Sunday, December 8, 2013

Straight Shooting on the ACA

As I’ve noted in a previous post, when it comes to interpreting reports about how well the Affordable Care Act is doing, Sen. Fred Thomas is very good at being both selective and creative. This talent was on full display at a meeting of the Revenue and Transportation Interim Committee in Helena this week. During the discussion of some arcane tax issue, Thomas (no doubt aware of the TV camera in the room) engaged in the following exchange with the committee chairwoman, Sen. Christine Kaufmann:*

 Thomas: “The insurance premiums available on the new Affordable Care Act are significantly higher than what’s available in the market today…, so people are going from a lower costing health plan to a much higher one… We’ve done some analysis on these rates and these very significant rate increases…”

Kaufmann: “The new insurance rates are not significantly higher; in fact they are quite good rates for Montana consumers… I work daily with these insurance plans and rates and there are very good ones out there”.

Thomas (tapping on a paper): “We’ve got the study that indicates that’s not accurate ... I don’t agree with what you concluded.”

Kaufmann: “And I don’t agree with what you’ve concluded.”

Thomas (still tapping):
“Forty percent is a pretty big increase.”

Gosh! You mean we’re all going to be paying 40 percent more for health insurance?  But wait a second! Who is this “we” who’s got this study? What study is it? Can we read it for ourselves? What does it say?

Well, it turns out that it is a study by the Legislative Auditor, performed at Sen. Thomas’ request but on the taxpayers’ dime. Since it is a public document, we can have it and read it for ourselves.** And when we do we find that it doesn’t say at all what Thomas claims it does.

It is not a comparison between what people are paying today and what they will pay in the future.

It does not say that “people are going from a lower costing health plan to a much higher one.”

It does not say that there are going to be very significant rate increases or that rates are going up by 40 percent.

What it does do is compare the published prices of health insurance policies on the exchange with the anticipated prices of comparable policies bought off the exchange, and the very broad conclusion it reaches is that “premiums will generally be the same for plans on and off the exchange.”  It also notes that people whose income falls at or below 400 percent of the Federal poverty level***, and who buy insurance on the exchange, will get a tax credit which will lower the effective cost of the insurance, in many cases by quite a bit. And it creates four different “scenarios” comparing the anticipated prices of on-exchange and off-exchange insurance for four different families, in different circumstances, and eligible for different tax credits.

In three of these scenarios, the family is eligible for the tax credit and will be able to purchase insurance at substantially lower cost on the exchange than off. In one scenario, in which the family earns enough not to be eligible for the credit, buying on the exchange would cost about 40 percent more.  That’s apparently what Thomas calls a “40 percent increase.”  But it’s no such thing. It’s not how much more a family in that particular scenario will pay, compared to what they pay today. It’s how much more that family would pay in the future if, in a catastrophic failure of common sense and good judgment, they chose to purchase insurance on, rather than off, the exchange.

It’s pretty obvious that Thomas was using the opportunity of the committee hearing to try to scare people about the terrors of Obamacare!  And since the report he requested from the Legislative Auditor, read objectively and in its entirety, wasn’t at all scary, Thomas had to read it creatively and selectively to try to make it say what he hoped it would.

If Thomas wants to use the public’s money and a public forum to gun for the ACA, is it too much to ask that he at least shoot straight?

* Talk about being selective! That’s obviously what I am doing here, and I am leaving out the part of the discussion relating to taxes, so you might want to check out the audio minutes of the meeting. The conversation I am quoting starts at about 01:07:45, if you want to cut to the chase (and you should!).

** I don’t think this study is available on line yet, but you can request a copy from the Legislative Auditor’s office. Here’s the contact information.

*** For a family of four, 400 percent of the Federal poverty level is an income of $94,200.

Friday, November 29, 2013

Zero Sum Shopping

The Missoulian today is running an editorial exhorting all of us, as we plunge into the annual orgy of Christmas shopping, to remember to buy local. The idea here – and it’s nothing new and certainly not unique to the Missoulian – is that if we all shop locally, we will “keep money in the community” and help local businesses create more jobs.

Well maybe, but there’s more to it than that.

Here’s the problem: if you’ve ever wandered up and down the rows in the Mall parking lot, you’ve probably noticed that a fair share of the cars are not from Missoula county. Missoula, after all, is a regional trade center which brings in lots of shoppers from surrounding communities, counties, states (Idaho) and even countries (Canada).  And spending by those folks helps keep the lights on and people working in lots of Missoula businesses.  If fact, if you compare the earnings of local retail trade workers to the total income of all local local residents, you’ll find that retail trade earnings are substantially greater in Missoula County than they are in the counties around us. In other words, Missoula’s retail trade sector is somewhat outsized, and the reason is that it serves not just Missoulians, but other folks as well.

