Report from Santa Fe; Garrey Carruthers

. 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. Hello, I'm Lorraine Mills and I'd like to welcome you to report from Santa Fe. Our guest today is one of New Mexico's finest statesmen, former governor Gary Careathers. Welcome. Thank you. It's good to be here today. Well, I'm so happy to have you because you know you've all to the point where your fingers on the pulse of every major issue that's happening in the state. So I'm very thankful that you're coming to to fill us in on what's happening. So some of our topics of discussion today will be your member of the Blue Ribbon Tax Reform Commission and you've been president of Simmaron Health Care since 1993. So you know about health issues and you are one of the Republicans that came out in favor of the constitutional amendments that we're having a special election for on September 23rd. So we'll talk about that too. So welcome. Thank you for being with us. Thank you. I'm delighted to be here. It's

been a while. It's been a while. Let's talk a little about your background. You know, I know that you have a PhD in economics. You were a professor at New Mexico State. You were governor from 1987 to 1990. Right. President of Simmaron Health Care from 93 and now the newly appointed dean of the New Mexico State School of Business. Correct. So tell us how that formed you into. I came back to my roots to be honest with you. As you know, I started off as a university professor at New Mexico State University and I kind of wandered off the reservation about 23 years ago. I tell people I was an exile because I was doing politics and that was essentially true. But I always missed it. Even though I was a governor and I loved that job and I was in business and I found that challenging and remarkable career in business, every now and then I would say to Kathy, you know, I really want to go back to the university. That's where I started. That was my first love. That's my

last love. That's what I like to do. Always enjoyed being around students. So I kept saying it and saying it and finally, faculty members said you're always saying coming back and there's a job open that just fits you. They want a new dean of business administration and economics and they want somebody. It'll spend 30 or 40 percent of time out with the business community and the government and the other 60 percent of the time being dean and we think you're just the right guy for that. So I pondered it for a while applied and they gave it to me and I'm having a great time. It's great to be back on campus and it's a great university. I've always been proud of it and now I get to go back and maybe share some of those other experiences you talked about. In fact, it's rather novel that I'm proud of the first business dean, maybe in the Mexico that came out of business. Normally, if you're a dean, you come up to the ranks. You come up assistant professor, associate, full and maybe a department hit and they become a dean. I came from a whole different world so I hope those experiences just pay off for the Mexico City. I

know they'll bring a tremendous amount. Do you have about 2 ,000 students? 2 ,200 students in our college and about 80 faculty member and probably 35 staff members. What do you bring from your health care running one of the largest health care businesses? How can you, you know, pastiche that onto there so that people will know what jobs are available, the climate, the shifting sands of the major industries? Well, I think just having experience in businesses is the most important thing I can do. I made a comment on one of the faculty members about business plans and where's your business plan? And the faculty members said to me, oh, we teach that. We don't do that. Oh, it's the old professors professors don't do. And so I said, well, we're going to change a little bit. And what I'm trying to do is put the college on a more business like basis. And I think they're relatively enthusiastic about some of my notions. And we're currently working on strategic planning. We're looking at both the revenue and cost sides of our business. But I'm also trying to bring to the

university and to that college a real fascination for customer service. We have a number of customers far and away are probably our closest customers are our students. And I want to make sure we're taking care of the customer. But also the other faculty, our own faculty and other faculties, the business community in the Mexico and the state in general because the university's owned by the state. So I'm trying to bring what I learned in business and in the healthcare business is the only way you stayed in business is you had great customer service. You took care of your customers. And so what I'm trying to do is bring that plus the business acumen that I picked up and trying to make a business work. And we nearly lost some around a couple times. It was not always a financial success. And you learned along the way some real lessons. And I'm trying to bring those lessons of having learned my business in the school of hard knocks, I guess. You talked about walking the halls of academia. Well now I've caught you walking the halls of the state capital, which must be very

