Efficiency Group and the Deck Chairs

Gov.-Elect Susana Martinez has put the Garrey Carruthers efficiency group back in business. Excellent.
In its previous life as the Committee on Government Efficiency, starting in December 2009 and ending with a report dated January 14, 2010, the group surveyed the low hanging fruit and found savings to recommend of $129 million.
The biggest item was $35 million from increasing state coverage insurance premiums. The group also tended to little stuff, finding about $700,000 in savings from eliminating and/or consolidating more than 35 boards, commissions and task forces.
Another ten items were recommended for further analysis including reducing the number of school districts and the number of institutions of higher education.
However, the group didn’t really look at eliminating activities of state government, except outdated boards and commissions.
Efficiency has to go beyond rearranging the deck chairs.
Here are a few thoughts:
First, recommend some actions that might be considered outlandish. How about eliminating Harding County? The latest housing estimates show the county with more housing units than people, clearly a statistical quirk of some sort but yet another indication that paying special attention to Harding County as a county is a waste.
Or eliminate the local government division of the Department of Finance and Administration. Any functions thought useful such as the capital budgeting advisory work can be parked elsewhere.
Opportunities exist in higher education.
Just looking at degree titles, I find New Mexico State University offers two doctoral degrees in educational administration. One is a doctor of education. One is a doctor of philosophy. The college of education at the University of New Mexico offers 11 (wow!) doctoral degrees in education. There is one in just “education” and with one each covering educational leadership, linguistics and psychology.
Consolidation and program reduction opportunities await.
Western New Mexico University offers ten graduate degrees. The listing for education masters degrees is confusing, but there appear to be 11. There are two ways to get a masters degree in social work, two MBA options and three ways to get a masters in “interdisciplinary studies,” whatever that is.
Highlands University has masters degrees in 16 fields including computing, business, human performance and sport, public affairs (absurdly promising “a comprehensive understanding of the social and cultural environment in the public and private sphere”) and social work. The latter, by the way, is well regarded. By contrast, I simply don’t understand how, with five campuses outside its Las Vegas home, Highlands can offer computing and business graduate degrees that are other than a complete waste. And of course, those five non-Vegas campuses should be eliminated.

Abq Loses 6,100 jobs. Rest of NM Gains 10,700 jobs.

The Department of Workforce Services says New Mexico added 4,900 wage jobs (seasonally not-adjusted) during October and 4,600 jobs, or 0.57% (that’s just over one-half of one percent, in case the decimal makes your eyes blur), again not seasonally adjusted, from October 2009 to October 2010. Metro Albuquerque lost 6,100 wage jobs over the year. That means the rest of the state gained 10,700 jobs.
The Bureau of Labors Statistics numbers reported yesterday were seasonally adjusted. DWS released the figures this morning. This is the first year-over-year job growth in 23 months, DWS says. Happy Thanksgiving.
Statewide, the year-over-year losers were: Construction (-1,000); wholesale trade (-900); retail trade (-2,900); transportation (-600); information (-600); professional and business services (-2,000).
The retail job loss suggests consumers are still hiding their wallets, bad news for state gross receipts tax collections and for the deficit-ridden state budget.
The big gainer, as reported yesterday, is state government with 2,900 net new jobs over the year. That’s amazing. Note that not all “state government jobs” are with the state government of New Mexico. That these numbers are seasonally adjusted says that mostly likely real growth has occurred. The other explanation is statistical trouble. The growth is in rural New Mexico. Only 500 of those 2,900 state jobs are in the metro areas.
The Albuquerque job loss was 1.6%. Albuquerque lost 3,700 jobs, year over year, in professional and business services. This sector hosts all sorts of technology companies such as engineering services firms, computer systems design and environmental consultants. However, about 20% of the sector’s employment consists of accountants and lawyers. Construction lost 2,600 jobs, year-over-year, in Albuquerque, which means that the rest of the state gained 1,600 construction jobs. Construction has the fewest jobs in Albuquerque since February 2000.
The beginning of the state’s recovery, such as it is, is driven by Las Cruces (up 2,000 jobs, year-over-year, a very nice 2.9% increase) and the rural areas. Santa Fe lost 100 jobs over the year while Farmington lost 400. Professional and business services leads the Las Cruces recovery with a 1,200 job, one-year increase.

NM Employment Grows! State Still in Trouble.

