are considering them.  The National Right To Work organization favors passing right to work laws exclusively through state legislatures.  They have spent years cultivating legislators on this issue only to find that powerful forces in Kentucky are divided about which approach to take.

In a story by the Washington Examiner (click here) on February 9, National Right to Work President Mark Mix was quoted as saying, "I got lectured for 15 minutes by Senator Rand Paul yesterday on this very issue, saying that we had made so many people mad about our position."

My Take?  RTW, alone, does not predict good or bad economic outcomes.  There are too many other factors:  the willingness of the business class to invest in long-term, coherent, development efforts, the commitment of the state to a solid education system, the presence or absence of a reasonable tax structure, etc.   With these factors present, economic development will take place regardless of the presence or absence of RTW.  Unfortunately, New Mexico doesn't have a lot of positive "other factors" to brag about.  The state should therefore focus on developing a bipartisan, broad-based consensus on a long-term economic development strategy, supporting serious education reform and a fair tax system, and not waste our time arguing over the nonsense of a largely symbolic issue.  If right to work should pass in New Mexico (and I doubt that it will) it will be because the power of labor unions, who have a vested interest in opposing it, has slipped even more, not because it represents a step forward for the state's economic well being.

Friday, March 6, 2015

Does Higher Education Perpetuate Income Inequality? How About Lottery Scholarships in NM?

A strong and comforting belief in America is that education, not the proverbial Colt 45, is the great equalizer.  Go to college, work hard, keep your nose clean, and you too will end up with the three-car garage, a healthy retirement account, and a modest-sized sailboat docked in San Diego Harbor.  Increasingly, evidence suggests that, far from providing access to equal opportunity and thereby leveling the playing field, government student-aid policies perpetuate and reinforce existing income inequalities.  Rising tuition, fees, and other higher education costs, combined with a severe decline in federal student aid (in real dollars) in recent years, have made it much more difficult for students and parents of modest means to go to college.

The key here is the probability that the poor will attend college, and that those poor who do enter college will graduate.  According to a recent study (click here) (by the Pell Institute for the Study of Opportunity in Higher Education and the Univ. of Pennsylvania Alliance for Higher Education and Democracy), only 45% of dependent students whose parents are in the bottom quartile of income will enroll in college between the ages of 18 to 24.  But of those students whose parents are in the top income quartile 81% will enroll in college, and the middle quartiles are in the 60-something percentiles.

But inequality also continues after college enrollment, affecting the probability of graduation.

In a blog (click here) published on February 24 Sandy Baum, from the Urban Institute, compiled the table above using data from the US Department of Education (click here), showing a BA six-year graduation rate of only about 25% for students from low income families, compared to a graduation rate of 59%-62% for students from high income families.  Again, the affluent finish more frequently.

What does government policy and financial aid have to do with it?  Pell grants, the federal program for low-income students, have not kept up with the cost of inflation, let alone the cost of attending college, which has risen much faster than inflation.  In 1975, according the Pell Institute study (page 19 and 20), Pell grants were high enough to cover about 67% of the cost of attending college.  In 2012 Pell grants covered only about 27% of the cost of attending college.

Incidentally, the Sandy Baum post (click here) was critical of some of the data used by the Pell Institute study, and there is a lively and healthy debate in higher education circles about the full impact of college training on social mobility in the U.S.  The book is not closed, and if the weight of evidence suggests things are worsening for the whole, there are many exceptions in which some low-income students do well in spite of the trends.

New Mexico

Since the lottery scholarship began in New Mexico students of all income levels have been eligible for the scholarship. With the demand for lottery scholarships at nearly $70 million, but a revenue stream of only about $40 million in a poor state (New Mexico ranks 3rd in the nation in poverty), many have advocated adopting a means test for eligibility to preserve lottery solvency and fairness.   As it turns out, according to NM Higher Education Department data, at least 29% (see NOTE below) of lottery scholarships in 2012 were given to students with family incomes higher than $84,000.  The average family income that year in New Mexico was about $59,000. By failing to adopt any kind of means test, in effect, the state's lottery scholarship program has (a) diverted very scarce money from where it is most needed to subsidize students who don't need it; (b) acted to perpetuate, reinforce, and perhaps even speed up, the trends toward inequality in educational outcomes discussed above.  Incidentally, income inequality in New Mexico is high and getting higher, arguably the highest in the nation--see here, and my blog of February 24.