evocative of your governorship here. What do you think as you come back here to go to these tax reform commissions? What what what bubbles up from your governor? Well, I've always had an enthusiasm for public policy. I've never really been out of public policy. And I'm not going to get out now. Just because I'm a dean, I will be actively engaged, particularly in educational policies, which you introduced a while ago. And we'll talk about a little later on. But I always enjoyed public policy. And one of the reasons the deanship fits so well is so much of our public policy deals with economic development and the creation of jobs and things of that nature. So I'll be greatly involved coming back to Santa Fe. But frankly, don't think I want to come back here on a more permanent basis. I like to come back and visit a good relationship with the civil servants here and with the current administration as they did the past administration. And so it's always a pleasure to come back. It's rewarding to me. I can use my experience, but don't want to make it a long term project. Well, although the project you're involved in is not long term, it

is one of the most intense projects that I could really think of because your commission, they're the one that you chair a committee of, and you'll tell us about that in a minute. But the Blue Ribbon Tax Reform Commission's mission was to study and make recommendations for a complete overhaul of the state's tax system. And you've been meeting what, two days, twice a month, all day long, I'm surprised that you could even break away to come here, thanks. Well, I had to break away as a matter of fact in a discussion that has really created most of the controversy. And that is the possibility of taxing 501C3 corporations. And someone says, well, why would you do that? Because they're normally associated with charitable organizations, most charitable organizations are 501C3s. But then there are some large ones that are 501C3s that we don't tax right now. And probably the one that comes to everyone's mind is Los Alamos National Laboratory. And we don't tax Los Alamos National Laboratory, but we do tax San Diego Corporation, which is really a spinoff of Los Alamos National Laboratory. And so

in terms of equity, people wonder if that is a fair and reasonable thing to do. Los Alamos were counter that we tax their contractors, which leaves a lot of grocery seats tax money in the local communities in fact is correct. But we also say, have on the hospital side, we have about 50 or 55 hospitals that we don't tax and we have about five or six four profit hospitals that we do tax. And one has to ask the question, is it fair to tax these five or six if we're not going to tax those 55? So those are the kinds of deliberations we're going through right now. When that question is asked, who answers it? Who makes the decision? The tax commission will make a recommendation to the legislature. And then at the special session. To the governor too. On the special session that starts October 27th, all this will be hashed out. Yes, that's true. Now which committee do you chair for committees? The equity subcommittee. And the only question before the equity subcommittee, and my view was, is

everyone or every firm that's in the same position, tax the same way. And that's why you get into 501c3 issue because some 501c3s who are producing the same kinds of goods are not being taxed. Well, those the hospital situation, the four profit ones were being taxed, the not for profits were not being taxed. My recommendation is going to be that the tax commission would have to agree to it, is that we probably ought to make provisions for these five or six that they would not be taxed under certain circumstances. Because if you tax the other 55, then you just drive the price of health care up again. And it's already escalating from my other background. It's already escalating far too rapidly. So why would you exacerbate an already troubling problem? So those are the kinds of deliberations and debates and discussions we can enter. So the equity committee of the commission looks at inequities or inequalities, the fairness issue. And your main subjects are the national labs who gets taxed and who doesn't, the hospitals,

anybody else? What about their old scout cookies? Well, that comes under 501c3. And they're up there in masses. They'll be here on October 20th Saturday. They'll be here on our next meeting. We have two more days coming up the end of the month. They will show up to make sure. And that's been attempted in the past. I'm told, and it's quite politically volatile. But that's not the intent of looking at equity. And last, there's a 501c3. That competes commercially with a non -51c3. And that happens. I'm told in some services that some people actually form 51c3 corporations. The one that's always given is workout gyms. You know, they're a whole host of them that are private for profit. And then others form some that are private, not for profit under some educational aspect of the 51c3 law. And they compete directly with the ones that have to pay. And so those are the kinds of conditions that exist. The other thing

we are looking at is the grocery seats tax, which is our version of the sales tax, has a whole host of exemptions and deductions that have been granted over time for a variety of reasons. We're looking at whether we ought to retain those exemptions or deductions. And some of those will probably go. Well, I remember they always used to talk about zero -based budgeting, where you start from everybody on the same playing field. And then if their exemptions have to be earned again, maybe we'll be looking at something like that. I just recommended to the commission recently that in the future, when the legislature and the governor decide to grant any kind of exemptions or benefits from the tax code, that that be evaluated every five or six years or sunset every five or six years so that you force you to evaluate it to make sure that what we thought we were getting by giving that particular exemption or deduction, that in fact materialize, that jobs were created, that conditions that we thought would happen, did happen. Otherwise, you may find some companies out there