New Mexico added 6,300 wage jobs (seasonally adjusted) during October. With the 0.8% increase (to 810,800), New Mexico was second nationally in percentage job growth from September to October. The numbers were released by the Bureau of Labor Statistics today. The state also added jobs on a year-over-year basis, with a 4,600 job increase from October 2009.
The state’s labor force was 957,000 during October (seasonally adjusted), the same as during October 2009.
With 80,800 New Mexicans unemployed during October, the unemployment rate was 8.4%, up from 8.2% in September.
On a year-over-year basis, selected sector during October performance is below:
Construction: 44,400. -1,000.
Manufacturing: 30,400. +1,200. (A crucial, basic economy sector)
Trade, transportation and utilities: 129,000. -4,500.
Professional and business services: 98,500. -1,900.
Education and health services: 124,600. +5,300.
Leisure and hospitality: 86,300. +700. (The proxy for tourism)
Government: 203,100. +3,700. (Gasp! Incredible!)
Reality check: The overall job growth is great news. But, together, government and a semi-government sector, education and health services, added 9,000 jobs. That means the private sector, the real world wealth creating part of the economy, lost a net of another 2,700 jobs. And that means that while the New Mexico economy may be edging toward the door of the intensive care ward, we’re still in big trouble.

This coming Friday, November 26, won’t be a “black Friday” for all. That’s because the Bugg Lights display will start its third year at Menaul School. The lighting ceremony starts at 5 p.m. The lights will be on until 9 p.m. The lights will be on again at sundown the 27th, on Friday and Saturday the next two weekends and then every night from the 16th through the 24th.
There are about 200,000 of the lights, as I remember, in a variety of displays. The display was create by Norman and Joyce Bugg in their northeast Albuquerque front yard. After outgrowing the Bugg’s yard, the display migrated to the now-defunct outlet center between Albuquerque and Santa Fe and then to Menaul School.

For more information about the light display and the school, see www.menaulschool.com.
Menaul School is one of those Albuquerque institutions that is easy to overlook. Located at 301 Menaul Blvd NE since its founding in 1891, the school is small. The buildings are set back from the street, which was named after the school, and far from the flash and dash of the recycled UNM Pit Arena.
The Presbyterian Church ran Menaul until 1972. Now there is what school president Lindsey Gilbert calls “a covenant relationship” with the church. Not that Menaul shies from its origin. Indeed, Menaul embraces its faith base. “You should discuss issues of faith” in a non-dogmatic way. Gilbert was leading the campus tour after hosting a number of community members at the schools monthly outreach breakfast. There is daily chapel, but run by the students.
The faith-based mission is “vital to helping our kids have a sense of identity,” Gilbert says.
The student body is 75% non-Anglo with 60% receiving financial aid. Half the students are the first one in the family to attend college and 70% finish college.
All in all, worth a look.
(Bugg Light photo, courtesy Menaul School.)

Albuquerque Real Estate: Sales Down, Prices Steady, Nonsense Published

The DukeCityFix.com website this morning picked up an item from Memphis and blithely republished a claim that “September price reductions” showed Albuquerque with a 35% decrease.
While it’s unclear exactly the timeframe referenced by the Memphis folks (year-over-year?), the claim is nonsense. I have asked DukeCityFix to publish a correction. Here’s the truth. In September, average ($217,677) and median ($183,000) single family detached home prices were up a bit over September 2009.
Overall the metro price pattern appears to be stable-to-increasing. The median single family detached home price was $180,000 for October. This marked the third month out of the past four with an increase on a year-over-year basis. The average price of a metro home was $225,666, a 7% increase from October 2009 and the second highest average price since August 2008. The highest average price for 2010 was $230,213 in July.
The pending sale of 655 single family detached homes was recorded during October, almost the same as the 657 pending sales during September. During October the sale closed on 456 homes, a 4.8% drop from September.
My quick look at the realtors' website (www.gaar.com) indicated that metro single family home prices peaked in June 2007 with an average of about $262,000 and a median of $215,000. By July 2010, the price peak for 2010 to date, the average price was down 12% and the median down 13%.
I don’t know what the Memphis folks have put in their barbeque sauce, but DukeCityFix does harm if they don’t publish an attention getting correction.
On a year-over-year basis, closed sales continue well below 2009 when sales reflected the first-time buyer tax credit that ended in April. That pending sales during October were essentially the same as September suggests that perhaps November sales may be in the vicinity of the October figure of 456 closed sales. That’s because pending sales are a leading indicator for closed sales in the following month.
On the other hand, as economists like to say, it’s cold. In Albuquerque the winter months, January and February in particular, are the slowest for home sales. So we’ll see.

