Report from Santa Fe; John Carey

music Report from Santa Fe is made possible in part by a grant from the members of the National Education Association of New Mexico. So an organization of professionals who believe that investing in public education is an investment in our state's economic future. Hello, I'm Lorraine Mills and welcome to report from Santa Fe. Our guest today is John Kerry who is the president of the New Mexico Association of Commerce and Industry. Welcome to our show. Thank you. Well, I want to talk a little bit about the background of ACI. How long has ACI been in existence? I know that you've been president for 10 years. That's correct. And when was ACI first founded? ACI has been around 60 years since 1946. Wow. And what is the mission of ACI? ACI's mission in a sentence is to improve the business climate of New Mexico. And the way we do that is we lobby all three branches of state government on a year -round basis to lobby them to enact laws and policies that will make New Mexico a better place to do

business. Well, talk about objective verification. New Mexico has made the top 10 and number one in so many lists to measure the business climate. For example, we're number one with Forbes, at least Albuquerque is, Hispanic magazine, Albuquerque is number three, the state is way up there, orbits. So if you were looking for any validation, am I doing something right? Well, clearly from a national point of view, we are doing something right. So what has made everyone suddenly wake up and take notice to things you've been doing for so many years? Well, I think it's a combination of things. The Mountain West is growing very quickly. And ever since about the 1940s population and job growth in the U .S. has been moving south and west. And if you look at New Mexico, Arizona, Texas, Colorado, Nevada, you're seeing a lot of growth. And I think for many years, New Mexico was left out of that. And I think beginning in the 80s with

Intel and Honeywell and GE and some of those plants in Albuquerque and with the mining industry and other parts of the state and with the strong oil and gas industry, more people are beginning to notice New Mexico. And I think one really important thing that's happened in the last few years is when the 2003 legislature reduced our personal income taxes by 50 % and our capital gains tax by 50%. That was really noticed. I know that you do a lot of legislative work and I think you've just come back from 30 statewide round table meetings around the state. And that's when business owners and members of ACI come to their regional meeting and tell you what's on their mind. That's correct. What's on their mind? Well, what we're hearing this year is the four main issues. Whether we go to Chama, Rui Doso, Albuquerque or Santa Fe are health care, education and workforce development, economic development and water. And what's interesting is water has become one of the top two or three issues just

in the past four or five years. And I think that's due to a combination of things. For many years, New Mexico thought for geological reasons we didn't have the same water issues that Arizona and some of the other Western states had. Well, we realize we do. So quantity and quality of water have become really big issues. And just the fact that we've been in a drought for six or seven years has helped people focus on that. So in our lobbying in recent years, one of the issues we've lobbied is to try to get the state to spend more of its infrastructure funding on water projects. And in fact, about three years ago, we were successful in getting the legislature to appropriate at least 10 % of all severance tax bonding for water projects. Now, this November, isn't there a constitutional amendment on the ballot that establishes this water trust fund? That's correct. And a certain significant amount of money a chunk of change to put in there. How does ACI feel about that constitutional amendment? We support that. And

again, it's one of a number of steps that we've supported. One of the important things is to fully fund our state engineer's office. For years, it was not adequately funded. And it had had a very huge backlog of water applications and water adjudications. And as people know, the state engineer helps adjudicate who owns water. So they've gotten some additional computer funding where they can computerize their database and more funding for staff. And we're hoping that we can get that office fully modernized. That's wonderful because they not only adjudicate water issues within the state, they have to fight Texas and the other national conflicts about water that are, you know, it's appalling for us. We feel we have so little water and we think we have to give so much of it downstream. I know it's the old water laws, but we want them fully funded so they can fight for our water. Right. And I think the legislature is recognizing there's some innovative things we can do. We have a statewide water plan now. We've increased funding for the state engineer. A few years ago, we actually got a tax credit that would encourage

all and gas companies to reuse water. And some of the cities around the state have enacted some innovative programs to reuse water and to use gray water. So sometimes, you know, we focus on those really hot button types of issues like tax and dominant domain and things like that. But when people look at New Mexico, one of the questions they ask is, yes, New Mexico is a desert state. And yes, water is an issue. But what are they doing? So when we make progress on water issues, that makes a big statement to the rest of the country that we recognize we're a desert state. But there's a lot that we can do to ameliorate that issue. Some of the other issues that you mentioned, economic development, health care, education. I recently interviewed former governor Carruthers and he's worn all those hats. He's been an educator. He's been a business person. He was in charge of a health care organization. I said, which is more important? And he said it always comes back to education. So I'm not asking you to rank all those. But I know you've been very active in education

