Joseph Krist

Publisher

MEDICAID ON THE BALLOT AGAIN

If voters approve the referendum, South Dakota will be the seventh Republican-controlled state in the past five years to expand the low-income insurance program at the ballot box. A yes vote would expand its state Medicaid program to more than 40,000 people. 11 other states that have not expanded Medicaid, but only three — Florida, Mississippi and Wyoming — allow voters to collect signatures for a ballot measure. The expansions of Medicare which occurred under the Affordable Care Act added 17 million low-income Americans to the insurance rolls.

Under the American Rescue Plan enacted in 2021, Congress incentivized states to expand Medicaid by having the federal government cover an extra 5 percent of the costs of the program — on top of covering 90 percent of costs for the newly eligible population. In South Dakota, an American Cancer Society Cancer Action Network poll from August found that 62 percent of likely voters support the Medicaid expansion ballot measure.

A Kaiser Family Foundation analysis found that South Dakota would see increased costs of $50 million. The additional incentives however, would send $110 million to South Dakota. Opponents also tried to get a ballot measure to pass, in June to raise the threshold for approval to 60 percent. That effort was soundly defeated, meaning Medicaid expansion only needs 50 percent support to pass. A 60% vote requirement for such an initiative to pass in Florida is viewed as a serious impediment to expansion there.

The other path to expansion is legislative. The history is not favorable. The latest example is North Carolina where there is political consensus supporting expansion. There is one major hitch and that is the state’s Certificate of Need laws. The state’s hospitals would like that process to disappear. This would allow the various systems serving the state to expand and diversify their service areas. The state’s House and Senate passed separate bills on Medicaid expansion this summer but the CON issue prevented the final legislation of the issue.

DESALINIAZATION

California’s South Coast Water District has received approval from the California Coastal Commission for the construction of a water desalinization plant in the Orange County community of Dana Point. It would serve the district’s roughly 35,000 residents in Dana Point, South Laguna Beach and parts of San Clemente and San Juan Capistrano.  Proponents of desalinization have been trying for many years to have such a facility built to serve Southern California. In May, the Coastal Commission rejected Poseidon Water’s proposed $1.4-billion plant in Huntington Beach.

This plant uses different technology than the one in Huntington Beach. The water will be more costly than imported water from the State Water Project and the Colorado River. The Coastal Commission’s staff report estimates the increase at about 20% more at $1,479 per acre foot than for imported water. That translates to increased monthly costs of about $2 to $7 per household.  The district has already secured more than $32 million in federal and state grants. 

Opposition to these plants revolves around the potential damage to marine life. Other plants damage fish by drawing water directly. This plant would be the first commercial-scale desalination project to use slant wells that would collect seawater from beneath the seafloor. Seawater would be routed via a new pipeline to a treatment plant that will be built at a nearby site already owned by SCWD. SCWD plans to route its effluent to an existing, approved brine discharge system at South Orange County Wastewater Authority’s treatment plant. Those flows are discharged two miles offshore, 100 feet below surface water.

Other issues cited by opponents center around the use of electricity by these plants. The plant will include up to 5 acres of solar panels, which would provide 15% of that power. SCWD customers using 20% less water than they used in 2013. The district also sends 70% of its sewage flow to a treatment plant and reused for landscaping at local parks, resorts and other common areas.

CARBON CAPTURE

Opponents of carbon capture pipelines in Iowa have achieved a delay in efforts by one of the sponsors of a carbon capture pipeline to survey land for construction purposes. The sponsor had sought court support for its efforts to conduct such surveys under temporary restraining orders. One of those requests was rejected by a judge in Woodbury County.

The company has sought expedited court help because it says a delay of the surveys will impede its progress to its economic detriment. The company had argued that it needs to evaluate the land this month, otherwise those surveys might need to wait until the spring thaw. That will likely be the case as the judge noted that would have effectively ended the need for further litigation to approve the surveys. A ruling for Navigator would have resulted in its survey being completed, and the landowners’ arguments would have been rendered moot.

