The Good, The Bad, The Ugly: Update 1

Some of our elected representatives remind me of my ex-wife. "How can I be broke, I still have checks!" - A blog reader

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With 304 bills on the House side and 181 on the Senate side, this Good-Bad-Ugly update will be divided into two parts. Today we take a look at the Senate bills; tomorrow we examine the House bills, including HB236, the unfortunate school-finance omnibus bill. 

Our Lawmakers Build a One-Way Elevator

Our legislators are slowly beginning to acknowledge our state's dire economic situation. A House Bill here, a Senate File there, give us glimpses of hope that our elected officials are slowly beginning to come about and see the crisis for what it really is: a systemic, persistent economic depression that cannot be met with anything less than systemic policies. 

The appropriate response to the crisis requires a level of economic-systemic thinking that, unfortunately, is often notably absent in state legislation efforts. Senate File 159 is a refreshing exception, a fact that we should recognize its sponsors for: Senators Rothfuss, Case, Coe and Peterson; and Representatives Connolly, Harshman, Madden, Miller, Obermueller, Sommers and Wilson.

At the end of the day, though, the bill applies its systemic thinking to exactly the wrong problem.

Make Life Great Again

Sometimes, God offers us a contrast on life that wipes away any doubts, any hesitation. Today, Friday, I had the opportunity to participate in the March for Life in Washington, DC (thumbs up to my son who suggested I join him!). 

While a couple of hundred thousand Americans from all walks of life, of all ages and backgrounds, joined for a march in celebration of life, legislators in Wyoming are considering - and have so far been generally favorable to - two bills that go exactly in the opposite direction: HB122 legalizing euthanasia, and SF88 which would create a death panel under the Wyoming Department of Health. 

State Licensing Bad for the Economy

This is an opinion piece from Tom Reeder. It is written with reference to HB170, which proposes significantly higher licensure fees on health care facilities in Wyoming.

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Do licensing requirements restrict job opportunities or protect the public? 

• Americans that cannot work without obtaining a license or other governmental consent has grown in two decades from 4% to 25%.
• Occupational licensing laws were first passed to protect the public from negligent, unqualified and substandard practitioners, but increasingly they are seen as a mechanism designed not to protect consumers but rather to insulate existing business interests from competition.
• Licensing requirements vary widely from state to state, too. For example. Michigan mandates three years of education and training to become a licensed security guard, while most other states require only 11 days or less. South Dakota, Iowa and Nebraska require 16 months of education to become a licensed cosmetologist. While New York and Massachusetts require less than eight months.
• Licensing restrictions cost millions of jobs nationwide and raise consumer expenses by over $100 billion.
• Morris Kleiner, an economics professor at the University of Minnesota, "With licensing, you're creating a monopoly, and it's very difficult for people in many places to enter these occupations, Kleiner says. “It’s keeping people away from the American dream”.

“According to the bill, the sole purpose of the licensure fee is to pay for the costs of administering the licensing procedure”. 

Looks to me like they also want to deter competition which could lead to lower costs or heaven forbid maybe a better way of handling health care. When Medicaid expansion did not pass numerous times what happened? You saw hospitals put in clinics that could perform medical procedures that were being done in their emergency rooms to save money. Clinics created lower costs and more efficient. Hospitals did this because the money was not just given out. They had to solve a problem. What a great solution to a real problem.

The House Education Committee voted Monday night to sponsor the omnibus bill. In this bill is a moratorium on alternative schools until at least 2019. Oh! Another blow to school competition, free enterprise and parent’s choice. Competition creates better rational thinking, efficiency, better outcomes, maybe lower costs, etc. 

In my opinion there are certain legislators that are not addressing the real problems. Instead, let’s generate more revenue. I had a legislator once tell me, watch the body, they try to fix a problem by throwing more money at it or creating more revenue. They adhere a band aid when a full blown surgical dressing is needed.

