Riley Moore’s Political Stunt Will Cost West Virginia Money

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Riley Moore is a nice young man from a prominent political family. He was elected to the House of Delegates in 2016 from the old 67th District (Harpers Ferry and Shepherdstown) and was on his way to becoming the House Majority Leader in 2018 when a funny thing happened – Jefferson County voters turned him out of office.

Trying another path to public office, Moore ran for West Virginia Treasurer and was elected in November 2022. One wonders why Treasurer is a political office, for which the successful candidate need only demonstrate political skills not financial ones.  Good thing for Moore, because he had no financial education or demonstrated financial skills. Before trying his hand as a politician Moore received a degree in Government and International Politics and had a job with a defense contractor.

As Treasurer, Moore has relentlessly pursued a political agenda. In the last eighteen months, he has taken credit for two “culture war” policies that became laws after approval by the Republican super-majority in the Legislature. No surprise there. Let’s call them Moore’s Law No. 1 and No. 2. Both laws attack considering “ESG” factors (environmental, social, governance) in the investment of state funds. In case you hadn’t heard, ESG investing is the latest boogeyman of the political right.

West Virginia needs easy access to the municipal bond market to fund its needs and also has $34 billion in pension funds to invest. It retains respected banks and investment companies to create a market for its bonds and to invest the pension funds. Like any other investor, the state wants to get a reasonable return on its investments while minimizing unnecessary risks. Consideration of ESG factors that have a material impact on a company’s health is an important part of a sound investment policy. To ignore these risks would be irresponsible.

Considering ESG factors is not political, it’s just smart business. For example, if we invest in a coal company, will that investment have eroded in five or ten years? What if the market for coal dries up because of tougher government regulations or cheaper gas and renewable energy sources? On the other hand, does a company that develops clean water technology give us the return we want and provide a safer long term place for our money? Considering ESG factors does not undermine the pursuit of return on investment — ESG investors still seek the best returns. But it also better protects those returns from risk.

Nevertheless, Moore and his allies insist on making investing state funds a political issue. To them even considering ESG factors is a practice of “woke” liberals that West Virginia should reject. In one of his shrill press releases, Moore told West Virginians that “the ESG crusade being perpetrated by the liberal elites must be stopped!” This is just nonsense politics about culture, not economics.  In this posturing for right-wing votes, Moore has threatened the stability of state investments and will cost West Virginians money in the bargain.  He either doesn’t understand why it is important for investment managers to consider ESG factors or doesn’t care.

Moore’s Law No. 1 was enacted in 2022.  It empowers Moore as state Treasurer to create a list of financial institutions that, in his opinion, unreasonably “boycott” or limit commercial relations with any company engaged in the fossil-fuel based energy business.  Moore is authorized to disqualify firms on the restricted list from competitive bidding for state banking contracts or refuse to enter a banking contract with such firm, regardless of how financially advantageous to the state that contract might be.

Moore’s restricted list includes five of the largest, most sophisticated financial institutions in the United States — BlackRock Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, and Wells Fargo & Co. They provide banking services by generating a market for bonds issued by West Virginia state governmental units. The non-profit Sunrise Group commissioned a study of the costs to states who adopt anti-ESG legislation like Moore’s Law No. 1. The study estimated that in a single year of refusing to do business with these five firms, West Virginia would have to pay increased interest on its bonds of between $9 million and $29 million.

How have the five financial institutions targeted by Moore “boycotted” fossil-fuel energy companies to justify disqualification from doing business with West Virginia? Moore’s press release concerning BlackRock explained it – and you’d better cover your children’s ears for this one. BlackRock was disqualified because it “has urged companies to embrace ‘net zero’ investment strategies.” Seriously?

Isn’t this simply an effort to use politics to interfere with market forces, a practice free-market Republicans are supposed to hate? According to Dana Milbank, writing in the Washington Post, Moore and fellow Republican treasurers in other states are determined to “stop the free market no matter how much it costs.”  He reported that the Kansas Public Employees Retirement System expects that anti-ESG legislation could cause more than $1 billion in losses from early sale of assets and reduce returns by $3.6 billion over a decade. Arkansas public pension authorities said anti-ESG legislation there would cause them to lose $37 million per year.

West Virginia’s Treasurer doesn’t control the investment decisions for state pension funds. These funds are invested on the state’s behalf by banks and mutual funds at the direction of the West Virginia Investment Management Board and the Board of Treasury Investments. Periodically, our investments require these investment boards to vote as a shareholder on the direction of the corporations into which our funds have been invested. Moore’s law No. 2 requires these boards to consider only “pecuniary” factors when casting these shareholder votes. The law specifically states that “environmental, social, corporate governance, or other similarly oriented considerations are not pecuniary factors” unless they have an immediate financial impact.

When Moore’s Law No. 2 was enacted in 2023, he boasted by saying that the law was “leading the way to fight back against woke activists who want to use our state investments and retiree pension dollars to advance extreme political and social agendas.” Presumably he means saving the planet from catastrophic climate change.

The problems with Moore’s Law No. 2 are many, but the most significant is that it requires state investment board members who cast our votes to ignore long-term, systemic factors that, as fiduciaries, they can’t ignore. A 2021 study by the insurance giant Swiss Re estimated that by mid-century the world stands to lose 10% of its economic value from climate change. Moore’s Law No. 2 requires that our investment board trustees ignore this looming crisis and puts them in jeopardy of violating other state and federal laws regarding fiduciary duty.

Not to be unkind, but Riley Moore couldn’t think this stuff up on his own. Key features of Moore’s Law No. 2 are lifted straight from a template provided by the American Legislative Exchange Council to conservative legislators around the country. ALEC’s mission is to protect fossil-fuel energy industries at all cost, while instead claiming to be interested in small government. Moore’s Law No. 1 is based on a similar template that now even ALEC won’t support after complaints by the American Bankers Association that “government should not be dictating business decisions to the private sector.”

