Recent Columns

© 2024 NEW MEXICO NEWS SERVICES 1/27/25

Future disaster costs shadow state tax bills

By Sherry Robinson

All She Wrote

     Republicans want to get rid of personal income taxes in the state, and they’ve made it their priority for the current legislative session. It’s a big step, but in recent years a surge in oil and gas revenues have fattened state coffers so much that we can think about it.

     “Eliminating the personal income tax will return more than $2 billion a year to New Mexico’s families, without disrupting our public services or tax credits that many families rely on,” wrote House Minority Leader Gail Armstrong, R-Magdalena, in an op-ed.

     Freshman Rep. Elaine Sena Cortez, R-Hobbs, has said she will carry legislation to eliminate the personal income tax, noting that nine states don’t tax personal income.

     You can’t deny the appeal. Wouldn’t we all like to be free of state income taxes?

     But lately the president has lobbed a deal killer into this proposal and the Democrats’ plans to reduce taxes. The whole picture of state revenues just changed. 

     While touring disaster areas in North Carolina and California, the president said he was thinking about getting rid of FEMA. “It’s very bureaucratic, and it’s very slow,” he said. 

     He’s got that right. 

     “I’d like to see the states take care of disasters,” he said. “Let the state take care of the tornadoes and the hurricanes and all of the other things that happen.” That would be faster and cheaper than sending in FEMA. He suggested that Washington might provide money directly to the states.

     The way FEMA has operated for decades is that after a major disaster, local officials ask the president to declare an emergency. That ask tells the president that the disaster is beyond local and state governments’ ability to respond, according to an Associated Press explainer. The emergency declaration opens the federal purse and involves FEMA, which can reimburse local governments for rebuilding roads, bridges and public buildings. The agency will also help individuals with short-term needs like food, clothing or a motel room or longer-term help like rent assistance or some money to help rebuild. FEMA will also pay for projects intended to protect the community in the future.

     It’s not there to manage disaster recovery or to make disaster victims whole.

     As I’ve written previously, from its creation in 1979 to 2003, FEMA was a small, agile, independent agency that responded quickly. After it became a division of the Department of Homeland Security, it became another bureaucratic cog. Decision making, spending and communications bogged down. President Trump criticized former President Biden for not fixing the problem, but none of the presidents have fixed the problem.

     Whatever criticism we have of FEMA, we can probably agree that it’s better than nothing. Are states ready to shoulder these responsibilities? I doubt it. New Mexico certainly isn’t. Is it even cost efficient for states to replicate 50 little FEMAs? 

     Now throw in politics. The president plans to help red North Carolina, which voted for him, but he’s placing conditions on help for blue California, which didn’t vote for him and whose governor he despises. During his first term he held up disaster aid to Puerto Rico and California. The traditional political promise – I’m here to serve you whether or not you voted for me – no longer holds.

     How might New Mexico fare? I predict New Mexico will look more like California than North Carolina in terms of the administration’s future treatment.

     Returning to the president’s recent comments, the big question is how much the administration is willing to pay states for disaster recovery. The answer so far is, less. Much less. And yet the disasters are getting bigger, and we are even now in another drought. 

     Until we know more, it’s premature to give up any revenue streams.

© 2024 NEW MEXICO NEWS SERVICES 1/13/25

Protecting homeowners and keeping insurers in New Mexico

By Sherry Robinson

All She Wrote

     When we look back at fires, California’s and New Mexico’s, we’ll see that the victims got burned twice – once during the event and again when they tried to rebuild and found they couldn’t get insurance. That’s if they had any to begin with. Many don’t.

     This is not a rant about insurance companies. Two of my early jobs were with insurance companies. I spent years writing about them as a business writer, so I don’t expect them to act like charities.

     New Mexico and California have property insurance problems driven by climate change. The disasters are growing so big and so costly that insurers can no longer provide coverage. Many have been losing money. But  California’s insurance troubles are far worse than ours.

     The state of California placed price controls on home insurance; any increase in premiums above 7% requires approval from the state insurance commissioner, who is elected. He wants to keep his job, so he’s said no to insurance companies wanting to raise rates to match their risk, and companies have left California. Last year, State Farm, the biggest home insurance provider in the state, cancelled thousands of policies in risky places saying that in the event of a major disaster the allowable premiums would tank the company.

     With no other options, Californians have turned to the FAIR (Fair Access to Insurance Requirements) Plan, reported the Los Angeles Times. Provided by the state to cover uninsurable people and funded by a surcharge on insurers still doing business there, it provides limited coverage. That fallback is now strained.

     California voters have only themselves to blame for their insurance drought. In 1988 they passed Proposition 103, which required the state to approve premium increases. 

     California’s ballot proposition system is to governance what chewing gum is to hot pavement. If anybody ever suggests introducing it in New Mexico, vote them out of office quickly.

     It’s a bit comforting that we’re not in California’s boat, but New Mexicans have serious issues too. In August the Legislative Finance Committee, meeting in Ruidoso, heard testimony from the state’s insurance regulator that insurers are increasingly reluctant to renew or approve policies in riskier areas since this year’s wildfires, and home insurance premiums have spiked. (We can probably add Roswell’s floods to the list.)

     LFC Chairman and Sen. George Muñoz, D-Gallup, commented, “I got denied on a commercial property in the middle of Gallup next to a fire hydrant because of wildfires.” 

     The Office of the Superintendent of Insurance (OSI) sued State Farm, the state’s largest insurer, saying it improperly denied some claims after the South Fork and Salt fires. The state lost, reported Source New Mexico.

     New Mexico hasn’t seen quite the exodus of insurance companies as California; despite losses in 2016, 2017 and 2022, they’re mostly profitable here. Nationally insurers have paid out more than they’ve taken in over the last ten years.

     New Mexico also has a FAIR Plan, and it too is a fallback that costs more than conventional insurance and provides minimal coverage -- $350,000 for homes and cash value, not replacement cost, for a home that’s lost. Protection is too thin to get a mortgage. You can see how this cascades into economic impacts on builders and local economies.

     OSI can’t use a stick to force coverage, so it’s leaning toward carrots. That might mean property owners creating defensible spaces around their homes or new zoning regulations that prevent building in high-risk areas. It might mean beefing up FAIR plans but stopping short of competition with insurers. Fire departments might ask for more help.

     We’ll probably see insurance-related bills in the upcoming legislative session. Let’s hope they get serious attention and don’t get lost in the usual crush of a 60-day session.