Wells Fargo Doubles Market Share Lead

Wells Fargo Bank almost doubled its New Mexico market share lead over Bank of America between June 20, 2009, and June 30, 2010, according to figures from the Federal Deposit Insurance Corporation.
Wells has 24.16% of New Mexico’s bank deposits as of mid-2010, a three-point, one-year share increase. Wells added nearly a billion dollars ($972.9 million) to its New Mexico deposits, a 19% increase that brought total New Mexico deposits to $6.2 billion on June 30, 2010. Wells Fargo had 98 New Mexico offices in mid-2010, down one from June 30, 2009.
By major contrast, Bank of America, Wells’ main New Mexico competitor, dropped $434.6 million from its June 20, 2009, deposit total of $4 billion, an 11% decline that took 1.9 points of its 2009 market share. BofA’s New Mexico market share was 14.16% on June 30, 2010.
While the Wells-BofA gap widened significantly during the 2009-2010 year, the gap hasn’t always existed. In 1991, before the mad shuffle of bank ownership in the state began, Sunwest Financial Services, the market leader, had assets of $3.4 billion, about double the assets of United New Mexico. Sunwest morphed into Bank of America while the morphing took United New Mexico into Wells Fargo.
New Mexico had five banks with deposits of more than $1 billion in mid-2010. Bank of the West followed at $952 million.
The top six had 56% of the deposits. So far as I know, only one of the top six, Los Alamos National Bank is truly locally owned.
The next 14 banks had deposits between $217 million and $674 million.
Deposits grew $946 million, or 3.8%, in New Mexico between 2009 and 2010. The deposit total was $25.8 billion on June 30, 2010.
Wells Fargo’s one-year deposit increase, $972.9 million, was more than the statewide increase, meaning that, on net, all the state’s other banks lost deposits during the 2009-2010 year.

Office and Industrial Real Estate: Little Happening

Jobs are needed to justify building office and industrial buildings. The jobs aren’t there in metro Albuquerque.
What with a three supply of industrial space and a five year supply of office, no reason exists for new, speculative space. This was the outlook presented today to NAIOP, the New Mexico chapter of the Commercial Real Estate Development Association. The occasion was the annual office and industrial real estate update.
Money is the main reason for the expected paucity of new buildings. Lenders want up to 35% equity, backed by pre-leasing.
The industrial vacancy rate was 10.4% in the metro, driven by the GE engine plant closing. The fall 2009 vacancy forecast was 9.5%. As of now, no new industrial projects are in the pipeline for 2011. The forecast hopes 50,000 square feet of new industrial space will materialize.
Office space was 18.1% vacant in the third quarter of 2010, just above the national vacancy rate of 17%. For 2011, one project for 98,000 square feet is known. The little activity that does exist come from government.
For the national economy, Bab Bach, chief economist for Grubb and Ellis, sees 2.2% GDP growth in 2011. New wage jobs will average 125,000 per month in 2011, barely enough to absorb the new entrants to the labor force.

Two Fun Rankings

Fourth is New Mexico’s rank among the states for percentage of forecast revenue promised for annual pension benefits starting five years after New Mexico’s pension assets run out in 2026, says the article in the October 16 issue of The Economist (economist.com/usstatepensons). At about 40% of revenues obligated, New Mexico is behind only Rhode Island, Colorado and Ohio.
The calculations assume 2008 revenue grows by three percent per year and use a “wildly optimistic” assumption of an eight percent annual return on assets reinvested in full.
Thirty-third is New Mexico’s rank for business tax climate for the just completed fiscal year, FY 11, that ended June 30. First is best, 50th is worst. The Tax Foundation (www.taxfoundation.org) produces the annual report.
A more relevant number here might be ten. That’s the number of places New Mexico dropped from FY 10 to FY 11.
Rankings for previous years were: FY 09, 26; FY 08, 29; FY 07, 25; FY 06, 23.
South Dakota, Alaska and Wyoming led the tax climate ranking for FY 11. The clear implication is that while tax climate matters for prosperity and business location, other factors come into play such as having people in the state and being close to major markets.

Election Observations: It Was All About Bill

Gov. Bill Richardson says the results of the governor’s race weren’t about him, that it was a national race. This self absolving comes the guy who lied about being drafted by a major league baseball and then, much more important, stuck with the lie for 35 years until Toby Smith of the Albuquerque Journal told the tale.
Two years ago I was saying that Lt. Gov. Diane Denish had two main problems in her race for governor—Hillary Clinton and Bill Richardson. Mrs. Clinton was proxy for the heir apparent situation, which Mrs. Clinton blew in her presidential candidacy and which I know affected Lt Gov Denish, though I don’t know how.
The Richardson problem was, basically, that every day Richardson remained governor was a good day for the Republicans and a bad day for Denish and the people of New Mexico.
A corollary problem was that Denish was not only the political heir apparent, she was the establishment heir apparent.
My argument and the argument of others was that Denish needed a complete break with Richardson via a news conference to denounce both his “style” (Denish’s word) and as many policy items as could be found. Instead Denish tried to finesse the relationship, saying that everyone knew her style was quite different from Richardson’s. The worker bees in state government weren’t happy.
Denish could not have anticipated that the Republicans would have a real, viable candidate, unlike in 2002 and 2006. Nor could Denish have anticipated that Susana Martinez would reverse the usual demographics—Hispanic woman from the south—that favored Democrats. This meant the general election was Martinez’ to lose in the sense that the person getting the most votes in not necessarily the “winner” of the election. Denish had to “win” the election.
My nomination for the most significant event in the entire campaign was the day that Martinez went to Roswell and got the money, around $250,000 as I remember, from the guys that disliked Allen Weh, former NM GOP chair and self-financed primary candidate for governor. That money made Martinez competitive. Weh proved a poor candidate, successfully overcoming his marketing budget, and the rest is history.