enjoying a nice little tax concession and not generating much at all. Now let's go to health care because it is one of my nearest and nearest issues. I just read that health care premiums, health care insurance premiums have gone up another 14%. What is the future holds for all of us with health care here? Well, ultimately one has to imagine that changes have to occur. And there are several reasons that this happens. More recently, there was a rather rapidly increasing cost and hospitalization. And that was driven by two things, the consolidation of hospitals in the United States. And we've had that happen, as you know, in Albuquerque, the consolidation of the St. Joseph's and Loveless system. Typically, according to those who evaluate these things, those consolidations lead to greater market position for that hospital and therefore they can charge more. That has not happened in the Albuquerque case, at least to the health plan I've been affiliated with. But the

other driving factor is we don't have enough nurses or techs to run these hospitals and is a consequence the cost of labor is escalating rather rapidly. The third factor is more and more new equipment, more imaging technology, everything is more sophisticated and more expensive. And you and I as customers of the health care system want the latest gadgets. We want to make sure we're getting the very best treatment. And that costs money. I think one of the things that we noticed in the industry is utilization of health care has gone up rather dramatically. We are in fact contacting our health care delivery system much more than we ever did in the past. Part of it may be because we're not in as good a shape as we should be. And as a consequence, we have to, but the real reason is we're all getting a little older. And as you know, with the aging of the population, there is a tendency to have to show up at the doctor's office and occasionally have a procedure to kind of give you an overhaul so that you can continue along. So the aging of the population in New Mexico, the demand, and we

are big utilizers. And then we Americans and we New Mexicans want instant gratification from our health care system. And so what happens is I think occasionally we've built too much capacity because we need that instant gratification and we don't want to tell you, well, that's sort of an elective procedure comes to us in three months. We don't like that. When we think we need a procedure, we want it next week latest and that costs money to build that capacity. However, when we want to routine appointment, we're booking three or four months in advance because the doctors are so busy and over schedule. Right. And let me tell you what I think the solution ultimately will be that for routine kinds of things. I heard an excellent speech on that by one of the gurus nationally at a meeting of the American Association of Health Plans. And he says we have to get over having to have an MD in the room given us his exams that we're going to have to move much more rapidly to what they would call middle -level certified nurse practitioners in particular but physician assistance as well. And that they can do, and as a matter of

fact, I did a focus group in Las Cruces with some of our patient or some of our members of our health plan. And they were very attracted to a group of women certified nurse practitioners for women's year. Every woman in there wanted to go there and because they said they got more personalized treatment, there was better understanding, they were not as rushed, and they're not as expensive as as MD. So I think our system, particularly given the rurality of the state, we're going to have to encourage the development and the use of certified nurse practitioners and physician assistance to take care of that. And that will begin to get you in sooner to see a qualified health care provider. Now you spoke of listening to a health care guru speak to you, but whenever we turn on the television every presidential candidate has a health plan. So I'm wondering what you hear in these plans and if any of them appeal to you, what you think will work for us as a state and as a nation. Well, the governor currently wants to have everybody under some kind of coverage. And that suggests that you're going to have kind of

three components of the market. You're going to have those people who are totally covered by a public program. That would be Medicaid and Medicare generally speaking. You're going to have at the other end of the continuum, those that are covered by commercial insurance because the employer provides that. And in the middle, I foresee we're going to have a mixed program that's going to be partially federally and state -funded and partially privately funded. And there is such a plan in New Mexico right now designed over the last two or three years, and it's called Well Plan. And it was put together by political leaders, hospital leaders, physicians, insurance companies and everything else. And what that plan does is is directed towards small businesses with relatively low income people. And the small business or the employer would pay like $75 a month for insurance coverage. And the rest would be picked up by Medicaid and general funds. And that's the middle, the problem of our health care insurance business

