Archive for May, 2009

During April New Mexico played catch-up in the economic performance competition among the states with the nation’s second largest percentage drop in employment from March. The state trailed only Michigan. The 0.9% drop in employment took New Mexico’s unemployment rate to 5.8% for April, making for a roughly 50% increase in the unemployment rate since April 2008.

Employment in New Mexico dropped a seasonally adjusted 7,500 from March to April. The year over year drop is 22,100, from 847,000 in April 2008 to 824,900 in April 2009. The number of unemployed went to 56,100 in April 2009 from 37,600 in April 2008, again seasonally adjusted.

At the start of Tuesday’s annual meeting for PNM Resources, the sense was that the new goatee adorning Jeff Sterba, PNM chairman and CEO, might be the biggest news. But then Sterba slipped in some real news—a big change in the way new rates are determined. 

To vastly over simplify, our utility bills are set in relation to what is allowed into the rate base, which more or less is plant and equipment, by the regulator, the Public Regulation Commission in New Mexico. Until Senate Bill 477 passed this year, utilities were required to use historical costs in asking for higher rates. The fiscal impact report on SB 477 explains, “In the vast majority of utility rate cases, the (PRC) has determined those rates based upon the utility’s costs incurred during a 12-month period ending not more than five months before the rates are filed, as adjusted to reflect ‘known and measurable changes.’” Since rates cases take months and sometimes more months, that meant utilities sought rate hikes based on numbers possibly two years old.

SB 477 allows the use of a “’future test year’ period is defined as the twelve-month period beginning on the date a utility’s proposed rate is expected to take effect,” the FIR said. Also, construction costs in progress can be part of the rate base in the rate increase request. The change, Sterba said, will “reduce what’s called ‘regulatory lag.’”

Actually, the future test year use has been an option. SB 477 makes it easier. The interesting aspect of the change is that basing rates on future costs requires estimating those future costs. Estimating, of course, is less precise than historical numbers.

At the meeting Sterba proudly gave away copies of PNM’s 2007-2008 Sustainability Report,” a document with four colors of ink on all pages and printed on paper that is very white and lacks the obvious particles usually seen in recycled paper. A disclaimer on the back cover said, “This publication was printed on paper with 100% recycled content. The cover is printed on 110% tree-free, chlorine-free and acid-free mineral based paper.” Note that the second part of the disclaimer applies only to the cover. People at the meeting also got a copy of PNM’s annual report which had a four-color cover and a 16-page four color inside section printed on a heavy stock. 

PNM lost $270 million in 2008 and made $95.4 million including $86.1 million from one-time items, most of which came from the sale of the gas operations.

New Mexico has not supplied state tax receipts data to the  Rockefeller Institute of Government at State University of New York, a resource used by national media to monitor state economic performance.  The select group of secret keepers includes only two others—Montana and Nevada. The three have not supplied tax data to the institute for more than a year. 

The performance picture isn’t good. The Institute’s outlook says, ” The revenue situation worsened in nearly every state in the first quarter of 2009, including states that rely heavily on energy resources. Most of these states had been spared the worst of the fiscal crisis until recently. Only Iowa and South Dakota saw increases in overall revenue collections in the first quarter of 2009 compared to the same quarter of 2008. Deeper revenue shortfalls and more budget cuts are likely on the way for most states for the April-June and July-September quarters of calendar 2009. As discussed in a recent report by the Rockefeller Institute, tax revenues generally fall sharply after a recession for two or more years before any recovery. While some experts say the beginnings of economic recovery may be underway, deterioration in the fiscal picture for states will likely continue at least in the near term.”

The per capita income in New Mexico was $32,091 in 2008. This was a 4.5% increase from 2997, a performance that ranked eighth nationally. That’s the good news.

New Mexicans’ income ranked 44th nationally, up from 46th in 2007. Our hold on 44th place is tenuous. South Carolina is only $207 behind in 45th place. Kentucky in 46th place is $265 behind New Mexico. Such small gaps can vanish when the first published estimates are revised.

The rest of the other news is that nearly all of New Mexico’s income growth came in the first half of 2008 when oil prices spiked and the state’s economic forecasters thought the money would keep coming, thereby suckering the legislature into giving back to the citizens money it turned out the state didn’t have. 

On a quarter to quarter basis, personal income in New Mexico, starting the first quarter of 2008, grew 1.7%, 2.5%, -0.15% and then 0.17% from the third to the fourth quarter.

The report card, published last month, has been added under the articles and issues heading. The material is interesting, for those into policy stuff, and provides an opportunity for a one-stop, multiple topic comparison to other states. For more information about the State of the Rockies program, look here. A seven-page statistical abstract is of particular interest since the information isn’t easily available and certainly not in one place.

Colorado College, located in Colorado Springs, is a private liberal arts college. There are 637 alumni in New Mexico.