The point is that Moore’s legislative efforts do not spring from his own genuine concern about protecting West Virginia, as he claims, but rather from an ideological platform used by ultra-conservatives around the country. Other Republican-dominated states have passed nearly identical laws. Moore is taking advantage of this tool to become a Ron DeSantis clone, slaying the “wokeness” dragon. That plays to a certain crowd.

This all comes into better focus when you consider that Riley Moore is running for Congress. When the time comes, he will trot out his anti-ESG efforts to prove his conservative credentials. But his aggressive attack on the “liberal elites” and their evil conspiracy to halt climate change is just a boneheaded political stunt undertaken for the sake of publicity, without consideration of the costs it will impose on the average West Virginians Moore claims to protect.

Industry To West Virginia: We Can’t Be Bothered

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They’re at it again. Under the cover of the Covid pandemic, when citizens can’t rally in numbers, the West Virginia legislature is poised to gut one of the key protections of the Aboveground Storage Tank Act enacted after the 2014 water crisis. Remember the crisis? When 300,000 Mountain Staters had no access to safe water? Apparently, the legislature does not. The bill is pushed by tank owners and backed by industry. The reason? As Charlie Burd of the Gas and Oil Association of WV says, according to Gazette-Mail reporter Mike Tony, the regulation is too burdensome. Translation: We can’t be bothered.

We can’t be bothered to operate responsibly, they’re telling us. We can’t be bothered to make sure dangerous chemicals don’t foul drinking water supplies. We can’t be bothered to make an honest dollar — one with a reasonable return that does not force people to live under the specter of mass contamination.

The bill in question is HB 2598. It would exempt more than 1,000 oil and gas waste tanks — tanks near drinking water supplies across 27 counties — from Aboveground Storage Tank Act regulation. That’s right. The legislature wants to make our water less safe by throwing out common sense rules.

Oil and gas waste tanks contain a mixture of produced water and crude oil. The mixture is composed of a variety of pollutants that can contaminate drinking water supplies. This is true for surface water systems and surface water-influenced groundwater systems, or SWIGs, appropriately. There are some 20 SWIG systems along the Ohio River.

The Aboveground Storage Tank Act helps ensure that tanks in “zones of critical concern” are properly inspected and maintained. These zones are areas along streams located upstream from a public water system’s intake or well. This seems sensible. Rather than having the public pay for leaks, spills, and disasters in the water supply, let’s inspect tanks closest to drinking water supply more often, and keep them in working order.

That’s it. Seriously.

How can inspection and maintenance of a business asset be too burdensome? This is the same old trope industry rolls out every time it can’t be bothered. Installing seat belts in every car, the auto industry said, would make cars unaffordable. Too burdensome. The food industry said the same thing when the FDA required companies to state the ingredients on packaging so that people actually can know what they are eating. Too burdensome. It’s the same story every time.

We all face regulatory “burdens” every day. Like the 70 miles per hour speed limit on our wide-open interstates. Rules for safe food storage and handling in restaurants. Restricting hunting to certain seasons.

We accept these rules as minor inconveniences because we know, in our great big West Virginia hearts, that we do unto others as we would have them to unto ourselves. And that’s what the aboveground storage tank rules do, especially in the Ohio River Valley, where the vast majority are located. Call it the Good Neighbor Rule. It ensures people that their government cares and takes its responsibilities seriously. That their government is up to the task of fulfilling its most basic function: to protect the health and safety of its citizens. We need these protections.

In nearly laughable displays of feigned outrage, tank owners may level the ultimate threat — leaving the state altogether if they don’t get their free pass. For good. Take their ball and go home. I say, Good Riddance. Bye bye. Don’t let the door hit you on the way out. We don’t need you in West Virginia. We don’t want you in West Virginia if you’re not willing to play by the rules.

Another company, one that accepts the responsibility that comes with handling and storing dangerous chemicals, will step in and find a way to make an honest buck. Now that’s the free market. And then maybe other industries that value clean air, safe water, and responsive government will move in to create 21st century jobs.

I keep hoping that one day our legislature will have the courage to acknowledge one existential fact. That the states with the weakest environmental and public health and safety rules are consistently among the poorest. Exempting tanks near drinking water supplies will make us not only less safe, but poorer. A slap on both cheeks to people who live in the Ohio Valley and across West Virginia.

— David Lillard is on the board of directors of Conservation West Virginia; he lives in Jefferson County.

Solar Energy and the Legislature: A Power Play in Charleston

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For a state beholden to the coal and natural gas industries, solar energy generated a lot of heat at the recent West Virginia legislative session. Two initiatives concerning alternative energy, including solar, were introduced. One survived and will become law. Unfortunately, the survivor is a timid effort to attract a specific hi-tech enterprise that will involve no new solar energy facilities unless that enterprise locates here. But progress on renewable energy in West Virginia will have to be made in small steps, and this was a start.

The unsuccessful initiative – SB 759 – contained a number of wonderful ideas that would have enabled commercial and individual property owners to develop alternative energy for their own consumption.  The bill would have accomplished this by authorizing municipalities to establish low-cost alternative energy revolving loan programs to assist the property owners. Interest rates charged on the loans from these programs would have been below prevailing market rates.

The alternative energy technologies eligible for loans from the municipal loan program included solar photovoltaic projects, solar thermal energy projects, geothermal energy projects, as well as wind energy, biomass or gasification facilities for generating electricity.

SB 759 was introduced by Democratic Senators Robert Plymale and Mike Woelfel, both from District 5 (Cabell and Wayne counties). It was referred to the Government Organization Committee, the place where bills of this sort go to die. At the end of the session 67 bills, including SB 759, had expired in that committee with no action.

The survivor of the two initiatives — SB 583 — was introduced by Republican Senator Patricia Rucker of Jefferson County, among others. This bill will authorize electric utilities in the state to construct or purchase solar energy facilities on sites that have previously been used for industrial, manufacturing or mining operations. Wind and other alternative energy sources are not covered.

