Joseph Krist

Publisher

COLLEGE PRESSURES

Harvard University announced a hiring freeze. It comes in the wake of the announcement that the federal government was nullifying $400 million in grants and contracts from Columbia University over accusations that the school had failed to protect Jewish students and faculty from antisemitism. Harvard is one of 10 schools the Trump administration identified last month as subject to review over accusations that it had not done enough to curb antisemitic behavior on campus during protests over the war in Gaza.

At the University of Pennsylvania, administrators have asked departments in the School of Arts & Sciences, the university’s largest school, to cut incoming Ph.D. students. North Carolina State University announced that it was freezing most hiring. Stanford University announced it was freezing staff hiring, citing “very significant risks” to the community. The University of Louisville in Kentucky, announced an “immediate pause” on faculty and staff hiring until July. 

As the week opened a new list of target schools was announced by the Department of Education. They include American University, Arizona State, Boston University, Brown, Cal State-Sacramento, Chapman University, Columbia, Cornell, Drexel, Eastern Washington, Emerson College, George Mason, Harvard, Illinois Wesleyan, Indiana, Johns Hopkins, Lafayette, Lehigh, Middlebury, Muhlenberg, Northwestern, Ohio State, Pacific Lutheran, Pomona College, Portland State University.

The remainder on the list include Princeton, Rutgers, Rutgers-Newark, Santa Monica College, Sarah Lawrence, Stanford, SUNY-Binghamton, SUNY-Rockland, SUNY-Purchase, Swarthmore, Temple University, The New School, Tufts, Tulane, Union College, UC-Davis, UC San Diego, UC Santa Barbara, Cal-Berkeley, Cincinnati, University of Hawaii, UMass-Amherst, Michigan, Minnesota, North Carolina, South Florida, USC, University of Tampa, Tennessee, Virginia, University of Washington, University of Wisconsin, Wellesley, Whitman College, and Yale. They all made the grade.

While these institutions fight the ideology battle, others are fighting for their financial lives. The board of trustees for New Jersey City University voted to approve the pursuit of a merger with Kean University, a state school. NJCU was directed to find a partner by a state-appointed monitor after a new law was passed in 2023 to backstop the struggling institution and others in the future. The school serves a population primarily composed of first time and minority students.

D.C. DOWNGRADE REVIEW

It did not take long for the first “victim” of the DOGE and the President to emerge. Unsurprisingly, Moody’s Ratings has placed the District of Columbia’s ratings on review for possible downgrade. The outlook has been changed to rating under review from negative for all debt classes. Currently, the District is a Aaa credit with much of the support for ratings coming from the federal government’s dominant role in the District economy.

Placement of the District of Columbia’s ratings on review for possible downgrade is prompted by drastic cuts to the federal workforce. The large proposed reductions in federal employment- anticipated by the District to decline by 40,000 workers, or 21% compared to its previous forecast for the next four years will have significant impacts on both the public and private sectors.

The District’s downtown office real estate market also continues to experience high vacancy rates, leading to lower assessed values and property tax collections. According to the DC Office of Revenue Analysis, between 2020 and 2024, vacant office space increased by 8.4 million square feet, a 46.2% rise. The negative valuation trends are likely to be accompanied by potential reductions in the federal share of Medicaid funding. This is also highly credit negative for the District.

CLIMATE LITIGATION

The Supreme Court declined to hear arguments in a suit launched by 19 states (all red ones) who were trying to prevent other states, led by Democrats, from pursuing lawsuits against the oil industry. Those states include California, Connecticut, Minnesota, New Jersey and Rhode Island. It’s all part of a continuing effort to get climate litigation out of state courts and into the federal system. All attempts to date have failed.

In January, the Supreme Court denied review of a Hawaii Supreme Court decision rejecting oil industry requests to do so. That allows the state’s climate deception lawsuit to go to trial. This latest decision is consistent with those rendered in other request by the industry to take climate litigation out of the state courts..

ELECTRICITY TARIFFS

The U.S. is Canada’s only trading partner for electricity. In 2023, net electricity exports from Canada to the U.S. were 27.6 terawatt hours and came mostly from the provinces of Manitoba, Ontario, British Columbia and Quebec. Now, the power from Ontario will come at an increased cost of 25%. The Midcontinent Independent System Operator, which runs the regional electric grid in parts of 15 states including Minnesota and Michigan imported less than 1 percent of its total energy from Canada last year. The New York Independent System Operator said that 2023, New York imported a net 3,976 gigawatt hours from Ontario. That power represents almost 3 percent of the total energy usage across its bulk electric system.

AFTER THE FIRE

It has been estimated that 13,000 households were displaced by the Palisades and Eaton fires. They came from nearly 9,700 single-family homes and condominiums, almost 700 apartment units, more than 2,000 units of duplexes and bungalow courts and 373 mobile homes that Cal Fire determined were either destroyed or heavily damaged. That creates substantial demand for items necessary to a rebuild. Those items generally are subject to sales tax and one of the unintended consequences of natural disasters is a sharp rise in sales tax revenues as recovery occurs.