The Missoulian wants its readers to buy local, because that’s going to give the local economy a boost. But sauce for the goose is sauce for the gander. If buying local is good for Missoula, isn’t it good for Hamilton and Ronan and Polson and Deer Lodge and Superior too? If the folks in those towns read the Missoulian editorial and take it to heart, won’t they decide to keep their dollars at home and not shop in Missoula?

The problem here is that shopping locally will benefit Missoula businesses only if we here in Missoula are ones doing it, while everybody else continues to schlep their way into town from outlying areas and shop along with us.  It may work, but it seems to be recommending that we beggar our neighbors across the county line.

This kind of thinking frequently crops up in other contexts, as when we are told that some event that’s on tap for Missoula -  a convention or a football game or a track meet – is going to bring in visitors who will spend a bunch of money.  We count all that spending as a benefit for us or even for the state, forgetting that it means that somewhere around here – maybe Hamilton or Ronan or Polson or Deer Lodge or Superior – somebody is off having a fine time in Missoula and not spending their money at home. For the state as a whole, that amounts to a zero sum game. 

Can We Talk, Please?

Christopher Chavasse  writes, in a letter to today’s Missoulian, that the staff and members of the Reserved Water Rights Compact Commission have violated Montana’s open meeting laws by attending private meetings with interested irrigators to answer questions about the CSKT compact. He implies that at these meetings Commission representatives, “with incomes you can only hope for,” brainwash the irrigators in attendance and stray from “points of fact and points of law.”

You’ll have to figure out for yourself, if you can, how Chavasse can pout about being excluded from these meetings and, in the same breath, confidently describe what happens at them. Maybe he’s clairvoyant.

You’ll  also have to figure out for yourself why Chavasse believes that Flathead irrigators – or at least the ones who don’t agree with him -  are so gullible that they can be persuaded to support the compact without reference to the facts or the law. Maybe he figures there’s nobody around as smart as he is.

But when it comes to Montana’s open meeting laws, Chavasse needs a little straightening out.

What these laws refer to are the meetings of public bodies such as the Commission, the Legislature, city councils, and so forth. The laws guarantee that when a quorum of such bodies meets to conduct business, the public has a right to be present.* What the laws do not apply to is meetings of private citizens. No, in this country you are still allowed to meet with whom you want to, where you want to, and to talk about whatever you want to and you don’t have to let Chavasse or any other uninvited guest attend, even if you have asked a public official or employee to come and participate.

Chavasse thinks that this take on the open meeting laws is “weasel-wording” designed to “slick-willie rationalize those secret meetings” and “flout true legislative intent.” Colorful prose aside, I’ve got news for him: if he thinks that legislators intended to write a law that would prohibit them from meeting privately with a group of citizens to discuss some matter of public importance, he’s got another think coming.  That happens all the time. In fact, I’ve got 100 bucks that says that it’s already happened with some of the legislators who oppose the compact.

As far as those incomes are concerned, I at least, and I believe other members of the Commission as well, have attended these private meetings and have been paid absolutely nothing for doing so. When I  attend Commission meetings to do Commission business, I do get paid, but usually it’s less than the minimum wage.

Commission staff is paid, of course, and they attend these meetings because that’s part of the job. And because they are working for the public, it would be wrong for the Commission staff to  meet only with compact supporters. Or to lie to people, as Chavasse somehow concludes they do. But that’s not the way it works. Commission staff will meet with anyone who requests a meeting, and what they will do is provide facts, cite language from the compact, and explain the relevant points of law. They won’t engage in any political schmoozing or character assassination or brain washing or prevaricating. Chavasse should really give that approach a try.

* This is all spelled out in Title 2, Chapter 3, Part 2 of the Montana Code Annotated. Check it out. Click here.

Sunday, November 24, 2013

Looking For Civility and Respect

When it comes to the Flathead water compact, there’s a war going on, and the first casualty in this conflict is not just the truth. No - along with the truth, plain old common sense and mutual respect have also gone by the boards.

Case in point: the latest broadside from Catherine Vandemoer.

Vandemoer, or “drkate” as she likes to call herself, is a hydrologist, water policy consultant, and right wing blogger,* who apparently is currently employed by opponents of the Flathead water rights compact to churn out statements on their behalf. And her most recent churning, which you can read here, is a real doozy.

Writing on behalf of the Concerned Citizens of Western Montana, Vandemoer comments on a recent irrigator referendum in the Flathead (more on that in a moment) but along the way slaughters logic, mangles the facts, and abandons civility.