Demonstrating how timorous this initiative is, solar facilities under the law can only be built in 50 megawatt increments. When 85% of the power from the first increment is under contract, facilities for the next 50 megawatts can be built. No single such facility can generate more than 200 megawatts and the state-wide cumulative generating capacity of renewable energy facilities can’t exceed 400 megawatts. Evidently, neither the utility industry nor the coal industry wanted a lot of excess solar power sloshing around that would require companies to reduce coal-fired power generation.

This bill surprisingly had the support of the West Virginia Department of Commerce. It seems that whenever the business recruiters at the Department tried to lure tech companies to the state, these companies insisted on the availability of solar energy. Well, of course, we have had no such capacity.

The particular focus of the Department’s recent efforts is a company that proposes to build a research and development facility in Preston County that will test ultra-high speed transportation systems. The provisions of SB 583 that enable utilities to recover their costs for constructing solar facilities will sunset in 2025, by which time this company will either have located in West Virginia or not. So despite the high-sounding rhetoric about the need for West Virginia to enter the twenty-first century world of renewable energy, the real driver of this legislation was immediate business development and not a long-term commitment to renewable energy.

A similar bill – HB 4562 – was introduced in the House and debated extensively in the House Energy Committee, where it appeared to be stalled by objections from the coal industry. When SB 583 was passed by the Senate and sent to the House, it sidestepped the troublesome Energy Committee and went straight to House Judiciary and then to the House floor. Debate there was contentious. Delegate Tom Bibby, a Republican from Berkeley County, grumbled 

If renewable energy and solar energy were so good they (the tech companies) could afford to pay for it themselves. Renewables may sound nice and good, but they are heavily subsidized. To say coal-fired power plants won’t suffer from this legislation is just sticking your head in the sand.

House environmental advocates were initially considering an amendment that would broaden SB 583 to include solar power purchase agreements (PPAs). These are contractual arrangements where a third-party developer designs, finances and installs a solar energy system on a customer’s property at little to no cost. The developer sells the power generated to the host customer at a fixed rate that is typically lower than the local utility’s retail rate.

However, the idea for an amendment allowing PPAs was dropped. Democrats favoring the amendment had little time to gather support and it was feared that complicating the process would threaten passage of the main bill. Karan Ireland, lead lobbyist for the West Virginia Environmental Council, lamented that “what we see is utilities calling the shots and getting everything they want in the process.”

So West Virginia will move forward with a solar facilities law limited in scope that was carefully managed by electric utility and coal interests to avoid any threat to the existing carbon-based power generation monopoly in the state. The motivation for this law had nothing to do with any recognition that burning coal is fouling our air and literally killing us. Nevertheless, it is a first step and progress will have to be made this way.

West Virginia’s Green Amendment

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On February 11, 2019, thirty-two West Virginia legislators — all Democrats — introduced Resolution 25 in the West Virginia House of Delegates. The Resolution called for an amendment to the West Virginia Constitution creating a right to clean air, pure water, and the preservation of the natural, scenic, historic, and aesthetic values of the environment. Modeled on a similar amendment in Pennsylvania, the “Green Amendment” declares that these public natural resources are the common property of the people and appoints the State of West Virginia as trustee of those resources. These declarations would have sweeping legal consequences if the Green Amendment is adopted.

The Green Amendment reads like this:

The people have a right to clean air, pure water, and the preservation of the natural, scenic, historic, and esthetic values of the environment. West Virginia’s public natural resources are the common property of all the people, including generations yet to come. As trustee of these resources, the State shall conserve and maintain them for the benefit of all the people.

It was referred to the House Agriculture and Natural Resources Committee from which it did not emerge during the 2019 regular session. That Committee was co-chaired by Del. Roy Cooper and Del. Martin Anderson, both Republicans.

The Green Amendment will be re-introduced in the upcoming general session. Eastern Panhandle Delegates John Doyle, Sammi Brown and Isaac Sponaugle are among the co-sponsors. The Resolution will once again be referred to committee, where its future is uncertain.

According to Article 14-2 of the Constitution, the Green Amendment must be reported out of committee and then supported by two-thirds of both the House of Delegates and the Senate before appearing on the ballot in November.

The Green Amendment would substantially change the legal landscape regarding environmental rights and law. Presently, any rights to environmental cleanliness are created by statute or regulation. For example, DEP regulations now govern the amount of various chemicals that are permitted in our drinking water. The determination of what is permissible is heavily influenced by the industries that are affected by the regulation.

With a Green Amendment, the people’s right to a clean and healthy environment would occupy a higher order of legal significance. Statutes and regulations would have to be consistent with the right or be subject to rejection in a court as unconstitutional. If the West Virginia Legislature or the DEP created a statute or regulation affecting the cleanliness of drinking water, they could to do so only after considering how the protected environmental rights could be preserved with the least impact. This is a feature of acting as a trustee of those rights. Where protected environmental rights would be destroyed, no governmental action could be taken.

The trusteeship feature is very significant. The beneficiaries of the trust are the current generation of West Virginians and all future generations. So the government actor would have to consider not only the immediate effect of an action, but its long-term effect. And as a trustee, the primary concern would be the preservation of the environment. Where job creation or some other competing policy objective conflicted with these rights and could not be reconciled, the competing objectives would have to give way.

Taking the Rockwool situation as an example, if the Green Amendment were in place a private citizen would not be able to sue the company directly for any industrial activity. Instead the private citizen would challenge the state for issuing the air quality permit. Perhaps even local governments, which are instrumentalities of the state, would be subject to suit for acts in the permitting process that unconstitutionally infringed the protected rights.