Just one example. It is being reported that sellers of furniture and other home decor around L.A. are seeing an unexpected rise in sales.  About two weeks after the start of the Palisades and Eaton blazes, Ikea stores in Los Angeles County began noticing an uptick in sales for sleep and kitchen basics. There should be plenty of demand. It will be a boost to consumer spending for residential furniture and bedding which fell 3% last year to $116.1 billion, according to the American Home Furnishings Alliance. The number of production workers for furniture and related products fell to 235,500 people from 244,800 in 2023.

TARIFFS AND LAYOFFS

Signs are emerging that even the threat of tariffs in North America is taking its toll on business.  Layoffs, closures and furloughs have impacted workers and companies tied to the manufacturing, distribution and freight sectors in the U.S., Canada and Mexico. Since Jan. 20, there have been 14,357 job cuts, according to Worker Adjustment and Retraining Notification (WARN) Act notices. Cargill Inc., Archer-Daniels-Midland Inc., Foster Farms, and Perdue Farms all reported significant job cuts.

Detroit-based Harvest Sherwood Food Distributors is shutting down all its operations across the U.S. and laying off about 1,500 workers by April 21. Cargill Inc. will close a Springdale, Arkansas, turkey processing plant with 1,100 workers on Aug. 1, the company announced. Production is being shifted to processing plants in Missouri and Virginia. The threat of tariffs is leading to automotive layoffs. Goodyear Tires plans to cut about 850 jobs at a plant in Danville, Virginia, by the end of the year. Bridgestone Tires plans to close its truck and bus radial tire plant in LaVergne, Tennessee, by July 31. The closure will impact 700 workers.

WATER WARS

Among the funding frozen by the Trump administration are payments from a $4 billion pot in the Inflation Reduction Act that has been going to pay cities, farms and tribes to forgo water deliveries and funding major infrastructure projects that conserve water over the long term. Much of this funding is designed to address the long-term impacts of the drought which has slowly drained the Colorado River. The freeze has motivated some entities to fire some initial shots across the bow of the administration and they may have worked.

The rights to approximately 40 percent of the water in Lake Mead are held by cities, farms and tribes. Recently, the Gila River tribe sought reimbursement for some $105 million of infrastructure costs under the IRA. Those monies had been applied to things like fixing leaks in irrigation system which lowered the amount of water that needed to be withdrawn. In the face of the administration’s cuts, the tribe told the Feds to either pay up or the tribe would exercise its full water rights. The Feds paid. Interior unfroze the tribe’s funding Feb. 19.

The federal drought dollars were a crucial component of those negotiations on a new agreement to divide the Colorado’s waters. Those monies offer compensation to users, especially farmers to reduce their usage and withdrawal requirements from the river. They are considered a key component of any deal to revise water allotments from the Colorado. Now, the lack of funding is throwing a huge wrench into the negotiations.

CARBON CAPTURED?

Summit Carbon Solutions filed a motion with the South Dakota Public Utilities Commission to suspend its permit application and extend the regulator’s deadline to issue said permit “indefinitely.” The company said “With the passage of HB 1052, the Applicant’s ability to obtain survey permission has changed. However, the project must survey the route completely in order to inform the Commission of the constructability prior to obtaining a permit. The surveys which are necessarily required to inform the route decisions as to right of way will be significantly delayed.”

Survey law requires Summit to have a permit application and the legal authority to condemn property. The company said its request to change the permit schedule would allow staff more time to buy easements. Summit Carbon’s permit application had a one-year window. This “pause” would effectively stop the clock on that deadline. The company indicated it could resume the process at a later date. Iowa’s permit is conditioned on Summit receiving a permit from South Dakota.

STADIUM FOLLIES

The Tampa Bays Rays announced Thursday that they are backing out of a $1.3 billion deal for a new stadium in St. Petersburg. Had the original plan gone through, the new ballpark would have been set to open in 2028. By backing out now, the Rays are able to seek approval to negotiate with locations outside of the Tampa-St. Petersburg market, though they’d have to get approval from the league. Recent press reports indicate that Major League Baseball would prefer to see new ownership which would build a stadium in Tampa.

The situation is complicated by the fact that the proposed St. Petersburg stadium was to be the centerpiece of redevelopment of the city’s Historic Gas Plant District. The mayor indicated that the city will move forward with the development of the Historic Gas Plant District. In the meantime, the Rays will play this year in Tampa at the NY Yankees spring training home. The team is committed to playing at the Trop through the 2028 season.

CALIFORNIA MEDICAID SHORTFALL

California will need to borrow $3.44 billion to close a budget gap in the state’s Medicaid program. That’s the maximum amount California can borrow, and will only be enough to cover bills for Medi-Cal — the state’s Medicaid program — through the end of the month. Gov. Gavin Newsom’s current budget proposal estimates the state will shell out $8.4 billion to cover undocumented immigrants in Medi-Cal in 2024-2025, and $7.4 billion in 2025-2026. California has been covering undocumented children on Medi-Cal since 2016. Under Newsom, the program has slowly expanded, to young adults in 2020, older adults in 2022 and then all ages in 2024. The state anticipates spending around $42 billion on Medi-Cal in 2025-26, a $4.5 billion increase over the last budget.

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