It is becoming a political issue. An Iowa newspaper surveyed candidates for the state legislature. The majority of Eastern Iowa political candidates seeking seats in the state Legislature who responded to the survey say they oppose using eminent domain for carbon dioxide pipelines. Two other county courts are weighing temporary restraining order requests which are being contested this week.

The debate also unfolds as residents of other proposed sites for carbon capture takes steps to review projects. A second Louisiana parish has enacted a moratorium on the drilling of wells associated with carbon capture. Louisiana utility Cleco recently revealed in a regulatory filing that the project in Rapides Parish will significantly increase the plants water consumption and reduce the generation output of the plant by 30%.

CALIFORNIA PROPOSITION 30

California voters will get to decide if a “millionaire’s tax” should be imposed to help people buy electric vehicles and to build charging stations, with some also dedicated to resources for fighting wildfires. Proposition 30 would raise the state’s top income-tax rate on Californians making more than $2 million to an eye-watering 15.05%—the highest in the country—from 13.3%. About 80% of the $3.5 billion to $5 billion in revenue annually would fund electric vehicles and charging stations—mostly for lower-income drivers—and the other 20% would go to wildfire mitigation. 

The driving force behind the campaign is Lyft has spent at least $45 million backing it. Facing a requirement that all rideshare vehicles be “zero emission” vehicles, it is not a surprise that a TNC would back such a measure. Without significant financial support, Lyft would not be able to require its drivers to drive an EV. Either its drivers get state help to buy electric cars or Lyft would have to bear the greater costs of EV deployment.

The initiative hits several hot button issues. The employment status of its drivers, the role of TNC vehicles in road congestion, the concentration of the income tax base among a relatively small group of taxpayers, and even school funding. It also comes in the midst of federal efforts to address issues with the employment status of drivers for companies like Uber and Lyft. On 11 October, the US Department of Labor (DOL) proposed a rule to clarify the classification of employees and independent contractors under the Fair Labor Standards Act (FLSA).

CLIMATE LITIGATION

New Jersey has joined the ranks of states suing oil companies over the issue of climate change and their role in it. Like the other suits, it alleges that the oil companies new of the risks of their businesses to the climate and that their failure to disclose them damaged the state. New Jersey does have one powerful motivation as it cited the impact of Superstorm Sandy in New Jersey, killing 38 and leaving more than 300,000 homes damaged.

This suit comes as the oil majors have asked the U.S. Supreme Court to review for a second time whether a lawsuit filed against them by Baltimore over the costs of adapting to climate change belongs in federal court. The companies were denied in their latest attempt to get to the Supreme Court this past April. Since the May 2021 Supreme Court decision, several appeals courts including the 1st, 3rd, 4th, 9th and 10th have all remanded similar  suits to state court. Those cases were filed by state and local governments in California, Delaware, Hawaii, Maryland, New Jersey and Rhode Island.

Another suit has been making its way through the Eighth Circuit seeking to stop the reestablishment of an Interagency Working Group on the Social Cost of Greenhouse Gases (“IWG”) established by President Barack Obama. The State of Missouri is the lead plaintiff along with Alaska, Arizona, Arkansas, Indiana, Kansas, Montana, Nebraska, Ohio, Oklahoma, South Carolina, Tennessee, and Utah. Its roster includes seven cabinet members along with economic and science members of the Administration. It was disbanded by President Trump.

The issue driving the suit is the executive order reestablishing the Group which directed the IWG to publish interim and then final estimates of the social costs of greenhouse gas emissions (hereafter, “interim SC-GHG estimates”), and required federal agencies to use these estimates when monetizing the costs and benefits of future agency actions and regulations. Those estimates have been released only in preliminary form but the states sued nonetheless.