Pennsylvania’s Green Amendment was enacted in 1971. But through early judicial interpretation its impact was blunted. Instead of reading and enforcing the plain language of the Amendment, Pennsylvania courts treated it as a policy statement the meaning of which was determined by legislatively-created statutes and rules. This ended in 2012 with the case of Robinson Township v. Commonwealth, which successfully challenged the constitutionality of a one-size-fits-all zoning scheme that permitted drilling, fracking pads and gas wells in every zoning district, including residential districts, near schools, playgrounds and hospitals.

The Robinson Township court ruled that the people had withheld from government the power to trample environmental rights, which the Green Amendment had raised to the same level as the right to free speech or the right to be free from unreasonable searches and seizures. While the Green Amendment did not impose on the legislature a duty to enact affirmative statutes, a duty was created to avoid infringing those rights by legislative action.

Like West Virginia’s proposed Green Amendment, Pennsylvania’s placed on the Commonwealth the duty to preserve and maintain the state’s public natural resources. This duty was held by the court to mean that the government must prevent and remedy the degradation, diminution, or depletion of public natural resources and do so in a way that is consistent with the fiduciary obligations of a trustee, including the duties of prudence, loyalty and impartiality.

The principle of anti-degradation does not mean “no activity.” Instead it allows for sustainable development and activities that do not harm the quality and quantity of the water, air, fish and other aspects of the natural environment, now or in the future. Under this standard, it is hard to imagine how mountaintop removal mining could be given a permit by state authorities.

Pennsylvania is not the only state with a Green Amendment. The Montana Constitution declares a right to a “clean and healthful environment.” This is supported by other features of the state’s constitution. A section entitled Protection and Improvement reads like this:

The state and each person shall maintain and improve a clean and healthful environment in Montana for present and future generations. The legislature shall provide adequate remedies for the protection of the environmental life support system from degradation and provide adequate remedies to prevent unreasonable depletion and degradation of natural resources.

The Montana Supreme Court enforced these obligations against the Montana Department of Environmental Quality when it issued a permit to a massive open-pit gold mine to discharge polluted water into streams.

In fact there is a movement, called For the Generations, devoted to the passage of Green Amendments across the country. In advancing our own Green Amendment, progressive West Virginia legislators are out in front of many states. This Amendment would be a game-changer for us. Wish them luck.

Paper or Plastic?

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Remember when grocery clerks would ask this question at the checkout counter? Now you practically have to leap over the counter to prevent your groceries from immediately going into plastic bags. I have always assumed that plastic bags became the grocery industry’s packaging of choice because of the cost savings to the grocers. This is basically true. I have also assumed that paper bags are both biodegradable in landfills and recyclable into other products, while plastic bags are not biodegradable and rarely recycled. But going beneath these assumptions a little further, the environmentally sound choice between paper and plastic bags is not at all clear.

Plastic bags started to appear nationwide in the 1970s and soon captured 80% of the bag market. The principal grocers in Jefferson County – Food Lion, Martins and Walmart all default to plastic bags at the checkout counter. Paper bags are available only on request at Food Lion and Martins, which are both owned by the Dutch company Ahold Delhaize. Walmart does not offer paper grocery bags at all. One won’t find any explanation of the default to plastic bags on the websites of these chains.

All the chains offer reusable bags for sale at around a dollar a pop, and these are probably a better alternative than either paper or plastic bags. But even this turns out to be debatable depending on what they are made from and how many times they are used. Most of these reusable bags are woven plastic of some sort.

There are several factors to consider when deciding whether paper or plastic bags are more environmentally friendly. First, whether the raw materials that go into the manufacture of the bag are renewable. Next, how much electricity and water are used to produce them and how much greenhouse gas is emitted in each manufacturing process. Then how readily each type of bag can be recycled. Finally, how biodegradable each type of bag is at the end of its life cycle.

On the question of renewability of resources, paper bags are the clear winner. They are made from trees. Paper bag manufacturers do not typically use trees from Amazon rain forests, but rather tree farms of fast growing species. While they are growing these trees capture carbon. Plastic bags on the other hand are made from petroleum, which is a non-renewable resource that produces greenhouse gas when burned.

But when considering the use of resources and the release of greenhouse gas in the manufacturing process, plastic bags are the clear winner.  Making a paper bag consumes four times as much energy and three times as much water as making a plastic bag.  And because 1000 paper bags weigh over nine times the same number of plastic bags, transporting them also consumes more energy.

It is difficult to pin down exactly how much more greenhouse gas is emitted by the manufacture of paper bags than plastic bags. But it is a certainty that paper bag manufacturing is dirtier. The Sierra Club reports that you have to reuse a paper bag four times to reduce its carbon footprint to that of a plastic bag. Another study from 2008 asserts that paper bag manufacturing emits 80% more of this gas. A plastic bag manufacturer asserts that “solids” emitted into the air in the manufacture of paper bags is roughly twice what is emitted in the manufacture of a plastic bag.

The question of recycling further adds to the muddle. While paper bags can be recycled into other paper bags, the recycling process is inefficient, often taking more energy than it would to make a new bag. Furthermore, it takes about 90% more energy to recycle a pound of paper than a pound of plastic. But plastic bags are a recycling nightmare – most curbside recycling operations are not capable of recycling these bags because the thin plastic melts and fouls the machinery. It is estimated that only 12% of plastic bags are recycled.

So plastic bags often end up in landfills, where they can sit for 500 to 1000 years.  And plastic bags don’t ever “biodegrade.” Instead they “photodegrade” when exposed to light into smaller plastic particles. The more serious problem with plastic bags is that they don’t end up being disposed of properly but end up as litter. They are everywhere, fouling land and water. Plastic waste is deceptive to birds and mammals, who often mistake it for food. This would lead you to think that paper is the better choice. But here is the big surprise. A paper bag that ends up in a landfill does not biodegrade much faster than a plastic one photodegrades.