But first a little history. It’s a long story, but suffice it to say that the Flathead Joint Board of Control is in utter disarray. The Board, which has represented irrigators in negotiating the compact, last year reached an agreement with the Salish and Kootenai tribes about how water on the Reservation is to be divided between irrigators and in-stream flow. It was a good deal, with all sides giving up a little to gain a lot, including a big chunk of money from the state that would be invested in the irrigation system.

But as it turned out, a group of irrigators, who were not happy with the agreement, succeeded in changing the make-up of the Board, and it’s now demanding significant new concessions from the Tribes, who, of course, a deal being a deal, are not going to make them.

In response to this impasse, the commissioners for the Jocko and Mission irrigation districts - who like the agreement and don’t want to see it torpedoed - voted to withdraw from the Board and go it alone.  And the Board, sensing disaster, tried a variety of maneuvers to keep that from happening, the latest of which was to conduct a non-binding referendum among irrigators, asking them if they wanted to retain the Board as their representative. It’s the results of that referendum that Vandemoer has commented on, so now let’s get back to her.

Voting on the referendum was by acre and there were 36,593 votes in favor of retaining the Board as the irrigators’ representative and 36,588 against, so retaining the Board won by a margin of 5 votes. You might think that pretty much makes it a dead heat, but Vandemoer claims victory. “The results,” she says, “show a majority supports the FJBC with only 30% of project-wide acres against the JBC.” And “importantly, the Mission and Jocko Districts voted to support the FJBC.”

Well, okay, there’s some spinning going on here – the Board's margin of victory, at 5 out of over 73,000 votes, is razor thin, and it’s also true that only 30% of project wide acres support the FJBC – but everybody spins a little. The real problem arises when Vandemoer tries to explain why the Flathead Districtd, the third district making up the Board, voted against retention. And what she concludes is that “this vote reflects confusion over the wording of the referendum itself or intimidation of fellow irrigators by the compact proponents.”

Huh? Forget the “intimidation” business for a moment. Does Vandemoer actually want us to believe that the wording was confusing in the Flathead district, but somehow the exact same wording was not confusing in the Jocko and Mission? No, if confusion reigned anywhere, and it probably did,** it reigned everywhere. And if Vandemoer wants to use confusion to dismiss a vote she doesn’t like, she’s got to dismiss the ones she does like as well.

Since Vandemoer is apparently unable to produce any real evidence of “intimidation,” she can only imply it exists, the evidence being the vote against the Board in the Flathead district. But then what? By the same logic, doesn’t  the vote for the Board in the Mission and Jocko districts mean there is no intimidation? Or worse, that it was Board supporters doing the intimidating in those districts? Or that there was intimidation only in the Flathead district, which is the one district that isn’t trying to leave the Board? Go figure.

If Vandemoer’s reasoning here leaves a lot to be desired, her command over the facts  - or at least the way she represents them - isn’t much better. Here she is describing the Jocko and Mission commissioners who want to withdraw from the Board: “They want to sign the flawed…agreement which already has been ruled an unconstitutional taking of property without compensation.” Pretty serious stuff, until you realize that the ruling in question, which came from District Court judge C.B. McNeil, was tossed out, in its entirety, by the Montana Supreme Court, in short order.

But perhaps the worst thing about Vandemoer’s comments is the disrespect and hostility she heaps on people who happen to disagree with her. In a few short paragraphs, she variously describes compact supporters as “rogue Commissioners,” “petty dictators,” and liars who are “shilling” the compact through “threats and untruths” and “throwing their constituents under the bus.”  The Jocko and Mission commissioners are not “men of character” and they lack the “requisite courage or character to back off their mistakes.” They “wreak unnecessary havoc on their neighbors.” They are “useful idiots.”

Talk about wreaking unnecessary havoc! In whose name does Vandemoer say these vicious things?

Is this really the way the Concerned Citizens of Western Montana want to talk about their neighbors?

Is this really the way the legislators who have touted Vandemoer’s involvement with the compact want their constituents to be treated?

Is this really the way to reach any kind of understanding or agreement?

Three years ago, when we began to negotiate compacts for the Missouri River Breaks National Monument and the CM Russell National Wildlife Refuge, a lot of people out in central Montana were pretty hot under the collar. Ranchers and county commissioners were lawyering up to fight the Federal government. People flooded into public meetings and asked a lot of hard, hostile questions. But everybody kept talking. We met with folks in Winnett, Winifred, Lewistown, Stanford, Malta and Jordan. We met with ranchers is the coulees around Ft. Peck. We met and talked until we were blue in the face, and nobody ever traded outrageous public insults.  No matter how far apart we were on the issues, nobody abandoned civility and or failed to show others the respect they deserved. And in the end we got the deals done - in true Montana style.

 If the Concerned Citizens of Western Montana really want to play a constructive role in bringing about a compact everybody can live with – in true Montana style -  it’s time to jettison the vicious rhetoric and sit down to a respectful and constructive discussion.

