“Preliminary” Research Pushes Economic Impact Boundaries for LANL

While Sandia, LANL, and Journal Statements Leave Many Questions

A January 15 Los Alamos National Laboratory (LANL) press release reviewed preliminary research from the University of New Mexico’s Bureau of Business and Economic Research (BBER). The research claimed that the “average annual total impact on economic output across New Mexico from 2015 to 2017 was $3.1 billion.” This implies that BBER estimates that LANL contributes an average of  $3.1 billion a year to the state’s economy annually.

This $3.1B conclusion is based on unreleased data and pushes the boundaries of accepted economic theory. The authors or the title of the research are not given. No estimate of when the final report of this will be released is given. Is the research even complete? Will the results change? Has it been reviewed?

High Multiplier and an Unexplained Budget

The Lab’s economic impact brochure states that the Lab’s total budget for 2018 is $2.66 billion. (Does the $3.1B economic impact for 2015 to 2017 apply to 2018? We’ll have to assume yes.) The annual salary to Lab workers is listed as $1,075,117,754. (Craft/contractor salaries not included) It’s unclear how much salary is paid to workers out of state. The flyer continues – “Of the more than $756 million in goods and services procured by the Laboratory in the 2018 fiscal year, 55 percent (more than $420 million) went to New Mexico businesses.”

If we add the salary number ($1.1B+) to the goods and services that went to New Mexico ($420M), we get $1.5B. Comparing this number to the $3.1B economic impact number gives us an economic impact multiplier of 2, which is generally considered a high number for an economic multiplier.

For instance, one economic guide states, “A rough rule of thumb would be that the total economic impact on income within a state is less than twice the original new income. A multiplier that exceeds 2 should be subjected to critical review before acceptance or use in further analyses. (Income Multipliers in Economic Impact Analysis, Guide Z-108, Reviewed by Terry Crawford, College of Agricultural, Consumer and Environmental Sciences, New Mexico State University, July 2011.)

We await the final research that will hopefully explain this high multiplier.

If we add the salary number ($1.1B+) to the total goods and services ($756M+), we get $1.86B. Subtracting this from the total budget ($2.66B) leaves us $800M. It is not explained what this is or where it is spent. Since the annual salary number ($1.1B) appears to cover most all, if not all, employees, and the total goods and services amount ($756M) covers all the other procurement, where this 1/3 of the budget is spent remains a mystery to us. If it was spent in NM, certainly the Lab would be singing those praises.  We await the final research that will hopefully explain where this 1/3 of the budget is spent.


LANL Impacts Favor Los Alamos County

The LANL press release claims that the Lab’s budget has an “impact on economic output across New Mexico”, but it should be no surprise that the benefits are centered in Los Alamos County. For starters, 45% of LANL workers live in Los Alamos County (LAC) and those workers receive 54% of the pay. This leads to an average $109,789 salary of LANL workers who live in LAC. The average employee salary overall is $91,554.

21% of LANL workers live in Santa Fe County (SFC) and those workers receive 22.5% of the pay. This leads to an average $98,136 salary of LANL workers who live in SFC.

16% of LANL workers live in Rio Arriba County (RAC) and those workers receive 11.6% of the pay. This leads to an average $66,184 salary of LANL workers who live in RAC.

Here’s the full table:

Salary % Of Salary % Of Workforce Workforce Average Salary
County by County By County By County By County  Per Worker
Los Alamos: $580,161,207 54.0% 45.0%  5,284  $109,789
Santa Fe: $242,006,147 22.5% 21.0%  2,466  $98,136
Rio Arriba: $124,352,193 11.6% 16.0%  1,879  $66,184
Sandoval: $32,342,691 3.0% 3.0%  352  $91,807
Bernalillo: $32,058,119 3.0% 5.0%  587  $54,600
Taos: $12,504,471 1.2% 2.0%  235  $53,242
Other: NM & Non-NM $51,692,926 4.8% 7.0%  822  $62,886
Totals $1,075,117,754 100.0% 99.0%  11,626

(The numbers given in the brochure are vague when it comes to the “Other” category. The numbers made more sense when the “Other: NM” counties were added to the “Non-NM” counties.)

This gives an idea of how much of the money at LANL stays “on the hill.”


Sandia Jumps on the Economic Impact Bandwagon, Kind Of

A January 17 press release from Sandia National Laboratories concerning its economic impacts in 2018 shied away from mentioning any actual economic multiplier. The press release delved into the amount spent where but it a confusing manner.