supporting the pre -K programs and the full -day kindergarten. And do you, if you were to, do you think, which is the basic building block? Well, water, because people have got to water to live. But then what would you put maybe as the next most important? Well, one issue, one reason education is always in the top three or four with business people, is one of the biggest challenges our members have. And I hear this everywhere in the state and from every type and size of business, is the real challenge in finding qualified knowledge -based workers. So 15 years ago, organizations like ACI didn't normally get involved in education. It wasn't considered, quote, unquote, a business issue. But now we look at pre -K, we look at K through 12, we look at our community college system, we look at our four -year colleges, we look at improving our governance structure. And one reason governance is important is before we had a secretary of education and a secretary of higher education, it was very difficult for business people and citizens to know, well, who's really

accountable? Who's really accountable? So now we have a cabinet officer for both K through 12 and higher ed so that business people have one person to go to in the governor can put one person in charge. So while sometimes business organizations get caught up in ideological type issues, a very practical issue for almost every type of business is finding good qualified workers, whether they're recent high school graduates or community college graduates or college graduates. And I can tell you that everybody looks at that when they're considering expanding or relocating a business. Another hot button issue that always comes up is healthcare. And we had discussed this a little bit as we were preparing. A lot of people ask, how did Evergate hooked up that employers had to provide healthcare? And they use as an example that if you buy a new GM car or any American made car, $1 ,700 of that is the cost of healthcare for the worker, whereas if you buy a Toyota or a foreign made

automobile, you are not paying healthcare for that. So I think it would be really instructive if you could tell us a little about how that hookup got made. Sure. And there's a debate now among a lot of people should quality healthcare for Americans be an entitlement or a privilege. And some of the reading I've done prior to World War II, very few businesses or employers offered major comprehensive healthcare. And one of the things that came out of World War II is because of the economy in the war, some companies were having a hard time giving major pay raises. So one thing they did in lieu of that was start to offer healthcare. And then gradually it became standard among larger companies and then medium companies and then a lot of small companies try to offer it. But one question we need to think about is you know employees don't have their employer take care of their automobile insurance or their homeowner's insurance or things like that. Why major medical and is an employer based system the best? Well people could also say well having

200 million people out individually buying health insurance wouldn't be any more efficient either. And then our argument is it would never be efficient for the government to completely take it over. What then would your solution be in the best of all worlds? There is no perfect solution. I have no magic bullet in what I tell people if there were an easy answer for healthcare we would have found it. And part of the challenge is us. Most of us as Americans want affordable accessible world class cradle to grave healthcare without paying much for it. And that can't happen. And every possible solution involves some pain. Either we as consumers pay more or employers pay more or the government pays more which requires more taxes or doctors are paid more or doctors are paid less and what is the role of the insurance company and all of this. So there are all these factors in New Mexico because we have one of the highest percentage populations under age 25.

We have a very high percentage of uninsured and not all of those uninsured are people who are not working a fairly high percentage of uninsured around the country or people who work for small businesses and small employers. And either the small employer can't afford to offer it or the employee makes the decision not to take it because the copay is too high and they gamble they're not going to get seriously ill and if they do they go to a county hospital. So one thing people need to consider when we talk about healthcare is we're already covering uninsured people through county hospitals. They're obligated to take care of those people. Is that the most efficient way to do it or is there a better way to get them insured? Well I think this administration has been like taking bites out of the problem given the fact that we have 400 ,000 uninsured people here. And I think in the last session they made access for all children under five no matter of income that there will be healthcare

for them and they're working with small businesses. And like you say it's a huge problem and we can take nibbles out of it and if someone had a dream solution it would have been solved a long time ago. So thank you for your thoughts on this. Another thorny issue is tax or tax structure. Does it help accomplish the goal of making this a desirable climate for other businesses to come to New Mexico? Or I know the governor had appointed the Blue Ribbon Tax Reform Commission and they came up with lots of ideas and not too many of them have been implemented. Do you see changes that need to be made in our presence tax structure? Sure. Let me talk about our successes a little bit first because ten years ago we were not competitive and what people need to recognize is New Mexico is not primarily competing with New York or Rhode Island and high tax states like there. We're competing with Texas, Arizona, Colorado, Oklahoma. We're completely surrounded by low tax pro growth

right to work states in the Mountain West. So it's really important that we compete with those other states and when we took our 8 .2 highest marginal rate down to 4 .9 that was a very important signal to the rest of the country that we want to be competitive. And we're now I think in the fifth year of a six year phase down from 8 .2 to 4 .9 and that makes us competitive with a lot of other states and people take note of that and when we lowered capital gains that was a positive statement. And also we lowered unemployment insurance rates a few years ago which is a positive statement because almost every business pays that. The one area that's our biggest challenge as you know is a gross receipts tax on services. Most states don't have a gross receipts tax on services accounting firms, law firms, architectural firms. Chiropractors, employment agencies. In fact when I moved to New Mexico I think I got a dental bill or something that