is the middle group. The commercially, their costs are going up surely, but so is Medicaid and Medicare. But we have this gap in the middle that are not covered at all. One thing, this strata, these three tiers, are they income -based? Generally speaking, yes. These people are fully employed and normally at reasonably high well -paid jobs. These people are either senior under Medicare or relatively poor people. And these people, some of these, and then in the middle, a way of a population of very young who don't want to buy insurance and a lot of indigent people, they're working, but they can't afford insurance and or their company does not offer insurance coverage. So they're kind of, as they say, going naked and it's not a good place to be, particularly if you're relatively young and you're going to have children, there's some rather major costs now with hospitalization for children, even the maternity costs now have gone up rather dramatically over time. Most people who can't afford insurance, can't afford to have children in the hospital at the rates we're charging now. Do

you see some day sort of, every word is so loaded, I'm afraid to even say universal health care, single payer or anything, but do you see any kind of, let's call it universal, healthcare, possible in the state like ours and even possible nationally? You have to separate universal health care from universal coverage. They're different. I say that universal health care is like a Canadian system and it's kind of a, everybody's in the system where they want to be in the system or not. The new concept, which they call universal coverage, is much like I just described to you. You make sure that every element of the population has some avenue that they can be covered and some of it will be totally public, some of it will be totally private and some of it is going to be mixed. And there seems to be a movement nationally into some degree in our state to more of a concern of coverage and access than to have a single payer system. Single payer system

is opposed by a lot of people. But it will always be around as an alternative, but it doesn't have the great support of the physician groups. It certainly doesn't have the great support of those of us who have been in the industry of insurance. And I don't think many people in the business community are very supportive of having a single payer system. That is, it becomes a government run program. And for some reason that's never been very appealing to Americans. I wonder, could it be the government's track record? We've done some things well in government, but that's probably not one of them that we would be very competitive. Well, speaking of track records, let's go to education because there's what Governor Richardson called the most important election in the history of the state coming up on September 23rd, these constitutional amendments for education. Would you speak a little bit about them? And one thing that I want to tell you going in, I was so impressed with the bipartisan support. And although I am, you know, suspicious of figures in the country girl, when I know you've got a PhD in economics and you're a Republican and you're support these

amendments, and Pete Dominguez, head of the Senate Budget Committee, is a Republican also in supports this, supports our Governor Richardson's plan and the NEA. All these people tell us a little about this election. Why it's so important. Strange but came after four or five years of effort, as you know, we've been working on education reform. I have a group called the New Mexico Business Roundtable that's the collection of business people who spoke to this issue. And through two task forces, you remember the initial task force that Speaker Sanchez and then President Pro Tem, many are going to put together. We went through that whole process, passed some legislation, had a big budget, Governor Johnson vetoed it, and probably correctly because it was a big budget item. Went through another one just recently with Governor Richardson. That was a more modest approach to it. It did pass and was signed into legislation. So we've been at this for about five years. And in the process, the union learned to live with the administrators, with the teachers, with business community, with the politicians.

We all finally learned to live together on this issue. Governor Richardson came along and through his leadership, we were able to get it through the legislature. And he had to be reasonably persuasive. So what we're about now, and the reason I co -chair this with Governor Richardson is, it is a nonpartisan issue of which we both feel intently about. And so we're out trying to recommend that people vote. And I do recommend they vote for Amendment 1, which is established as a cabinet member answering to the Governor for all educational matters. And I've been promoting that for years after my experience here as Governor. What I found is there was a school board over here that didn't respond to the Governor, and they ran the public schools. And there was a commission on a higher education that was affiliated with all over universities. And the Governor had at least some influence here because he appointed that commission. But for budgetary matters, they never came together and talked about education. And they neither won were very responsive to budget direction. But most of all, in other

words, I'd tell him, give me a 5 % budget. They'd give me 17 % budget. Let me pair it down. But the real problem is they were never at the cabinet table to advocate for education. But there was always a Secretary of Transportation advocating for transportation, Secretary of Corrections advocating for prisons, et cetera. And education was just not there. So we need that. We need the keeper of the flame. We need the visionary that helps us identify where we want to take the state and education. The second one deals with funding the reforms that we were successful in getting. And that will require an increase in the distribution from the permanent school fund. And we have in the past taken out as much as 9 .2 % of the permanent school fund. But in 1996, by constitutional amendment, we said it at 4 .7%. This is a request for 12 years to move it up to 5 .8 % for about five or six years. It'll drop down to about 5 .4. And then it drops down to five. And it has some safeguards so that if the permanent fund is not protected,