So perhaps the way to avoid this bag conundrum is not to use either type of single-use bag. The reusable bags offered for sale by grocery stores are a good option – if you use them long enough.  Heavier reusable plastic bags and cotton bags also have the freight of energy and resource consumption in their manufacture and their own greenhouse gas emission problems.  A heavy-duty plastic bag must be used five times to reduce its carbon footprint to that of a single-use plastic bag. A reusable cotton bag must be used 173 times.

There might also be a political solution to the problem. Eight states—California, Connecticut, Delaware, Hawaii, Maine, New York, Oregon and Vermont—have completely banned single-use plastic bags. Some cities and localities have also instituted bans, including Montgomery County, Maryland. Jefferson County Delegates John Doyle and Sammi Brown introduced legislation in the 2019 Legislature that would ban single-use plastic bags in West Virginia. The legislation was referred to committee, where it awaits some sort of action in the next session.

Most likely, however, we will have to change our behavior voluntarily. That’s not to say we couldn’t use a nudge. The German grocer Aldi, which is a small player in the market, provides that nudge. That chain will happily sell you a plastic or paper bag for about 10 cents each. Aldi claims this saves them money that they return to customers in the form of lower prices. Perhaps.

But there is no doubt that Aldi’s price on single use bags acts as a tax with the predictable result of encouraging shoppers to come up with their own bags or reuse bags they have previously purchased at Aldi or elsewhere. While this approach doesn’t completely eliminate the problems associated with single-use bags, it gets us moving in the right direction without government intervention. My conservative friends like this.

Death By A Thousand Cuts

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The West Virginia Legislature began its main 2019 session on January, 9, 2019. All bills introduced in 2018 that were not then acted upon were re-introduced on the first day of this session. New legislative proposals have also been introduced early in this session. A review of both categories introduced in the House and Senate shows that there are several serious attempts to deal with the state’s problems.

But it also shows that many legislators are in love with tax exemptions and credits, which benefit one class of taxpayer and disadvantage everyone else. Sometimes these proposals have merit, but taken cumulatively they show the Legislature’s willingness to bleed our government of the revenue required for it to function effectively, drop by drop.

Legislators from both parties have proposed tax exemptions or credits, although Republicans have done so by a margin of roughly three to one. Here are some of the many proposals:

  • To exempt law enforcement officers from the payment of personal property tax (HB 2075);
  • To reduce the federal adjusted gross income figure used in West Virginia tax calculations for volunteer fire department and rescue squad members (HB 2208);
  • To exempt firefighters and volunteer firefighters from the payment of income tax, and real and personal property taxes (HB 2403)
  • To permit honorably discharged veterans to hunt, trap and fish without a license (HB 2030);
  • To exempt all motor vehicles from personal property tax (HB 2094);
  • To exempt the pension benefits of Department of Natural Resources police officers from state income tax (SB 12);
  • To exempt income earned by primary and secondary school teachers from personal income tax (HB 2370); and
  • To establish an income tax credit for practicing physicians who locate to West Virginia (SB 80).

For the last several years, this state has struggled with large budget deficits created because in earlier periods, when coal severance revenues were high, we reduced or eliminated other taxes. Among these were the business franchise tax and a reduction in the corporate income tax. Then the coal market, as it always does, went bust. We are now again operating with a surplus from an improved coal market and revenues from gas pipeline construction. But these sources of revenue are not permanent. Tax exemptions and credits, on the other hand, often become permanent.

Effective government costs money. Nobody likes paying taxes, but many of us like even less the failure of our government to create a successful, modern state that we don’t have to apologize for. Jim Justice is right about one thing – we are all tired of being 50th. Yet our tax choices don’t reflect an understanding of how to change this.

I am certain that cogent supporting arguments can be made by the legislative sponsors of each of the proposed exemptions and credits mentioned above. And it is difficult for opponents to argue that, say, school teachers aren’t worthy of tax relief. That sort of debate, though, is limited to the worthiness of the constituency to be favored.

What is missing is an analysis of the opportunity cost of granting exemptions and credits. What more important thing would we be able to do with the money we propose to confer on teachers or DNR police officers? There is very little of this analysis in the Legislature beyond the legislative fiscal notes, which are little more than a bookkeeping of what a proposal might cost. These fiscal notes are routinely ignored. You can be sure, however, that every nick in the general revenue fund created by a tax exemption or credit is ultimately felt somewhere else in the budgetary process.

This is not to say that tax exemptions and credits can’t be useful in achieving important policy goals, so long as they rationally fit those goals and are not one-off gifts to a particular constituency. Some of the recent legislative proposals fit well and seem worthy of enactment. For example, a refundable state earned income tax credit of 50% of the existing federal earned income credit. (HB 2108). This credit would further supplement the incomes of low and moderate income working adults. Doing that would increase the attractiveness of work and reduce the need for other public benefits like food stamps.

The idea of raising taxes is like the third rail in West Virginia politics. Nobody in the Legislature wants to touch it for fear of being punished by voters. But maybe we can be more careful about “spending” the revenues we do have on tax benefits for narrow constituencies. One way to do this is to resist the temptation to open any more small fiscal wounds in the body politic for the sake of momentary political benefit.

Going through all the bills that have been introduced in the Legislature so far, I came upon another idea. In each of the last two sessions, a bill has been introduced in the Senate proposing a five year sunset period for all tax credits in the Code (SB 23 and SB 48). Now that is a breath of fresh air.

 

The West Virginia Legislature Fails Its Budget Responsibility

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“Do Your Job!” This was a constant refrain heard from the thousands of citizens, many of them teachers, who filled the halls of the state capitol in late February and early March.

They were calling for investment in public education, and for decent salaries for themselves and thousands of other seriously underpaid public employees. The Legislature was dragged kicking and screaming into granting an average 5% raise.

This raise was critically important. But there is another critically important job the Legislature failed to do.