* It’s called drkatesview. Click here if you want to look it over.

** As the referendum is worded, a yes vote meant that not only did you want to retain the Board, you also supported its call to reopen the compact. A no vote meant you wanted neither  to retain the Board nor support reopening.  As Dick Erb pointed out in a letter to the Missoulian, there was no obvious way to vote if you wanted to retain the Board but didn’t support reopening.  Erb is right: there are two separate issues here, and the referendum hopelessly conflated them.

Friday, November 8, 2013

Medicaid Expansion Was (and Is) Affordable

I’ve made this point before: if Republicans in the 2013 Legislature thought that expanding Medicaid coverage would wreak havoc with the state’s current biennial budget, they were barking up the wrong tree. Fred Thomas tries to make that case in a recent Missoulian column, but he has to use bogus accounting to get there. He argues that when we were building the budget, projected spending on Medicaid expansion 8 years in the future would eat up a pretty big chunk (88%) of the increase in revenue we expected to receive this biennium compared to the prior one (2012-13).  But that number doesn’t mean much. If there was anything we should have been worried about, it was the cost of Medicaid expansion now. But that, it turns out, was pretty small.

But maybe Thomas has a point, and it’s this: even if the cost of expanding Medicaid was modest this biennium, we knew that for a variety of reasons it was projected to rise over time. So the question is, even though we could have easily afforded Medicaid expansion this time around, could paying for it in the future have gotten beyond our reach? In Thomas’s words, "blown a hole in the budget"?

To answer that question we need to compare the growth of Medicaid expansion spending with the growth of state General Fund revenue, and that, though it involves a little guesswork, is not too hard to do.
In the case of Medicaid expenditures, we have Gregg Davis’s projections of the annual cost to the state of expansion, from 2014 through 2021.* The annual increase in Medicaid expansion costs is just the year to year difference in Gregg’s projections.

Projecting the growth of General Fund revenue, particularly 8 years out, is a little trickier. The way I’ll do it here is to start with 2013 actual revenue, and grow it every year by 4.64%. That’s the average annual rate that General Fund revenue has grown at since 1988. Obviously sometimes growth is a little faster, and other times it’s slower, but those variations are hard to predict and are just as likely to be in one direction as another.** So I’ll stick with the 4.64%, project revenue out to 2021, and take the year to year change in that number as the annual dollar growth in revenue.

So now take a look at the chart. The red line shows the annual growth in spending from 2014 to 2021 that would have occurred due to Medicaid expansion (if the Legislature had agreed to it!). You can see it sort of jumps around, but over the 8 year period averages about $17 million. That $17 million a year is what we were supposed to be worried about: the increasing cost we would have been locked into had we expanded Medicaid.

The blue line shows projected annual growth in revenue over the same period. It grows steadily (each year the number of additional dollars available is more than the year before) but averages out at about $114 million.

The bottom line here is pretty clear: if we had decided to expand Medicaid, we would have had to commit about 15% of future revenue growth to paying for the increasing costs of the program. Looked at the other way around, 85% of future revenue growth would have been available for increased spending on schools, the University system, other social services, and the like. It may be a matter of opinion, but I don’t see any budgetary crisis lurking in those numbers.

A word of caution here: it’s not correct to take these numbers, which refer to the situation we were in in the legislature 7 months ago (when we were building the budget and expanding Medicaid this fiscal year was still an option), and use them to describe where we will be if we expand Medicaid now or next year. For one thing, we have lost the opportunity for one year (2014) of expansion entirely paid for by the Federal government. But the point still stands: the cost of Medicaid expansion, if we ever take it on, is going to increase in the future. But we will be able to afford those increases because in a growing economy, state revenue will rise as well.

* By “cost to the state” here I am referring to budgetary outlays. Gregg calculates another, lower cost figure that includes the effect of both reduced uncompensated care costs and increased taxes stemming from a very large infusion of Federal Medicaid spending. See An Estimate of the Economic Ramifications Attributable to the Potential Medicaid Expansion on the Montana Economy. This report should be available either from the Bureau of Business and Economic Research at UM or from the State Auditor’s office.

** I got these figures from a report by the Governor’s Budget Office. Click here for the full report.

Wednesday, November 6, 2013

What Medicaid Expansion in Oregon Really Tells Us

My last post commented on (okay, lambasted) a recent column in the Missoulian by Fred Thomas, in which the senator tries to justify the unjustifiable failure of the Montana Legislature to expand Medicaid coverage. In part, Thomas claims that the Legislature did the right thing because expanding Medicaid would have “blown a hole” in the state budget. That’s an argument that I think I’ve disposed of, although I’ll have a little more to say about it in a future post.