said what is this tax because I had never paid it before. The bad news is most states don't have that. The good news is in kind of an ironic sense. Other states are beginning to look at taxing services because the economy is moving from an industrial manufacturing economy to a knowledge based economy. I mean we could have been out out in front. But I think for the foreseeable future we do need to diminish the burden of that gross receipts tax on services. And we've had some success in recent legislative sessions a couple of years ago we got about a three or four million dollar fix and then we need to do more. But we can't totally eliminate it because our state is too dependent on it and we have one of the lowest property taxes in the nation. And like we were talking about you look at taxes as a three -legged stool and every state has a sales tax or gross receipts tax, a property tax in an income tax. So if any one of the three legs

gets out of kilter. So they saw down the income tax and so that made more burden fall on the property tax and perhaps the gross receipts tax. It makes the gross receipts tax more important as a part of the state budget for important infrastructure needs. And we have important infrastructure needs with schools and transportation. So the last thing the business community would say is we can totally get rid of the gross receipts tax on services. We can't ride away but what we need to do is say where is it hurting the most. And our tax committee looked at pyramiding where as a transaction moves through the stream of commerce. Like if you talk about a construction project there's a general contractor, a subcontractor, an architect. What we're trying to do is not have the gross receipts tax come into play at every state. So what we're trying to do is tackle this issue through pyramiding. And to his credit Governor Richardson has supported that and the legislators have. And unfortunately during the last legislative session that ended a few months ago. A

bill to give us relief died during the final hours of the session. There was bottleneck. It was in a big bill and it died from a lack of time rather than opposition. Right. Another issue that didn't fare as well as many people would have liked during the last legislature were attempts at ethics reform. You talk about, we are being competitive with our neighbors and if we've got these black marks of ethics indiscretions or violations on our record. People might turn away from doing business here. What would you like to see in the way of ethics reform? Well an important first step was about five months ago Governor Richardson appointed a task force on ethics reform. And might I congratulate you for being a member of that task? I remember and former Governor Gary Carruthers and the Dean of the University of New Mexico law school and Matt Brex with common cause and Barbara Brazil with New Mexico first. And a lot of very prominent people are on that committee. We've had a number of meetings. And what we're doing is we're taking a look at it at the whole picture. Executive branch, legislative branch.

Should there be campaign contribution limits. Rules on gifts, rules on nepotism. The whole structure and it's very complex. I've got three bound volumes that I can't even lift to take to my car of what other states are doing. And one thing that we're looking at that's very interesting is a majority of states have an independent ethics commission. And we're taking a look at that to see if that might be a good idea here because part of the problem now is there's some confusion. Is to exactly what controls the legislative branch has. What controls the executive branch has. And where do you go? Now there are some tricky separation of power arguments and issues because the legislative branch never wants to be told what to do by the judicial or executive. And the executive never wants to be told what to do by the legislative. So something would have to be worked out to make sure that all three branches were properly protected. I personally support campaign contribution limits. We're one of the few states where there's no limit on what

someone can give to a governor, a lieutenant governor, an attorney general candidate, a legislative candidate. And I think that would be an important first step. It wouldn't totally solve it. But it would diminish the possibility of a tiny handful of individuals or organizations having a disparate effect on funding a particular candidate. And I wonder sometimes if some of this isn't cultural, have we gotten away from a really basic sense of what's right and what's wrong. And the thing that brought that to mind was when allegedly Michael Montoya, when the former treasurer, when being investigated allegedly said, well kickbacks is how we've always seen business here. And I thought, either that's extremely disingenuous or could somebody miss, you know, just not get it, that this, this might be wrong to conduct business like this. And the whole pay to play thing. I think you mentioned, even on your website, New Mexico has got to get away from that image that you have to pay to play in order to succeed in business here that you have to be contributing.

What do you think? Well, that's correct. And I want to be careful here. New Mexico is not unique. I've lobbied in other states. Chicago, Louisiana. New Jersey has problems. In a whole bunch of states now are reworking their ethics laws. There's been a major scandal in the Tennessee legislature. The governor of New Jersey had to resign. Governor of Arkansas, there have been a lot of issues. But I think the fact that we've had a couple of very high profile trials recently and some very high profile resignations helps people to focus on the issue. I do think it's a relatively small percentage of people, but one or two is too much. And when the Wall Street Journal or New York Times run an article about a state treasurer allegedly receiving cash and envelopes in a men's restroom, that's not good for our image. Now, we are taking these people to trial and the law enforcement people are investigating and looking at it. So we recognize you can't totally legislate morality.