HB170 - Statist Logic Strikes Again

In last week's review of good, bad and ugly legislative bills I put HB170 in the "bad" category. This bill, sponsored by Representatives Wilson, Barlow, Hallinan, Larsen and Madden, and Senators Landen and Pappas, drastically increases the licensing fee for health care facilities. The state would now charge $5,000 for a new facility - up from the current fee of $500 - and would then a "renewal" fee of $1,000.

According to the bill, the sole purpose of the licensure fee is to pay for the costs of administering the licensing procedure. Therefore, the logical conclusion from this bill is that the bureaucracy that administers the licenses has expanded by 1,000 percent. 

Today Alaska, Tomorrow Wyoming

I recently compared the Wyoming economy to Alaska, concluding that:

The job losses in Alaska are dwarfed by the losses in Wyoming. 

 Please keep this conclusion in mind, as we listen to what Jonathan King, vice president of Northern Economics, has to say about the economic crisis unfolding in Alaska. From the Alaska Dispatch News, January 20: 

Will Trump Be Good for Wyoming?

Recently, Bloomberg News published its 2017 Economic Evaluation of States (BEES). They placed Wyoming dead last. This ranking is based in part on the decline in minerals-industry production, but also on private-sector job creation and GDP growth.

The BEES study confirms what I have been saying all along, namely that our state has more macroeconomic problems than anyone could blame on the minerals industry.

 

Many people, including some legislators, apparently pin their hope of a better future for Wyoming on our new president. That is not unreasonable: 

Legislative Bills: The Good, The Bad, The Ugly

The number of bills introduced for this legislative session is closing in on 300. Only a handful have anything to do with our state's current budget crisis. A few more are indirectly related. (The budget bill itself is not included here - it needs its own analysis.) None of the budget-related bills are "big" enough to make a substantial difference, but there are some good bills in there that point in the right direction. 

There are also some bills that are bad for our economy - and a couple of downright ugly ones that deserve a dishonorable mention. 

CREG Report: Intentional Over-Optimism

The Consensus Revenue Estimating Group has released its January report. Once again, I am sad to say that their report is tainted with deliberate over-optimism. I do not say this lightly, but there is far too much evidence in their reports - not just this one, but similar reports from years back - that is impossible to ignore. 

Let us begin from the beginning. The main message in this report is that:

HB134: A Business Property Tax Credit

Good news: a few aspiring lights are beginning to defy the fiscal darkness imposed upon us by the governor's "bare bones" budget and quest for a "broader, more comprehensive tax structure". One of those fledgling flames is HB134, sponsored by Representative Scott Clem from Campbell County, six other representatives and two senators. This bill wants to create a property-tax rebate for new manufacturing businesses moving into Wyoming. Here is the key point of the bill, with the new measure highlighted in red:

"Taxable value" means a percent of the fair market value of property in a particular class as follows: Property used for industrial purposes, eleven and one-half percent (11.5%), provided that, for the purpose of economic incentive, property used for industrial purposes for the first three (3) years of use, five and three-quarters percent (5.75%), and for the fourth year of use, nine and one-half percent (9.5%)

Can You Afford $4K in Tax Hikes?

Yesterday I summarized Governor Mead's State of the State speech in three points:

1. He thinks his budget is "bare bones";

2. He maintains that the budget deficit is really only an education-funding crisis; and

3. He wants a "broader, more comprehensive tax structure".

In addition to my analysis of his speech from yesterday, there is another angle to the "broader, more comprehensive tax structure" that deserves attention. But first, let me make one more point about the "bare bones" statement. With all due respect for the governor, whom I like and I think overall is doing a fine job leading our state: the idea that our government is bare-bones is almost an insult to the rest of the country. 

Subliminal Mead Hints of Higher Taxes

In his State of the State speech, Governor Matt Mead made three points about the state's budget crisis:

1. His budget is "bare bones";

2. The budget deficit is a deficit in education funding: and

2. Wyoming needs a "broader, more comprehensive tax structure".

Taken together, these points tell us a great deal about what we can expect from the legislative session - and it is not good news for us the taxpayers.