Thomas’s other claim is that expanding Medicaid will not do the newly covered any good, and he cites a study in the New England Journal of Medicine to prove it. He extracts this quote from the study, which compared the outcomes of 6,387 Oregonians who got Medicaid coverage to those of 5,842 who did not:

“This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured health outcomes in the first two years.”

Now I’m no expert on health care studies, but I can read. And what I read tells me that Thomas was pretty selective in quoting the New England Journal study. He’s even been a little selective in quoting the single sentence, because he left off half of it! The whole sentence reads:

“This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured health outcomes in the first two years, but it did increase the use of health care services, raise rate of diabetes detection and management, lower rates of depression and reduce financial strain.”

Apparently Thomas doesn’t think that giving people adequate medical care, managing their diabetes, helping them avoid depression, and saving them from medical bankruptcy are worth much.

Like I say, I’m no expert, but I don’t think Thomas is either. And no doubt each of thinks the other has an axe to grind. So if you want to find out what really happened in Oregon, take a look at this KUFM commentary from last May by Dr. Tom Roberts, who knows this stuff inside and out.* You’ll be glad you did.

* Since I originally posted this comment, I realized that Thomas wasn't the first Montana Republican to bash Medicaid expansion. Former state senator Joe Balyeat took his best shot at it in the Missoulian and Tom Roberts responded in print. All that may amount to more than you want to read, but if really want to get down in the weeds, you can read the study itself. Click here.

Tuesday, November 5, 2013

Nonsensical Budgeting

If you’re like me, you’ve probably found the relentless conservative Republican opposition to Medicaid expansion more than a little mystifying. After all, if here in Montana we agreed to Medicaid expansion under the terms of the Affordable Care Act, we would receive Federal funding that would create thousands of new jobs and hundreds of millions of dollars in new income. It would reduce hospital charges and private health insurance costs. And most important of all, it would provide good health insurance to 70,000 low income Montanans who now go uncovered. What’s not to like? How could legislators of sound mind and with the state’s best interests at heart turn down this opportunity? Anybody out there got an answer?

Well, yes! Senator Fred Thomas does.

But unfortunately, it makes no sense. Zero. Zilch. Nada.

I am not making this up. Writing in a recent Missoulian guest column, Thomas argues that the Legislature was “right to reject Obamacare Medicaid expansion” because of the “hole it would blow in our balanced budget.”  Here’s the way Thomas has it figured: when we were putting together the budget for the current (2014-15) biennium, we thought we’d have about $319 million more in revenue than we had in the biennium before. But Medicaid expansion was expected to cost the state $179 million in the 2018-19 biennium and $282 million in 2020-21.  So we would have used up “up to 88% of … current revenue growth” to fund Medicaid and thus could not have increased funding for schools, or the University system or other services without blowing that hole in our budget.  What Thomas has calculated here is that Medicaid costs six years in the future amount to 88% of our projected revenue growth right now.

What this calculation means is anybody's guess.

The numbers Thomas is using look okay. The go-to source for the economic effects of Medicaid expansion in Montana is a report by Gregg Davis at UM’s Bureau of Business and Economic Research.*  Davis provides both low and high estimates for the cost to the state of Medicaid expansion and Thomas is apparently using the high one.  You can argue the number if you want, but that’s really not the point.

If we want to know how much of our increased current revenue we are going to encumber through Medicaid expansion, we need to know how much our current Medicaid expenditures are going  to grow. But that number, which would mean something, is – surprise! –  a whole lot less than the one that Thomas randomly pulls out of the hat. In fact, Davis estimates that the state’s 2014-15 cost of Medicaid expansion would have fallen somewhere between $35 and $40 million. That means that expansion would have used up somewhere between 11 and 13 percent of the additional $319 million that Thomas says we can expect to take in. 

But wait! There’s more!

If the state had taken the plunge and spent $40 million this biennium to expand Medicaid, according to Davis the corresponding Federal contribution would have been $1.054 billion (yup, that’s billion with a b). That would have meant a whole lot of new jobs and new income for Montana, and of course a whole lot of new state and local tax revenue as well. How much? Davis puts it at $75 million. That’s above and beyond the $319 million Thomas is already counting on. We could have spent $40 million and collected $75 million more in new tax revenue than we thought we would.

So far from blowing a hole in the budget, far from gobbling up all the new revenue, Medicaid expansion, if we'd had the common sense to accept it, would have increased an already substantial budget surplus.

If all this sounds depressingly familiar, don’t be surprised. It’s business as usual. Whenever there’s a program that’s going to provide an essential and valuable service to the public, and anti-government conservatives don't like it, they monkey with the numbers and predict financial doom. If they’re lucky, they can even  make it sound like standing in the way of progress is the right thing to do. I mean, after all, think about how that shut down thing worked out.

