Thursday, January 19, 2017

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. 

The Good
Here are the bills that give us hope - not much hope, but some. Kudos to their sponsors.

HB104 - Severance tax on coal. Sponsored by Representatives Hallinan, Biteman, Clem, Edwards and Halverson. 
This bill would reduce the severance tax on surface coal from seven percent to six percent. It will not make a difference in terms of encouraging more coal production, but it can probably help the coal industry stabilize its production. Recently we have seen the coal industry's decline level off; the January CREG report mistook this for a sign that coal is coming back again. That is not the case - but if the state reduced the tax rate, if ever so slightly, it may encourage coal companies to stabilize their activities. 

HB172 - Severance tax exemption. Sponsored by Representatives Miller and Greear, and Senator Bebout. 
HB134 - Property tax rebate. Clem, Biteman, Edwards, Hallinan, Henderson, Jennings, Lindholm and Winters, and Senators Boner and Driskill. 
These two bills are similar in kind. HB172 would make new production of crude oil and natural gas tax-exempt, provided production begins in the next five years. The exemption would last for four years. This bill is basically similar in reasoning to HB134, which proposes a property-tax rebate for new manufacturing businesses. Both bills are good in the sense that they bring up the conversation about how lower taxes can help stop the catastrophic decline in private-sector activity in Wyoming. They may also have a limited, yet actual positive effect on the industries they target. The downside is that they limit their tax breaks to specific industries; if these bills are passed, it is essential that the legislature treat them only as a first step toward a general reduction in taxes on businesses here in Wyoming. (For more on HB134, see my analysis that I published this past Monday.) 

SF83 - State spending and revenue reports. Sponsored by Senators Bouchard and Driskill, and Representatives Baker, Biteman, Clem, Edwards, Gray and Lone. 
This bill would increase transparency in state agency contracting, both for services and supplies and on revenues. While this bill would not directly affect the budget, it would make it much easier for legislators and the public to keep tabs on government finances. Given the serious criticism that has been presented against the capitol "renovation" project, this bill is both timely and necessary. 

The Bad
Sponsors of these bills need to think again. 

HB60 - State investment policy. Sponsored by the Select Committee on Capital Financing and Investments. 
HB79 - State investment funds equity pool. Sponsored by the Joint Appropriations Committee. 
These two bills both aim to increase the state's investments in equity. HB60 wants to remove the restriction on what percent of permanent funds the state can invest in the stock market. HB79 wants to create an investment pool specifically for stock-market investments. The bill creates a limitation on what money can be invested in the fund, but the limitation is constructed in such a way that it can be easily changed. 
There are many unanswered questions with these two bills. One problem is that they want to allow the state to take more risks with taxpayers' money, and that they want to pursue more financial revenue for the state. If the legislature passes even one of these bills, it increases volatility in state tax revenue. What will state legislators do the day there is a major decline on the stock market just as they were expecting to throw more stock-derived gains into the General Fund? 
Furthermore, what kind of ownership policies is the state going to implement on the companies they own stocks in? Are they going to buy stocks in coal companies investing in Wyoming, in order to force them into keeping jobs here? Will the state use its money as proxy venture-capital investments in new IPOs, in order to maximize short-term capital gains? 
These questions are not irrelevant. One of the biggest problems for businesses in Wyoming today is access to venture capital. Would the state use its authority to invest in equity as a backdoor to supplying investment capital to a business that, in return, promises to establish itself in Wyoming?
All in all, the state is throwing itself into new territory, raising more questions than answers. The problems with these bills range from putting taxpayers' money at risk to using financial muscle to pick winners and losers.

HB127 - Wind energy tax. Sponsored by Representatives Clem and Madden, and Senator Case. 
This bill would increase the tax per MWh wind energy from one to five dollars. The fiscal note from the LSO suggests that this tax will yield $15 million in new General Fund revenue per year from fiscal year 2019. Believe it when you see it. Unlike nuclear or hydroelectric energy, wind energy is not based on large, fixed-cost heavy plants. Furthermore, with all the subsidies that have been going into wind energy in recent years, it would likely be a cheap affair for wind-mill owners to shut them down if the tax makes them unaffordable compared to similar plants elsewhere. For example, Colorado, Idaho and Montana all have various tax credits to increase investments in wind energy in their states. Wyoming would be going in the opposite direction.