then it bails back to five. And there's no more distributions. So we are very supportive of those. The vote is on September 23rd, Governor Richardson and I, I don't speak for him often, but Governor Richardson and I are asking all of our people interested in improving education in New Mexico to go out now or on September 23rd and vote on behalf of those two amendments. You wrote a very articulate answer. Representative George Buffett had sent out one of his wonderful newsletters called Buffett's Bullets condemning these amendments. And you wrote a very eloquent response. I wonder if you could kind of neutralize or give your response to some of the concerns that people have. They, the Buffett himself calls it a raid on the permanent funds. And yet, when Johnny Gutierrez, the Democrat chair, was speaking about these amendments with us, she said, that's wrong. It's really like a harvest. You don't have to kill the tree to harvest the pecans to use a lot of cruises. And

yeah. I think Johnny said it very well. First of all, it's there to finance education. It's currently at a $6 .81 billion level. If we take off the percentage that I just mentioned to you over the next 12 years, by the year 2020 or 2021, the fund will still grow to $14 .3 billion. If we don't take it off, it grows to just over $15 billion. So what, what we're arguing is, and so there is no raid on the fund, the fund will continue to grow. It's actually grown at about 8 .2 percent per year over the last 10 or 12 years. So we're not, we're allowing for it to grow at the same time we're making investments. And that was the intent. But the economists feel fairly comfortable with their projections that the fund can grow from where it is $6 .81 billion to $14 to $15 billion with this investment. But we have to, we have to fund the reform. And let me tell you where most of the money is going to go. In the reform, there's, there are, we instituted for the first time ever a

three tier salary structure for public school teachers. Right now, entry level to be a public school teacher in New Mexico, on average, about $24 ,000. Pretty low. The entry level under this new scheme will be $30 ,000. $6 ,000 increase. We need to keep our good teachers and, and have our good graduates stay here. In New Mexico State University, we produce a lot of bilingual teachers at our College of Education. They drive across the border 40 miles and they'll pass on and get $45 ,000 more. So we're, we're generating teachers for Arizona, California, Texas, everybody else. We need to get the salary up where we get to keep them. Then there's a, the next level with certain tests and everything else, you can, you can go to $40 ,000 a year for a nine month contract. And if you become a master teacher, you can move to $50 ,000 a year as a master teacher. What we're saying is teaching is a profession. It's a very good profession and we will compensate you for it. But you need to be tested along the way to make sure you can perform. We've never had

that before. And if we make that investment in teachers, the students will benefit. I'm going to guarantee you. Just one thing that I'd like you to speak for just the, the one or two minutes we got left. I was very impressed with the safeguards so that the people who were nervous about the status of the fund, that if it dips below a certain amount of money, these increases, the distribution are stopped. By a three fifths vote of the legislature, it can all be stopped. It's one more safeguard. Well, I was quite impressed that it was thorough. And And as a matter of fact, that was added by the legislature. And I thought, I thought they were visionary in doing that because I think those, oh, if the fund drops below a certain amount, then it's just. But, but I think they were responding. I think the legislature by crafting the amendment, but they have already responded to the anxieties of those who believe it's a rate on the fund. I think they were visionary enough listening to those same people make their points said, okay, I understand you're fearful of funds going to disappear. Let me put some, some conditions in there

to guarantee that won't happen. So I think the, the legislature in crafting that, that's not the way we sent it to them. We sent it to them just straight off, let us do it. And they responded to that constituencies by saying, okay, we'll try and protect your fund. I think they've done a marvelous job. I think you have done a marvelous job and our time is up. So I'd like to thank you, Governor Gary Carruthers, definitely one of our statesmen. You've taught us so much today. Thank you for being with us. Great to be with you and I look forward to coming back sometime. I hope so. And I'm Larry Mills. I'd like to thank you for being with us on report from Santa Fe. 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.