An Estimate of the Economic Ramifications Attributable to the Potential Medicaid Expansion on the Montana Economy. Not exactly mellifluous, but heck, Gregg’s an economist. That’s the way we roll. 

Tuesday, October 8, 2013

Joe Balyeat is Very, Very Scared

Joe Balyeat, a former member of the Montana Senate and self described “national award-winning CPA,” writes in today’s Missoulian that the national debt is much, much bigger than you thought; so big, indeed, that it threatens to consign “our great grandchildren to lifetimes of bondage.”

Purple prose aside, what Balyeat is talking about is something called the “unfunded liability” of the Social Security, Medicare and government pension systems. This unfunded liability is the difference between what these systems are expected to take in and pay out over some time into the future (usually 75 years in the Social Security financial reports). The unfunded liability is calculated in terms of its “present value,” which you can think of as the amount of money you would have to set aside right now, today, to cover all of the excess of pay-outs over income over the next 75 years. To calculate the present value you of course have to take account of the fact that the money you set aside will earn some interest you can use, so it gets a little complicated, which creates good jobs for actuaries.

Balyeat argues that these unfunded liabilities are, after all, payments we are all on the hook for, and should – but don’t – show up on the balance sheet as part of the national debt. When they do, he says, the national debt turns out to be $142 trillion rather than the roughly $17 trillion we thought it was. And that means every single taxpayer is in debt to the tune of $1.25 million! Balyeat doesn’t tell us where he got his numbers – it’s not clear, for example, how many years he’s using to calculate unfunded liabilities – but it really doesn’t make much difference. Because even if they’re right, the numbers don’t mean what Balyeat thinks, or wants us to think, they do.

For one thing, there is a very big difference between money that we actually borrowed in the past and owe today and money we may owe in the future. An unfunded liability – that money we may owe in the future – has to be calculated making some assumptions about how things are going to be done: what the payroll contribution rates, benefit formulas, cost of living provisions, and so forth are going to be. Usually, the assumption in calculating the unfunded liability is that we are going to continue to do what we always have. In other words, we figure out how short we will be if we do nothing.

But as anyone who had paid any attention at all to the public debate over, for example, Montana’s public pension systems should know, we don’t do nothing. Faced with a large unfunded liability, we do adjust contribution rates, benefit formulas, and cost of living provisions. That’s what the legislature did this year and our funded liability was dramatically reduced.

But suppose Balyeat is right. Suppose that the average taxpayer really would need to set aside $1.25 million to cover his or her share of the payments that we are collectively locked into over the next 75 years. Coming up with that money sounds impossible, and since it’s many times more than that average taxpayer will earn this year (about $118,000*), it is. But of course there’s no reason to set aside all that money today. After all, these are payments that are going to be made over the next 75 years, and if he or she lives that long, this taxpayer is going to be earning a growing amount of money every year. So is $1.25 million is big, scary, bondage threatening number? Yes, if you compare it to this year’s income (which is what Balyeat wants you to do), but no, if you compare it to all the income you will earn in the next 75 years (which is what you should do).

Balyeat’s larger project in his Missoulian piece is to attack the “beast” of excessive government spending, so it’s not just debt that’s a problem, it’s the deficit too. It turns out that deficit spending might just “tank” the American economy!! And the evidence for this dire warning is the fact that since 2008, when deficit spending rose, household income fell.  Here we have a classic “correlation does not imply causality” problem: as any Economics (but not Accounting, apparently) 101 student can tell you, a decline in household income (triggered by the bursting of a real estate bubble, a financial meltdown and credit freeze, reduced business investment, layoffs, or whatever) can cause the deficit to blow up. And there’s no reason to assume that causality runs the other way.

As state director for Americans for Prosperity – Montana, maybe all Balyeat’s trying to do is provide a little cover for the right wing Republicans in Congress who these days are trying to kill the ACA and burn the fiscal house down.  That may be good politics, but it’s bad economics.

*I came up with this figure by dividing total US personal income in 2012 ($13.2 trillion) by 114 million, which appears to be the number of taxpayers Balyeat is using. I have no idea if it’s correct, but I’m trying for apples and apples here. In any case, debt burdens are usually measured with respect to GDP rather than the smaller figure of  personal income.

Friday, October 4, 2013

Tax Fairness for All (Straight People)

I’ve been involved with tax legislation for several years now, and I’ve never run into anyone – legislator, bureaucrat, business person, citizen – who’s said they want taxation to be unfair.

Nope, we all want our taxes to be fair. And although we can argue at the drop of a hat about what fairness actually means, there is one principle of fair taxation that everybody appears to agree on, and that’s that “similarly situated taxpayers should pay similar taxes.”