By essentially “rubber stamping” the proposed budget sent to it by the Governor, the Legislature failed to exercise proper stewardship of the public’s money. When it comes to the single most important document the Legislature produces each year, the State Budget, the Legislature did not do its job.

As to my bona fides, I served on the House of Delegates Finance Committee for 19 years (as Vice Chair for 10 years). Later, I was Deputy Secretary of Revenue for 3 years. I have learned the budget process from both the legislative and executive points of view.

Under our state constitution, it is the Governor’s responsibility to propose a budget. It is the responsibility of the Legislature to enact a budget. We on the House Finance Committee took that responsibility seriously and every year we went through the Governor’s proposal carefully, looking for places to economize.

Each of the members of the House Finance Committee was assigned individually to the proposed budget for one or more executive branch agencies to find money that might be cut or used elsewhere. It took us the first 30 days of each annual Regular Session to gather the information and about the next 20 days to compile and analyze it. We would make dozens of changes, sometimes over a hundred, to the Governor’s original proposal. When we reported our completed budget to the House floor during the last week of the session, we were confident that we had done our job up to that point.

But the job wasn’t finished. The Senate Finance Committee would send its budget to the Senate floor at the same time. A Budget Conference Committee for the two chambers would begin meeting as soon as the regular 60-day session was finished. It would usually take between five and seven days to finish. The Governor was always invited into the discussions. I served on this Committee for twelve straight years. The result would be a budget thoroughly vetted.

But that did not happen this year.

In recent years the Legislature has stopped being thorough in analyzing the Governor’s proposed budget. This year the Legislature didn’t even appoint a Budget Conference Committee to discuss ways to improve the budget.

This year’s final budget (FY 2019) included fewer than a dozen changes from the Governor’s proposal. And most of those changes were dictated by the decision (unanticipated when the Governor presented his proposed budget) to grant that 5% pay raise, which cost the state’s coffers about $150 million.

Either our present Governor is the smartest person ever to occupy the office, or the Legislature punted. I think the Legislature abdicated its responsibility to vet the governor’s budget proposal thoroughly. This was fiscally irresponsible.

The West Virginia Constitution permits the Governor to extend the Regular Session for as long as it takes to finish the budget. This is called the Extension of the Regular Session and is different than the Special Session that was required for the FY 2018 budget.  Each day of an extended regular session costs the state approximately $20,000. If this extension averages six days that would cost the taxpayers approximately $120,000. If that work can save at least $500,000 I argue it’s worth the expense. Every year I was on the Budget Conference Committee we saved at least several million dollars.

Because of this work we were able to significantly pay down the unfunded liabilities of the workers’ compensation fund and the various public employee retirement funds, and to establish the rainy day fund. We stabilized the public employee health care program, then called PEIB and now PEIA. The system was so behind in its payments in the 1990’s that medical providers were refusing to see state employees.

Through careful work and negotiation, West Virginia — a financial basket case in 1992 — became recognized as one of the half dozen most fiscally responsible states in the Union by 2012 when I left the Legislature. Our bond ratings were “junk” status in 1992, but had risen so much by 2012 that some were the highest rating (aaa-plus).

In the last four years the so-called “fiscal conservatives” in the Republican Party who lead the Legislature have raided our rainy day fund several times and have overseen a drop in our bond ratings. They have also slowed down paying off some unfunded liabilities. In my view this is fiscal irresponsibility. Their lack of budget scrutiny is another example of irresponsibility.

John Doyle resides in Shepherdstown. He is a Democratic candidate for the House of Delegates from the 67th District.

Panhandle Legislators Lead West Virginia’s “Bad Idea Machine”

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Delegate Mike Pushkin, who represents Charleston’s East End in the House of Delegates, once quipped that the West Virginia Legislature is a “bad idea machine.” Our Eastern Panhandle delegation contains some of the leaders, if that is the proper term, in generating bad ideas. I have recently written that Sen. Patricia Rucker has sponsored a host of bills that advance her far right ideology and religious beliefs. Most notably, these include her sponsorship of Senate Joint Resolution 12 that would put on the November 2018 ballot a proposed amendment to the West Virginia Constitution declaring that nothing in that Constitution creates a right to abortion. Not to be outdone, her Panhandle colleagues in the House of Delegates have introduced pro-gun and anti-public school legislation that give Sen. Rucker a run for her money.

The recent teacher strike has highlighted how badly our government has allowed the state’s public schools to deteriorate. Until the settlement announced on February 27, 2018 is implemented, teacher salaries in West Virginia rank 48th out of 51 state jurisdictions. We are surrounded by states that value their teachers more. And yet the poor-mouthing by Governor Justice about the state’s inability to raise teacher pay was obviously just posturing in light of the 5% bump teachers will now receive.

If there is any truth to the “inability to pay” argument, that inability has been created by a decade of corporate tax cutting that has blown huge holes in the budget. Over this period, West Virginia has relentlessly cut corporate taxes. In the period 2007 to 2014, the Legislature reduced the business franchise tax from .7% to zero and reduced the corporate net income tax rate from 9% to 6.5%.

In the midst of a courageous walkout by teachers in all 55 counties, the Legislature was primed to hand business interests yet another tax cut in the form of eliminating the business inventory tax and may yet do so. Tax cuts for business are nothing more than a choice on how to “spend” revenues, in this case by forgoing revenue that otherwise would be collected and available. Until its hand was forced by the teachers, the Legislature was prepared to spend a big pile of cash on corporations instead of quality education.

But there is reason to question whether our Panhandle Delegates care about public education at all. Del. Michael Folk (R-Berkeley, 63) has introduced HB 2031, which would eliminate state payment for teacher training or professional development, and HB 2094, which would give home school parents a $100 tax credit per student. This tax credit would begin the process of permitting home school parents not only to opt out of public education but to avoid paying for it like everyone else. This folks is what libertarians want not only when it comes to public education but all government services.