One argument in favor of maintaining the income-neutral status of the lottery scholarship program has been that if relatively well off students don't get the scholarship, they might get their parents to send them off to better schools outside the state, thereby possibly losing the future talents of these students.  But even if we accept that argument (I have serious doubts about the magnitude of this effect), it still implies that the state needs the future talents of well-off students (who will get educated whether they get a lottery scholarship or not) more than it needs the potential talents of less-well-off students who might not otherwise get a college education at all.  What New Mexico needs is a higher proportion of our population having a college degree, and whatever the lottery scholarship can do to raise that number, is good policy.

Quiet discussions are underway in the legislature about adopting a means test this year for lottery recipients.  Let's see what happens!

NOTE:  29% is almost certainly an underestimate.  Applicants for the lottery scholarship are not required to fill out a FAFSA (family income) report required for Pell and other forms of student aid.  Lottery scholarship applicants who do not fill out the FAFSA, it can be presumed, are much less likely to qualify for Pell and other low-income forms of aid.  Using a conservative estimate, if half of those students who did not fill out the FAFSA are at the $84,000 and above income level, this raises the 29% to 34%.  Thus, a conservative estimate suggests that fully one third of lottery scholarships go to families earning $25,000 more than the average family in New Mexico.

Tuesday, March 3, 2015

New Mexico Third Among States in Speed of Ethnic "Diversification" What Does This Mean?

The Brookings Institution in Washington DC has posted an interactive map of the US, showing each county's racial and ethnic makeup by age group.  The map compares the proportion of the population 19 and under to the population 65 and over as an indicator of the speed of change.  You can find it here. You can see an arc of change beginning on the East Coast and following the coast Southward to the US-Mexico border region then along the coast all the way up to San Francisco.  Most of this dramatic shift is due to the increasing presence of Hispanic citizens in these regions.

New Mexico has long had the least proportion of white Non-Hispanic citizens.  Now it joins Nevada and Arizona as the states with the speediest trends in "diversity."  While all counties in New Mexico appear to be experiencing this change, the most dramatic shifts appear to be in the most urban counties:  Bernalillo, Santa Fe, Dona Ana, San Juan, Lea, Chavez.  This follows the classic American tendency for minority groups to congregate in larger urban areas, where jobs are more readily available, services are more widespread, and acceptance of diversity is greater.

What does this mean for New Mexico?  Will it affect the political agenda?  Do Hispanic citizens in New Mexico identify as a group?  Is the goal of most Hispanic or Native citizens eventual assimilation?  Will Anglos end up losing some of the political or economic power they now hold?  The future social structure in New Mexico, and to some extent the quality of life, 50 years from now, depends on the answers to these questions. 

I have told my students for many years that in New Mexico, ethnicity is an element is virtually all elections, and New Mexicans quietly talk about ethnicity (almost exclusively among members of the same ethnicity), and in elections often activate ethnic sentiments.  But you do not talk about it in public.  Why is there this taboo, which seems firmly embedded as part of a shared cross-cultural value?

The Chicano movement in New Mexico, which lasted for roughly a quarter of a century until the late 1990s, broke the taboo, openly addressing social inequalities toward Hispanics, creating a political agenda for action, and suggesting stronger ethnic identity among Hispanics as a partial solution.  But the term "chicano," imported by the Left from other states, never caught on with many Hispanic citizens in New Mexico, in spite of Anglo acceptance of the term, and the term "hispanic" gradually replaced "chicano" in popular language.  Now the taboo appears to have returned, at least in part, reaffirming its cultural strength and resilience over time.

The term "diversity" is also sensitive.  As the backlash against affirmative action grew stronger in the past two decades (sometimes with the support of the Supreme Court), the term "diversity" became increasingly popular among Liberals to suggest that the value being espoused in affirmative action is not social justice (addressing rigid social inequalities across racial and ethnic lines), but rather the simple act of enhancing cosmopolitanism (that is, having people of different races and ethnicities interact with each other) in an increasingly global society:  bring Black Americans (or Indonesians, Peruvians, and Trobriand Islanders) into the classroom (or the halls of corporate America) not to equalize racial outcomes in life, but to enhance the inter-racial learning opportunities for both black and non-black individuals in the classroom or boardroom, as a value in itself, justifying preferential treatment of certain applicants for admission to prestigious venues.  Bookings, a Liberal (Progressive?  Speaking of taboos, there appears to be a backlash against the use of the term "Liberal," often shared by liberals and conservatives alike) organization, uses the term "diversity" rather than "racial and ethnic composition."