The press release states, “Sandia’s overall economic impact in 2018: •About $1.95 billion was spent on labor and non-subcontract-related payments.…”  It’s not totally clear but it seems that the $1.95B represents mostly salaries in NM. A Sandia economic flyer does mention the “New Mexico Total Procurement Impact” of $475,546,000 which when added to the $1.95B totals under $2.4 billion spent in NM. But no economic impact claims (such as an economic multiplier) past that are made. The actual amounts spend in NM could be much clearer.


Gross Receipts Tax Numbers Raise Questions, Too

Both Sandia’s press release and the flyer mention that More than $95.1 million went to the state of New Mexico for gross receipts tax last year.

A January 19 article from the Santa Fe New Mexican, County fears loss of tax revenue if Los Alamos lab gets nonprofit status, states that LANL paid $50 million in gross receipts taxes last year.

Why does Sandia with an annual budget that is 19% larger ($3.3B vs $2.66B) than LANL’s annual budget pay 47% more ($95.1M vs $50M) in state tax? I know the tax rates are different (6.44% vs 7.31%) but this difference means that Sandia should be paying even less tax.

Let’s look at it this way –

Sandia is paying $95.1M, which is 6.44% of $1.48B (45% of Sandia’s budget).

While LANL is paying $50M, which is $7.31% of $684M (26% of LANL’s budget).

Why does LANL pay taxes on such a smaller percent of its budget than Sandia?


Albuquerque Journal Editorial Board Throws In

On January 24, the Editorial Board released its thoughts, Editorial: Federal labs an essential part of our state’s economy, about the economic impacts of the two labs and basically agreed with everything the Labs said.

It started here:

“There’s a lot of cool science and research going on at the national laboratories based in New Mexico. It ranges from Los Alamos National Lab’s role in ushering in the nuclear age to the hypersonic vehicle Sandia National Labs is pioneering.”

I’m going to save my comments on how “ushering in the nuclear age” and hypersonic vehicles are “cool science” for a later time. (Hint: Supporting military-industrial complex weapons production is never cool.)

Everyone can agree that keeping New Mexicans working in New Mexico is important. And we all hope that nuclear arsenal never has to be put to the test. But over 2/3 of LANL’s annual budget is spent on nuclear weapons research, development, and production. Over ½ of Sandia’s budget is nuclear weapons research, development, and production design.

So when the Journal comes out with a blanket statement in in favor of the Labs’ growth, the editors are essentially in favor of increasing nuclear weapons production. The Editors stated, “the growth of both labs is good for New Mexico.” Lab Growth may be good for New Mexico’s economy, but when will New Mexicans insist that the Labs engage only in life-affirming research and development that would be good for all people?

The press release mentioned that recruitment isn’t always easy for the Labs. Sandia director Steve Younger cited “concerns about the performance of the state’s education systems and the crime rate as challenges in recruiting and keeping a workforce.” (We hope that working on weapons of mass destruction is a reason to work elsewhere for some.) But this touches on another important point – the Labs have been around for many decades and the performance of the state’s education systems is still a problem. The Labs seem to be good for the Labs’ employees’ economies first.


Funding Nukes We’ll Never Use

But nuclear weapons work that the Labs do is like digging a dry well with tax dollars. If the government pays to dig a good well, the well-diggers and the materials suppliers get paid. There is an economic impact to the community. And the public gets water that can be used for attracting new businesses and farmers. It’s spending that keeps on giving. This would be the same for other projects such as roads or hospitals. If the government pays to dig a well and it turns out dry, the well-diggers and the materials suppliers get paid. There is an economic impact to the community during the digging but not after. And the public gets nothing lasting after. The only way to keep the benefits flowing is to get funding to dig another dry well.

Instead of touting the Labs’ press releases, the Board should help push the Labs towards science and technology for good and away from the dry well of nuclear weapons production.


More Questions

Why did Sandia, Los Alamos, and the Journal put out articles on the Labs’ economic impacts within two weeks of each other? Could it be that Los Alamos’ new management contractor, Triad, is about to be named a non-profit, which would cost the State of New Mexico $50 million per year in taxes? Do they want to lessen the blow by reminding us of all the other money LANL brings to the State? Or is it because the fiscal year 2020 Congressional Budget Request is due out soon? (It is usually out the first week of February, but the shutdown will delay that.) The budget request will show another $10 billion+ to be spent next year on nuclear weapons. Does the fact that New Mexico benefits from this dangerous waste of money make it OK?

Why are they trying so hard to convince us?

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