IdeasforNewMexico@swcp.com

I have set up this email address to gather ideas for the coming Martinez administration. The task is to reset New Mexico’s state government. But what to do?
Look around. Tune your observational antennae to the activities and requirements of government. You will see activities and/or rules that should be designed for more efficiency or simply eliminated.
Make notes and share your information. Send your observations to: IdeasforNewMexico@swcp.com. The ideas can be of grand scale or quite specific. The first contribution had to do with regulatory simplification.
I will use your ideas in columns during the rest of the year. (The column runs in ten newspapers around the state.) The best comments will be here.
It's our turn.

Filming Closes Intersection, No Compensation To Drivers

Every time my life is interrupted by filming, I want a place to send a bill for the distraction and time lost. This happen most recently on Sunday, October 31. A traffic safety commercial with a fake accident scene complete with volunteer state police officers was filmed at Girard and Indian School Road NE in Albuquerque, north of the University of New Mexico.
My problem with filming disruption comes from two places. First is the idea that the government grants a privilege, a monopoly, for the use of an area for a while and if I don’t like it, that’s tough. In economics this privilege comes under the idea of rent seeking. Second, I am already subsidizing the private enterprise doing the filming through the state’s 25% rebate. It’s double rent.
The rent idea and the duration of the disruption, hours or days, makes the filming situation different from, say, waiting five minutes for a truck to back into a warehouse dock along Broadway NE in Albuquerque.

In this case, I knew about the filming thanks to a heads-up email from an organization that had vehicle access affected by the filming. Early Sunday afternoon, as I walked from this organization, I saw the crew setting up, noted the situation and continued walking.
Hundreds of others, maybe a few thousand (I don’t have traffic counts), had to have been much less relaxed about the situation. They didn’t know about the filming, which went on into the evening. Driving by, they saw three or four vehicles with flashing red lights and a couple of smashed vehicles. “What the hell was that?” would be the normal reaction.
Also, the film company’s choice of location blocked the usual route of choice into and out of the neighborhood, thereby increasing stress and danger. The intersection is preferred because it has a light, allowing drivers to avoid playing dodge-car with speeders who hit up to 55 mph on Indian School Road.
Thanks to Mark Bralley for the photos and the insight that the offers were volunteers. Their service is appreciated.

NM Economy: Recession Continues, Says KC Fed

A dozen days ago Mark Snead came to Albuquerque with the traveling road show of the Federal Reserve Bank of Kansas City. Snead is branch executive and regional economist with the KC Fed’s Denver branch. Snead talked about the New Mexico economy.
New Mexico and Colorado are the poorest performers among the KC Fed’s seven states. Both lag the economic cycle, stuck in a last in/last out situation. All in all, though, New Mexico “is progressing through the cycle nicely,” Snead said.
New Mexico entered the recession late, had a sharp contraction and, as yet, shows no recovery. We’re in the first severe recession of the post World War II period with 51,000 jobs lost. Continuing unemployment claims are a complication for New Mexico. The claims continue to continue, meaning that folks aren’t going back to work.
The metro situation is “no bottom” in Albuquerque and Farmington, a possible bottom in Santa Fe with Las Cruces bouncing back and adding jobs.
New Mexico has seen a 20% employment drop in the good producing sectors. State and local government employment stood above the fray until around June and since then has fallen steeply. New Mexico has lost 7,100 jobs since December 2009 including 5,000 in state and local government.
Proprietor’s income is the technical name of what self-employed people earn. This fell off a cliff in 2009, especially in the construction and energy sectors. Earning and compensation also fell, but much less, and now show a slight increase. Proprietor’s income, though increasing again, remains well short of the peak.
Real estate and construction are “your Achilles heel,” Snead said. Construction employment, seasonally adjusted, picked up a little during the summer and is now headed back down.
Home prices here, down 8.5% since 2007, show the largest drop of the KC Fed states. Existing home sales dropped 60% from peak to trough, but have recovered a bit. Mortgage delinquencies may have peaked here and nationally.
Some evidence exists of stabilization in commercial construction employment.
One good note is that New Mexico is seeing a strong rebound in drilling.