HB140 - Minimum wage increase. Sponsored by Representative Byrd. 
In case this fine Democrat has not noticed, Wyoming is currently bleeding jobs. Our private sector is in complete free-fall, with even retail businesses pink-slipping employees. The job hemorrhage is statewide, with almost every county losing taxpayers, private income and purchasing power. Is this really the best remedy for our state's economic depression that Representative Byrd can come up with? 
I like Representative Byrd. He is a nice guy who is always willing to talk to his ideological opponents. I hope this bill represents a clerical error on his behalf. 

SF67 - CHIP program amendments. Sponsored by the Joint Labor, Health and Social Services Interim Committee. 
This bill expands managed-care benefits in a program to meet federal compliance regulations. However, the minute Congress gets serious about cutting the federal deficit, how big a part of this expanded cost for CHIP is Wyoming going to be responsible for? How does the Joint Labor Committee intend to pay for those benefits when federal funds are cut?

HB170 - Health care facility licensure fees. Sponsored by Representatives Wilson, Barlow, Hallinan, Larsen and Madden, and Senators Landen and Pappas. 
This bill proposes a ten-fold increase in licensing fees for health care facilities. The new licensing fees will be $5,000 for the initial license and then $1,000 for renewals. 
There are two problems with this bill:
a) It substantially increases the threshold for small health care practices to open up in our state. The effect is to protect existing facilities against new competition, thus putting an upward pressure on the cost of health care. This will hit smaller communities especially hard. 
b) The motivation for the increase is "to recover administrative and operational expenses of the department in conducting its licensure program". 
Seriously?? Has the cost of licensing health care facilities really increased ten-fold in one year??? What kind of bureaucracy do they have over there at the Department of Health????
This bill is nothing more than a new milking cow for the state government. Besides, it is completely unnecessary, since both our governor and our legislative leadership have made clear, on many occasions, that the budget itself is in balance - we just have a small education-funding problem. Since this license fee is constructed entirely to recover administrative fees, not a dime of the license fees will go toward education funding. Right? So unless they are absolutely reckless with their bureaucratic costs at the DOH, this bill is completely unnecessary. (And if the bureaucracy has expanded by 1,000 percent in one year, the problem is not that the licensing fee is too low...) 

The Ugly
These bill sponsors had a lot of bad luck while thinking. It would be better for the future of our state if these bills died with dignity.

HB151 - Cigarette tax. Sponsored by Representative Madden. 
This bill wants to increase the cigarette tax by 50 percent. Apparently, Representative Madden is a fan of taxing people's addictions; this is not a "sin tax" because the purpose is not to discourage tobacco consumption. It is an addiction tax, which explicitly relies on the continuous addictive consumption of a product that is medically harmful. Addiction taxes are cynical: they exploit people's weaknesses and addictions for the purposes of funding government. The expectation behind an addiction tax is that people will continue to do what is bad for them, so that government does not have to reduce its number of employees or otherwise cut its costs. Rather than proposing a major increase in an addiction tax, Representative Madden should introduce bills that help reduce the size of government.

HB122 - Death with dignity. Sponsored by Representatives Zwonitzer and Pelkey. 
This bill would make euthanasia legal in Wyoming. There are a range of arguments against such an idea; from a fiscal viewpoint, the combination of Medicaid and euthanasia opens a very, very ugly can of worms. There are plenty of examples from around the world of what government-run medical care does to people when it is legal for doctors to actively kill patients. An ugly idea that we do not need in Wyoming.
There is also SF88, which proposes the creation of a palliative-care council under the Department of Health. It is unclear at this point whether that bill is related to HB122; caution advised. 

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