When it comes to guns, our Panhandle Delegates are second to none in the bad idea category. Here Del. Folk fully reveals his extreme views. He sponsored HB 2311, which would declare any federal or local laws or regulations that attempt to tax, regulate or restrict gun ownership void and unenforceable in West Virginia.  He clearly needs some re-education about the Supremacy Clause of the U.S. Constitution.

The recent horrible school shootings have perhaps caused us to forget the equally horrible workplace shootings of the near past.  Del. Saira Blair (R-Berkeley, 59) may be too young to remember what “going Postal” meant to America but a few short years ago.  She has co-sponsored HB 4187, named the Business Liability Protection Act, but referred to as the Parking Lot Gun Act.  It would allow an employee, contractor or visitor to a business that bans guns on its property to nonetheless keep a gun locked up securely in their cars while parked in the business parking lot. The business would even be prohibited from inquiring whether a gun is in the car. This bill has now passed the House of Delegates.

In Committee, Del. Riley Moore (R-Jefferson, 67) offered an amendment to HB 4187 that was favored by the NRA to retain the full scope of this bad idea against efforts to soften it. State Chamber of Commerce President Steve Roberts, West Virginia Manufacturers Association President Rebecca McPhail and David Rosier, general manager of administration for Toyota’s Buffalo plant, have all come out against HB 4187, saying it would make their workplaces less safe.

Elections have consequences. The 2016 House of Delegates election produced this crop of Republican legislators and we are now truly living with the consequences. Fortunately, the winds of change are swirling.

Blaming The Victim: West Virginia’s Flirtation With Medicaid Work Requirements

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It was my intention when launching this blog to support economic policies in West Virginia that actually spread prosperity to all citizens. The wealthy don’t seem to need help ensuring they get a big plate full at the prosperity table. It is the less fortunate who need help. But in this long Republican winter, avoiding policies that hurt the less fortunate is really a full time job.

Two ideas popular in West Virginia and the nation today fuel this problem. First is the Koch-funded libertarian idea that any expansion of public benefits is a threat to the “liberty” of those who are taxed to pay for it. This is well-documented in Nancy MacLean’s 2017 book Democracy in Chains. Second is the populist notion that people who receive public benefits are somehow lazy and morally at fault for their situation. Both of these factors are on display in the current debate about whether to add work requirements for Medicaid benefits.

Medicaid is a jointly funded federal and state program that helps several categories of low income and disabled people with medical costs. As of 2017, Medicaid provided healthcare coverage to 74 million nationwide (over 23% of the population). Some of the covered categories include children in low-income families, pregnant women, parents of Medicaid-eligible children who meet certain income requirements, and low-income seniors.

Obamacare extended Medicaid eligibility to all U.S. citizens and legal residents with income up to 138% of the federal poverty line, including for the first time adults without dependent children. But as a result of a Supreme Court ruling, states were not required to adopt this expansion in order to receive federal Medicaid funding for previously covered groups. Given its large poor population, West Virginia wisely opted to extend coverage. About 170,000 additional West Virginians became eligible under Medicaid expansion, roughly 9% of the state’s population.

On January 11, 2018, the landscape changed. The Director of the federal Centers for Medicare and Medicaid Services (CMS) issued a letter to all state Medicaid directors inviting them to apply for a waiver that would allow states to require participation in work and other community engagement as a condition for Medicaid eligibility. The policy change is described as “designed to assist states in their efforts to improve Medicaid enrollee health and well-being through incentivizing work and community engagement.” Yes, you read that right. These bureaucrats are asserting that work will make you healthy. They cite studies that link unemployment with depression. Of course, they have it totally backwards – being healthy will enable you to work.

I am inclined to think that CMS’ explanation is a cynical effort to avoid the legal challenges to Medicaid work requirements that have already begun. In the first place, approving work requirement waivers is an about-face – several states attempted this in the past but were denied. They were denied because work requirements for eligibility are contrary to Medicaid’s stated purpose to provide comprehensive healthcare coverage for people below state income thresholds. Administrative agencies cannot lawfully rewrite a statute through adding eligibility requirements that advance other goals (limiting benefits to the “deserving poor”) that are contrary to the purpose of the law. CMS operatives know this, which explains their absurd effort to link work requirements with health.

At the urging of Republican legislators, West Virginia’s Department of Health and Human Resources is now considering work requirements for Medicaid recipients. According to Jeremiah Samples, Deputy Secretary of DHHR, this effort would focus on “able-bodied” people:

We’re trying to empower folks to get out of the system. At the end of the day, the best thing we can do at DHHR for our able-bodied population is to get them into the workforce, without question.

Truth be told, any such requirements would expel recipients from the system, not “empower” them to leave. This is a stick not a carrot. For Medicaid expansion states like West Virginia, any work requirements will have the (intended) effect of reducing the recipient population irrespective of whether those removed remain below the state income threshold.

How would this happen? According to Mr. Samples, the DHHR is reviewing how other states plan to add work requirements. Kentucky’s waiver was the first to be approved by CMS. The Kentucky plan calls for reporting by the recipient every 30 days to verify that he or she is working or involved in some other activity approved by the authorities. Kentucky will disenroll recipients from Medicaid for up to six months if they fail to report changes in income or work status.  Beyond the sheer hassle to the recipient and the possibility of inadvertent noncompliance, this would be yet another layer of red tape and opportunity for error. It would be a system the sole purpose for which is to snag and remove Medicaid recipients who do not repeatedly, month after month, prove their eligibility and worthiness. An aide to Kentucky Governor Blevins says that he expects 95,000 recipients to be removed from Medicaid benefits within five years.