How somebody is “situated” here refers to their ability to pay taxes.  In the case of the income tax, ability to pay is mostly driven by income, but typically we take other things – number of dependents, mortgage and health care costs, age, disability, other taxes, work expenses and so forth – into account as well. And the fairness principle here is that if my wife and I look pretty much just like the neighbors in all these respects, we can and should pay pretty much the same taxes. And generally speaking, that’s what happens.

But now it turns out that in some instances, securing that kind of fairness apparently violates Montana’s constitution.

As Chuck Johnson reports, Department of Revenue Director Mike Kadas last week announced that Montana would not, could not, follow the lead of the Federal government and allow same sex couples, legally married in one of 14 states where that can happen, to file a married, joint return. The reason of course is that the Montana constitution says that same sex couples simply can’t be legally married here. And the legal staff in the Department of Revenue has concluded that if they can’t be married, they can’t file a married, joint return.

So let’s review. Two couples, one same sex and the other opposite sex, live next door to each other in a nice Montana town. Both were married in, say, Minnesota. They have the same income, the same mortgage payments and property taxes, the same number of kids, the same medical and business expenses, the same …well, you get the idea: the same everything relevant to their ability to pay taxes, including their marriage certificates. The opposite sex couple files a joint return, but the same sex couple can’t. They file separately and as a result between them pay more than their neighbors.*

Now to be clear: Director Kadas is a staunch proponent of tax fairness (to say nothing of basic human rights) and so far as I know is no happier than anyone else about being backed into this corner by the Montana constitution. And he did say that the Department of Revenue currently has no way of knowing whether any couple that files jointly really is legally married, and it’s not about to start trying to find that out.** That means, in effect, that same sex couples that decide to risk it (after all, they’re breaking the law!) can file jointly and probably won’t get caught. It sounds a lot like “don’t ask, don’t tell.” Fairness (sort of) by subterfuge.

Kadas suspects that some day he will be sued over this. And that’s almost certainly going to happen. The issue goes well beyond taxes.  Pretty soon we are going to realize that our constitution is forcing the state to discriminate against same sex married couples in hundreds of ways, and in the wake of the US Supreme Court’s Defense of Marriage Act ruling, and of so many states legalizing same sex marriage, it’s hard to see how such discrimination will not be struck down.

Of course, we could save ourselves a lot of legal grief and do the right thing by repealing Montana’s constitutional prohibition on same sex marriage. Wouldn't that make more sense? 

*Filing jointly doesn’t always lower a couple’s tax bill. In fact, it can raise it. The explanation for all this gets a little wonkish, but Dan Dobbs at the Department of Revenue, one of Montana’s best tax wonks, lays it all out in this 2009 report.

** There's a practical side to this policy. The Department of Revenue figures that verifying couples' marital status would cost more than any additional revenue they would receive as a result of making that effort.

Monday, September 30, 2013

Putting Coal Ahead of Our Future

As Prof. Robin Kundis Craig noted last week in a lecture at the UM Law School, the preamble to the 1972 Montana constitution is really pretty splendid:

We the people of Montana grateful to God for the quiet beauty of our state, the grandeur of our mountains, the vastness of our rolling plains, and desiring to improve the quality of life, equality of opportunity and to secure the blessings of liberty for this and future generations do ordain and establish this constitution.

Craig wasn't just praising the eloquence of constitution's authors (although they certainly were eloquent), she was making the point that environmental resources - rivers, forests, fisheries, the atmosphere - are held in trust for the public and that trust carries with it the authority and responsibility for their protection. That's a point that sometimes gets lost sight of. Take, for example, a recent letter to the Helena Independent Record by Sen. John Brenden.

Brenden, who is chairman of the Legislative Environmental Quality Council, thinks that Governor Bullock and Department of Environmental Quality Director Tracy Stone-Manning should oppose the recently announced EPA carbon emission standards for new power plants. The problem, he says, is that the standards will “prevent new plants from being built anywhere in the country,” and that, in turn, will “kill future demand for Montana coal.” One might hope that Sen. Brenden would know better, but alas, he is wrong on two critical counts.

First, it’s not clear where Sen. Brenden, if he ever read the Montana constitution, could have gotten the bizarre notion that it's the job of the Department of Environmental Quality to prop up the coal industry. Just to be sure: it’s not.  The department is charged with protecting and sustaining a clean and healthful environment for the benefit of this and future generations (check out the DEQ mission statement here). By now it should be clear that protecting Montana’s environment – and when it comes to that, its economy as well - requires arresting climate change, and it's equally clear that we can’t do that alone. We must join in the national effort to reduce carbon emissions, and not subvert that effort in the interest of selling other states more coal. In order to oppose these regulations, the  Governor or Director Stone-Manning would have to neglect their public trust duty to protect the environment that Montanans treasure.  And neglecting that duty is something they should never do, even if Brenden thinks otherwise.