But I think some areas of our ethics laws can help diminish the possibility of people doing this. And there are some people out there that what I would say are marginal. And if they think there's a very good chance they'll be caught, we'll make a decision not to do it. So those are the people that you might prohibit from doing it. But the old rule in politics used to be if it even could possibly appear to be unseemly, just don't do it. That's correct. And in a perfect world, we wouldn't need ethics laws. Yeah, but welcome to our world. Yes. I want to talk with you about a project you have called the Prosperity Project. Sure. Tell me about it. The Prosperity Project was created nationally about five years ago. And what happened is some of the major business groups that we're affiliated with, like the National Association of Manufacturers. Notice the labor unions and environmental groups and other consumer groups that aren't always business

-friendly. We're doing a better job than business with grassroots politics and fundraising and activity. The door -to -door and the licking of envelopes and websites and all of that. And what business people would do is have the CEO or government affairs person attend a political reception and write a check. But they weren't getting the employees involved. So they did a poll. And they ask employees of businesses who do you most trust or rely upon when making a decision on whether to vote or who to vote for? A, your neighbor, B, your newspaper, C, your union's shop steward, D, your employer, by a fairly significant margin. They said, we want to hear from our employer. Because some of these issues, like free trade or unemployment compensation or worker's comfort, are real important to the bottom line of a company. So we realized we had this huge sleeping giant. All of these employees out there whose lives and careers were determined by Congress and state legislators and governors and mayors weren't being mobilized. So this is a real neat grassroots web -based program

where we're letting employees of businesses know these are the important issues at the federal level, state level, local level. These are how your representatives are voting. Here's a sample letter that you might want to send to your congressman or mayor or state legislator. It's nonpartisan and it doesn't tell people who to vote for. That's very important. But it might tell people like in - If you're in the mining industry. Here's an important issue that Congress is voting for. And some of it's just very practical information like, what is a deadline to get an absentee ballot in Duniana County? Yeah. And when is the date of the school board election in Duniana County? Or when is a deadline to register to vote for a legislative race in Raton? Or... Now you had mentioned nonpartisan and I think this is a battle you have to fight on many levels because of this kind of toxic partisan bickering between the two parties. Talk about partisanship and nonpartisan chip in terms of business and in terms of international level

too. Sure. Unfortunately in the last decade or so, both at the state and the national level, politics and public policy has become more polarized. When I first got involved in politics in the 60s, you had some very conservative Democrats in Congress and some very liberal Republicans. And what's happened is each party has made their moderates less welcome. So the parties tend to be more polarized and more firm and there's more pressure on party discipline. If a Republican or a Democrat doesn't toe the party line, they may not get campaign funding. They may not get good committee assignments. They may not get travel. And they're ostracized in the coffee room. So there's tremendous pressure to vote a party line. And it's very frustrating when you represent a business organization and people will tell you, well, John, you make a good point but it'll make people in the party mad. Or this is what my party tells me. So while there are a lot of advantages

to a strong two party system, and I could make a good argument that that's better than the parliamentary system in Europe, it still makes it difficult. And it can be very brutal. It can be toxic. And unfortunately, in most areas of the United States, if you want to run for office, you have to be a Democrat or a Republican because we don't have a very good history with independent and third parties. So I want to come full circle again to your mission and how bipartisan that mission is. It really is what blesses one blesses all. And if your fight is against poverty and to improve the business climate, everyone benefits from that. So really, you have to fight off these partisan urges so that everyone can say, you know, this works for everybody. Every Democrat, every Republican wants to make it good to be a better place. So tell me your mission again. Well, it's to improve the business climate. And when we lobby a bill like in our house, we have 70 house members. We look for 36 votes, which means we have to get Democrats and Republicans.

And on the Senate side, there are 42 senators. We need 22 votes. And a good example I can give you, the way that people look at things through partisan lens is when Governor Johnson was our governor, Gary Johnson for eight years. Sometimes very partisan Democrats would say, well, John, you and ACI are too close to Gary Johnson. Well, now with Bill Richardson as governor, some Republican oriented people say, well, John, ACI and you are too close to Bill Richardson. And I point out, you know, you have such short memories. Yeah. We work with whoever's governor. We lobby all 70 house members. We lobby all 42 senators. We work with regulators. And we try to avoid getting into the party label thing. Well, I'm, we've run out of time alas, but I, that's a perfect note to end on. So I want to thank you, our guest today is John Kerry, the president of the Association of Commerce and Industry. Thank you for joining us. Thank you so much. And I'm Lorraine Mills. I'd like to thank you our viewers for being with us today on report from Santa Fe. We'll see you next week.

Report from Santa Fe is made possible in part by a grant from the members of the National Education Association of New Mexico, an organization of professionals who believe that investing in public education is an investment in our state's economic future. Thank you.