Getting people off benefit rolls and onto employment rolls is a great idea. But West Virginia can’t do this by denying people healthcare. There are several reasons why an “able-bodied” person might be in need of Medicaid that have nothing to do with laziness. A shortage of jobs is one. Being between jobs for over 30 days is another. A mismatch between job requirements and a worker’s skill might be another. Opioid dependency might be involved. In an excellent editorial published on January 25, 2018, The Charleston Gazette put it this way:

How does interruption in coverage improve anything? Or is it just an exercise for the righteous . . . to feel better about themselves? ‘Must work for your healthcare,’ might be a great policy in the perfect imaginary world where ideologists live, but it fails to acknowledge the real circumstances of life in most of West Virginia, both town and country. No doubt that is by design. If people who never liked the Medicaid expansion can dress up their ‘solutions’ as getting tough on the poor and lazy, it sells better than if it is more accurately described as kicking the most vulnerable West Virginia workers, or potential workers.

Eighteen states declined to accept Medicaid expansion funds despite the needs of their populations. This group includes every state in the old Confederacy except Arkansas and Louisiana. But one unintended consequence of the present willingness of CMS to approve Medicaid work requirements is that several of these non-expansion states are now considering participation in the expansion. This may have the ultimate effect of increasing the Medicaid rolls nationwide. But it is a development that will not help expansion states like West Virginia.

Delegate Riley Moore and Business Tax Cuts

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On October 19, 2017 Delegate Riley Moore, who represents the Shepherdstown District in the West Virginia House of Delegates, published an opinion piece in the Charleston Daily Mail. The piece urged Congress to pass the Trump “tax reform” bill for the sake of economic growth, particularly in West Virginia. Putting aside that Del. Moore could not have known the details of the Republican tax bill on October 19 because it had not yet been made public, he extolled the virtues of various tax cuts he expected the plan to contain. In particular, Del. Moore is fond of tax cuts for business. His logic is the following. The desirable end result is more economic activity and good jobs for everyone. So far, so good. The means of achieving that desirable end result is to give over a trillion taxpayer dollars to corporations — with no strings attached — and hope that they spend this money in productive ways. What could possibly go wrong with this plan?

Republicans have creative ideas from time to time, and Del. Moore is no exception. He sponsored a bill during the last legislative session that would have created tax credits to stimulate new businesses in West Virginia. But Republicans never want to pay for their creative ideas with new tax revenue. Instead they want to cut into already existing tax revenue that would be available for other useful government work. Tax credits are one way to do this. Tax credits are tax reductions for specific taxpayers who meet the requirements, yet they are still essentially transfers of our public money in exchange for certain taxpayer behavior. Is encouraging this behavior more desirable than some other use for the tax money? The problem is that when these tax credits are proposed it is impossible to identify precisely what government program will be eliminated in exchange, or will suffer for lack of funding. The proponent of the plan doesn’t have to make the case that the tax credit is better than an environmental program, more student loans, or some other worthy project. So the public cannot intelligently answer the question.

Indiscriminate business tax cuts are far worse. Under the Republican world-view, money is best diverted from public uses to private uses. The end result is that government has less and less ability to do what we need it to do. Make no mistake, every dollar that is cut from the taxes of a business is a dollar that we could otherwise use to fund our schools, our healthcare and our public safety. Indiscriminate business tax cuts don’t even pretend to require desirable behaviors from the business like tax credits do. Business tax cuts are just giveaways of our money plain and simple. Today the Wall Street Journal reported that the Trump tax plan in its present House version would permanently reduce the corporate tax rate to 20%, costing $1.5 trillion dollars in lost tax revenue.

Has anyone else noticed that Republicans only seem to be concerned about the deficit and the debt when it is “entitlement” spending programs that are under consideration? True tax reform would shift tax burdens around to be more equitable and streamline administrative procedures. But it would also find new revenues to make up for revenues lost – revenue neutrality. Trump’s tax plan as initially revealed by the House Republican leadership hardly makes an effort to claim revenue neutrality. Paul Ryan and others say that the enormous tax cuts will stimulate growth over the next decade and from this growth new tax revenues will come. No economist will stand up to support this trickle-down baloney. If the so-called “fiscal hawks” in the Republican Party don’t oppose this thinking, then we should all change the channel the next time they complain about spending programs from the Democrats.

Del. Moore’s opinion piece in The Daily Mail also spoke warmly of middle-class tax cuts and on this it is hard to disagree with him. Putting more money in the pockets of those who need a boost is exactly the kind of alternative use for tax revenues that does make sense. It will also boost the economy because middle-class taxpayers will be much more likely to spend their tax cut than the wealthy, who will save any tax cut they get.

But a business is entirely different than a middle-class taxpayer. Sure a business tax cut will free up some money for the business, but what’s to keep that money from being spent on a vacation in the tropics for the owner, or a non-productive use like paying down debt or share repurchases? Writing in the Washington Post, David Lynch notes

Several companies already have indicated that they will use excess funds to pay off debt, increase dividend payments or repurchase their own shares rather than create new jobs or raise wages. On Wall Street, the consensus is that workers will be the last in line behind shareholders, creditors and investment bankers when the extra corporate cash is distributed.

The Republican tax plan contains absolutely no requirement that a business use the tax cut for investments that will create jobs. If Del. Moore wants to have his house painted, you can be sure he doesn’t just send checks to all the painters in town in hopes that one will show up at his house.

If this country is going to give away its tax revenue to corporations for the goals of generating economic activity and creating jobs, there are ways to ensure that the money is employed to these purposes. One need look no further than the way the money from the recent West Virginia road bond referendum will be used. The goals were increased economic activity in the short term and more jobs for West Virginians. There is a linear connection between these goals and the means chosen to achieve them. Projects will begin in the current fiscal year all over the state. The West Virginia Jobs Act requires that contractors receiving these funds employ a workforce of at least 75% West Virginia residents and a proposed amendment introduced at the recent Extraordinary Session of the Legislature would put some teeth into this requirement. Of course, there can always be slips between the cup and lip. But this arrangement creates more confidence that our tax money will be used for the desired purpose than trillion dollar business tax cuts with no strings attached.