Let us start with the "bare bones" budget. Yes, the General Fund budget, including spending from the Legislative Stabilization Reserve Account, is down 5.3 percent from the previous biennium. However, calling that a reduction to a "bare bones" budget is a little bit like complaining that you have to trade in your Mercedes for a Cadillac. 

Facts about the Wyoming Economy

In order to understand what is really going on in the Wyoming economy, we need to have accurate economic information about our state. This includes, of course, the trends and the scenarios that I often write about on this blog, but it is also important to have appropriate institutional facts about our economy. 

One of those factoids has to do with the, so to speak, composition of our economy. The prevailing wisdom is that our state is entirely dominated by the minerals industry. There is no doubt that the minerals industry is important to our state, but a closer look at our economy reveals a more complicated picture. 

It also reveals two troubling facts that help explain why our state government is in such deep fiscal trouble. 

Before we get there, though, let us look at one of the major economic variables and what it can tell us about our state: personal income. If we want to get "close" to people's real-life personal finances and still maintain good analytical standards, personal income is the variable to study. 

Raise Taxes, Watch People Leave

The headline of this blog article may be trivial: we all know taxes reduce private-sector economic activity. We also know that when taxes get unbearably high, we do everything we can to avoid them (which is legal; evading taxes is illegal and never acceptable). One way to avoid high taxes is to move to some place where taxes are lower.

Again, few people would dispute that lower taxes are preferable to higher taxes. Yet the first occasion our elected legislators here in Cheyenne get a chance to present their ideas for how to deal with the state's budget deficit, they immediately propose tax increases. 

This is not the first time we are being told that a tax increase will solve our problems. 

Endless: 19 Months of Lost Jobs

In November I reported that Wyoming had suffered job losses for 17 months in a row. The latest numbers from the Bureau of Labor Statistics cover two more months, taking us through November of last year, and the trend continues:

In October 2016 our state had 9,600 fewer private-sector jobs than in October 2015;

In November 2016 we had 8,000 fewer private-sector jobs than in November 2015.

In the minerals industry, year-over-year job losses were 4,100 in October and 3,700 in November. 

Colorado Saves Wyoming - For Now

Never bark at the Big Dog. The Big Dog is always right. 

Ever since I first heard rumors about a possible income tax here in Wyoming - that would be a bit over a year ago - I have been warning our state legislators that any such tax would send convoys of U-Hauls down I-25 into Colorado. This morning, when I was on KGAB AM650 here in Cheyenne with Doug Randall, I again made the point that any tax increases in general, but specifically an income tax, would tip the scale for people to move back to Colorado again. 

The Structural Budget Problem, Part 2

In the first part of this article series I explained how we got ourselves into our state's budget mess:

Once minerals prices deflated, a grim reality, hidden behind smoke screens of oil, coal and natural gas prices, was suddenly painfully visible from our (not yet renovated) state capitol. At that point, though, the prevailing opinion (not shared by all legislators) was that it was more important to save state spending than to bring the size of government in line with what the tax base could sustainably provide for. 

I also explained how entitlement spending runs away from tax revenue, and how the gap between the two continues to grow over time. 

Today, let us take a closer look at Wyoming and identify the so called "structural deficit" in our state budget. 

The Structural Budget Problem, Part 1

Last week the Joint Education Committee presented a white paper from is school-funding subcommittee. It was a soft-spoken yet unmistakable case for higher taxes. 

In fairness, the paper also discusses spending cuts. The problem is that the spending cuts they propose are of such a kind that they will make the same government that we have today, fit within a smaller tax base. None of the proposals would lead to a re-modeling of the school system itself.

And that, unfortunately, is exactly what we need.

Heads Up: Sven Larson at Cato Institute

Save the date: January 26! At 12PM ET / 10AM MT I will be participating in a book seminar at the Cato Institute in Washington, DC. You can watch it online through Cato's excellent webcast service. We are going to discuss James Bartholomew's book The Welfare of Nations, an intriguing hands-on review of the negative influence of the welfare state on people's lives. Don't miss it!