Gessing Warns Of Possible Federal Government Response To GRT Legislation

IMG_0540 (4).jpgRio Grande Foundation manager Paul Gessing addresses some two dozen people gathered Thursday in Los Alamos for an event called “The Good, the Bad and the Ugly of the 2019 Legislative Session: The Economic Impact”. Photo by Maire O’Neill/

Lisa Shin introduces Paul Gessing.jpgFormer candidate for state representative and member of the Rio Grande Foundation Board Lisa Shin introduces RGF manager Paul Gessing Thursday in Los Alamos. Photo by Maire O’Neill/


Paul Gessing, manager of the conservative economic policy think tank the Rio Grande Foundation, spoke in Los Alamos Thursday at an event hosted by Lisa Shin called “The Good, the Bad and the Ugly of the 2019 Legislative Session: The Economic Impact”.

Gessing discussed the Energy Transition Act, right-to-work and minimum wage legislation, the 11 percent increase in the state budget and what he expects to happen in the 2020 30-day legislative session. He said the RGF did a lot of work in Santa Fe during the legislative session trying to educate people around New Mexico on free markets and individual liberties, especially with regard to their pocket books.

Gessing said in Los Alamos there was the discussion about gross receipts tax and non-profit managers of Los Alamos National Laboratory and that SB 11 passed because former Gov. Susanna Martinez was the only one who vetoed it in the last session.

“I don’t know where the breaking point is with regard to the federal government and if they would ever actually make a real decision about a facility like that based on something like taxation or tax rates. But it’s a dangerous game to play to levy taxes where the federal government knows that it’s being targeted by a state like New Mexico,” he said. “Love him or hate him, our president is a little vindictive in some respects. This is not a state that voted Republican. You never know, you never know. He’s been prone to make a few random decisions about things for good, for ill, or somewhere in between and that’s a cautionary tale that you don’t know where that discussion is going to go.”

After his talk, Gessing told the Los Alamos Reporter there’s not a moral or overwhelming policy on the GRT issue. He said the person who handles the RGF’s website used to be based in Albuquerque.

“We pay gross receipts tax. He moves to Colorado. Suddenly there’s no gross receipts tax. So, by having that in place you are hindering small businesses especially from getting started in New Mexico and from wanting to come here,” he said.

He said if the legislation was part of a real reform effort to do a revenue neutral take on the gross receipts tax to minimize the harm done to the small business community and other industries, it would have been worth the price.

“I think you can make that case to the feds and other people but now you’re just talking an independent stand-alone bill – ‘we want your money’ – and it’s a revenue grab and if the feds decide that they don’t want to deal with that anymore, that they could move in a different direction,” Gessing said.

He said Los Alamos has other sources of revenue besides gross receipts tax and that Los Alamos goes without GRT for long stretches of time.

“There’s always this back and forth between non-profit and for profit. The revenue comes and goes as those decisions are made so Los Alamos shouldn’t factor that in. Other communities have military bases, or national labs and they don’t have a gross receipts tax. I look at it as the state the New Mexico – you’ve got all the taxes and all the stuff paid for by the national lab – the GRT is a cheap second straw coming in sucking even more revenue out. They’re given a good deal just like every other community that have these installations, lab or otherwise in their communities. The trick is if they decide to go somewhere else.”

During his talk, Gessing said the most impactful negative bill of the session was the Energy Transition Act. He said the coverage of that bill by the media has been pretty awful in his opinion because there has not been a realistic conversation about the costs that are going to be borne by average ratepayers in New Mexico based on the electricity prices. He said the goal for PNM and their customers is 50 percent renewable energy by 2020 and that that ultimately that is going to mean the shutdown of the San Juan Generating Station.

“That powerplant which is a relatively clean coal-fired powerplant. Of course, coal is deeply unpopular these days, especially with the environmentalists. PNM was all too happy to get out of that, to have their transition costs financed on the ratepayers’ backs,” he said.

Gessing said Arizona State University Business School on a ballot measure in Arizona that was defeated in 2018 on going to 50 percent renewable energy by 2030 and that ASU found that electric rates in Arizona were going to double by 2030 based on the new renewable mandate.