Second. even if  Bullock or Stone-Manning could somehow make the EPA standards go away, no new coal fired power plants would get built, because nobody intends to build them anyway.  And the culprit - if there is one  - is not the EPA; it’s cheap natural gas. As Brad Plumer reported recently in the Washington Post, for new coal plants to be competitive with natural gas plants, natural gas prices have to get above $7 per million BTU. But the US Energy Information Administration projects that the price will stay under $6 for the next two decades; as a result, the agency does not see any new coal powered plants being built between 2018 and 2035. If coal faces a grim future, it’s the fault of the heedless free market we're all so fond of til it gores our ox, not Washington policy makers.

Wednesday, September 18, 2013

Lessons from the Klamath Basin

Michael Gale, a perennial opponent of the Flathead Reservation water compact, fires off another salvo in a recent Missoulian. This time he opines that events in Oregon’s Klamath Basin illustrate the danger of the entire compact enterprise. But he's got it all wrong.

Part of the problem is that Gale doesn’t really appear to know what happened on the Klamath. He says that the Bureau of Reclamation decided this year that in-stream flow for fisheries is “more important” than “meat and potatoes” and has shut off all junior water users, “no matter paper agreements to the contrary.”

But what actually happened is that the state of Oregon determined that the Klamath Tribes have a “time immemorial” right to in-stream flows on Klamath tributaries, and that right entitles them to make a call on irrigators using water from those streams.* And in this very low water year, that’s what they did.  When a senior water user shuts down a junior, there is no implication that the senior’s use of water is “more important” than the junior’s.  All it means is the senior was there first. It may not lead to the best use of water, but that’s the way Western water law works.

It’s also important to note that the Klamath irrigators who were cut off this summer were not protected by any “paper agreements.” In fact, they declined to participate in the Klamath Basin Restoration Agreement, which  seeks to assure that there is enough water, equitably shared, for both fish and agriculture. Other irrigators with rights junior to those of the Tribes, who did enter into the agreement, have not had their water cut off.

Like the Klamath Tribes, the Salish and Kootenai Tribes almost certainly have a valid claim to extensive time immemorial in-stream water rights. These rights are a matter of law and not a creation of the compact. On the contrary, under the compact, the Tribes have agreed to exercise their rights in a way that protects existing junior users, including irrigators. The Klamath experience demonstrates the value of this kind of negotiated settlement, and the perils of rejecting it, and that's something opponents of the compact need to understand.

* There have been numerous press reports regarding developments on the Klamath. Google them. I found this article from the July 6 Oregonian helpful.

Friday, September 13, 2013

Speaking Freely About the CSKT Compact

Two recent letters to the Valley Journal have taken Rep. Dan Solomon to task for his direct response to Terry Backs’ criticism of the CSKT compact. Rather than taking on the substance of Solomon’s column, which might have been helpful, the authors of these letters (one of whom is Backs herself) accuse Solomon of personally attacking Backs and attempting to suppress her freedom of speech. It simply isn’t true.

I have served on the Water Rights Commission with Rep. Solomon for the past two years.  From the beginning, he, and indeed the whole commission, insisted that we needed a compact that provided all citizens, on and off the reservation, with comprehensive protection for their water rights. He has attended numerous public negotiation and information meetings, listened carefully and respectfully to literally hundreds of citizens’ comments, including many from Backs, and worked to make the compact better and more responsive to those concerns. To say that by defending the compact from attack he is trying to quash free speech is nonsense.

More to the point: anyone, compact supporter or opponent, is perfectly free to say publicly whatever he or she wants about the compact. That’s what free speech is all about. But your right to free speech doesn’t bring with it the right to be believed in or not be criticized by others who disagree with what you have to say. On the contrary: if you are going to be vocal on a controversial issue, you aren’t talking in a vacuum and you have to expect to be taken on. You can only hope to be dealt with on the issues (as Solomon did with Backs) and not personally, but there are no guarantees.

Another right all citizens have is to meet with whatever other folks they want, when and where they like.  And in limited numbers, public officials and employees (Commission members and staff, county commissioners, Tribal Council members, and so forth) can attend such meetings without violating Montana’s open meeting laws. These meetings are private, but not “secret.” Anyone – compact opponents or supporters - can call them, and already have.  And there is a standing offer from the Commission: if you want to get a group of people together – whoever you want – Commission staff and members will be happy to attend, explain the compact as they see it, and answer questions as best they can.  As far as the Commission is concerned, the best way to move forward with this compact is through open, respectful and comprehensive conversation.