The Court decided that the States are requesting a federal court to grant injunctive relief that directs “the current administration to comply with prior administrations’ policies on regulatory analysis [without] a specific agency action to review,” a request that is “outside the authority of the federal courts” under Article III of the Constitution. The Court did point to a specific path for the issue to be decided. “these policy disagreements are for the people to decide through their elected representatives in the legislative and executive branches of government.”

INSULAR CASES

After the Spanish American War, the U.S. came into possession of several territories. They included Cuba, Guam, American Samoa and Puerto Rico. Under the terms of Treaty of Paris was a statement noting that Congress would determine the political status and civil rights of the natives of the island territories. In the early 1900’s, the Supreme Court was asked to review nine cases in total, eight of which related to tariff laws and seven of which involved Puerto Rico as a part of that process. 

The challenges to the precedent gained the most notice in association with Puerto Rico and its issues surrounding its status. Earlier in arguments about another case touching on the status issue, Justice Gorsuch had expressed a pretty clear view that he thought the Insular Cases were incorrectly decided, this gave hope to many that issues around the status of Puerto Rico and its citizens might lead to a decision to overturn the Insular Cases decision.

The hopes were dashed in the short term when the Court announced that it would not review a new challenge to these Cases. Unfortunately for Puerto Rico, this case revolved around plaintiffs from American Samoa which is treated differently by Congress than is the case with other territories.

MUNIS AND TVA

The operations and energy development plans of the Tennessee Valley Authority (TVA) have been at the center of the energy debate. Its reliance on older large-scale coal plants have led to debates by several long-term customers to consider replacing TVA as their primary supplier. Much of the demand for change is customer driven. This has led municipal electric systems to reconsider their power supply arrangements.

Memphis has been at the center of that debate as its municipal utility is considering whether to maintain TVA as their power supplier. As that debate unfolded, other municipal utilities considered their positions. Now, one utility serving the City of Huntsville, AL has made an effort to move to a greener energy source. The city council last week unanimously approved an agreement for Huntsville Utilities to purchase power from Toyota Tsusho, which is building a solar power facility near a Toyota Motor Manufacturing in north Huntsville. 

In 2020 the city council approved a power supply flexibility agreement with TVA. That agreement allowed Huntsville Utilities to purchase up to 5% of its electricity from a source other than TVA. Huntsville Utilities will build a $2.6 million substation to connect with the solar development, which is expected to be completed in February 2024. That power would be procured by the city at a rate that is lower than what TVA could provide.

Huntsville made a fairy straightforward case for the move. “If TVA were to raise its base rate an average of half a percent a year and increase the fuel cost adjustment by half a percent, the project would provide nearly $500,000 in savings for HU each year.” 

SPITTING IN THE WIND

The core of ideological attorneys general trying to “punish” financial institutions which employ ESG principals by withholding business from them has grown by one more. The Attorney General in Virginia is joining Arizona, Arkansas, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Oklahoma, Tennessee and Texas in an “investigation” of six major American banks. The plan is to issue a civil investigative demand, which acts as a subpoena, for the institutions to produce documents related to their involvement with the United Nations Net-Zero Banking Alliance. 

The Virginia AG contends that the banks – Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo – by participating in the Banking Alliance are trying to impose UN rule. It’s a favorite theme of conspiracy theorists on the political right. The Virginia AG has already joined another Missouri-rooted move to “investigate” Morningstar, Inc. and Multianalytes for alleged violations of state consumer protection laws. He claims that the ratings are driven by “credible allegations” that the companies “allow(ed) anti-Israel bias to infect the ESG ratings they provided to investors.” 

If you are an ESG investor, these suits have to raise governance issues. The idea that market participants have to toe the line established by ideological trends should raise issues for all investors. This applies to progressive attorneys general as well.  Interventions like this latest one made in an effort to fight market trends don’t usually succeed in that fight. If you are a believer in markets, these continuing partisan efforts call into question the dedication to the rule of law which has supported the market on the part of “conservative” political figures.

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