“Arizona’s utility market is not exactly the same but I believe we are going to be dealing with something along the lines of a doubling of our electricity rates in the state of New Mexico,” he said. He added that he doesn’t think people understand that the costs are going to be borne by the ratepayers.

Gessing spoke for some time on SB 2 saying the truth is coming out on film subsidies.

“New Mexico cuts checks totaling $50 million a year to Hollywood film makers or wherever they’re from. This is a policy that the Rio Grande Foundation and economists on both sides of the political aisle, especially when you leave New Mexico, have said is ridiculous for the state of New Mexico or the taxpayers of New Mexico – to write checks to any business,” he said.

He said most other places give a tax break or exemption, that Intel did not pay property taxes in Sandoval County for 25 years. He said whether that is a good policy or a bad policy can be debated but that Intel didn’t get checks from the state of New Mexico.

“Hollywood does and finally, miraculously, (though it didn’t effect the outcome of the session) before the session started there was a report that $250 million was the film backlog. People began to ask what the heck was this backlog with the film subsidies because they had been told or misunderstood that it was just a tax credit like everything else,” Gessing said. “Well, at least going into the session the broad population finally said well we know this is actual direct subsidy – we’re writing checks and that film backlog grew to $383 million by the end of the session and $225 million was allocated by this legislature to pay down part of this backlog.”

Gessing said New Mexico prior to Governor Martinez had an unlimited film subsidy program which meant that 25 cents of every dollar that Hollywood producers and film makers spent in New Mexico would be reimbursed.

“If they spent $100, they got $25 back in a check from the taxpayers. This session saw an increase from $50 million to $110 million.  That is a tremendous increase – a staggering increase. We should be pushing the subsidy program to its conclusion. Any industry you subsidize should eventually be able to live on its own, especially when its heavily subsidized, but this administration has bought into the idea that we should continue funding film and I think that may not grow in the next session but I don’t think there is going to be any push to change it or limit it. It’s going to be how much more can we spend on Hollywood,” he said.

Addressing the passage of the minimum wage bill, Gessing said Los Alamos is currently at the statewide rate of $7.50 so that wage will go up $1.50 to $9 at the beginning of the year.

“Los Alamos is a relatively prosperous area but you wouldn’t know it from the road leading into town by the way! But there are a lot of areas of the state that are rural communities that are not going to deal well with a $12 minimum wage,” he said. “A lot of communities are going to be very negatively impacted by a higher minimum. Rural areas that don’t have oil and gas in them are going to be negatively impacted.”

Gessing discussed the 11 percent spending increase in the state budget saying that when government passes budgets their idea is not that it can easily go back and eliminate funding in the future if the money doesn’t come in.

“This is assuming 11 percent and some number of growth each year beyond that. We had the surplus. There was still a small tax increase. I haven’t even included that because it was relatively small in the big legislation that passed. The 11 percent spending increase is completely unsustainable. Yes you may be able to get that in one year but there’s no way you can continue with that into the future,” he said. He added that a lot of policies that were designed to diversify New Mexico’s economy actually make the state more reliant on federal spending and oil and gas industry. He noted that reliance on the oil and gas industry is all well and good as long as prices remain stable.

“If we get another shock and you can have these at any time literally, I just find it very troubling to be building 11 percent increase this year and expectation of further increase on that into the budgetary discussion and really, despite all the happy talk, we are really looking at oil and gas, especially the Permian basin to carry that load,” he said.

On the 2020 session, Gessing said he expects there to be another push for pre-kindergarten by tapping the permanent fund.

“I don’t know if they will come after the abortion issue again or maybe additional gun control. Maybe they’ll really dive into some of these economic policy issues but I suspect they got most of what they wanted aside from tapping the permanent fund for Pre-K, that they’re not going to go for a lot of these unless you see a governor veto come out of the blue on one of these and they say we didn’t want the half loaf, we wanted the whole loaf and we’re going for it in the 30-day session.I think they came very close to overreach or overreached in this session and they’re not going to be quite as aggressive as they head into election year,” he said.

IMG_0552.jpgFormer State Rep. Jim Hall, left, chats with Paul Gessing following Thursday’s event. Photo by Maire O’Neill/

IMG_0539.jpgRio Grande Foundation manager Paul Gessing speaks in Los Alamos Thursday. Photo by Maire O’Neill/