Southern Pulse Newsletter, July 2022

That’s a wrap for SLC 2022!

The official numbers are in, and more than 1,400 legislators, families, and affiliates joined us for a landmark Southern Legislative Conference in Oklahoma City. A successful SLC relies heavily on the hard work of a small army of volunteers and legislative staffers, and we thank our host state for ensuring and elevating the long-standing excellence of our annual conference. Thank you, Oklahoma!

Now back in the office, our focus pivots to the remainder of the year. Constantly aware of our responsibility to you, our members, CSG South does not simply hold the largest regional conference of state legislators in the country. In the months beyond July are three Policy Masterclasses and our two leadership development programs – The Center for the Advancement of Leadership Skills (CALS) and its staffer parallel, Staff Academy for Governmental Excellence (SAGE).  In addition, our policy team is working on new Issue Briefs and a myriad of publications with region-specific data and analysis for you and your offices to utilize.

Much like the work never stops in your states, so too does our work continue at CSG South. Always remember, we are an extension of your office!

Warmest Regards,
Lindsey G.

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States Respond to Inflationary Pressures

By Christina Gordley

Most indicators of the health of the U.S. economy have returned to pre-pandemic levels. Unemployment is at 3.6% and the employment payroll has returned to 151.7 million jobs. Consumer spending was $405.5 billion in the last quarter.

The economy is healthy, but these indicators point to what could be too much of a good thing. Demand for goods continues to outpace supply, which is creating a substantial increase in prices. The Consumer Price Index, the measure of price changes in a basket of goods and services, increased 8.6% over the past 12 months. Wages have not increased at the same rate, so people are experiencing a cost of living squeeze.

Federal Response to Rising Prices

The federal government has some levers to try to control escalating prices.

The Federal Reserve System is the combination of entities that try to maintain a sound financial system and promote employment and stable prices.

  • The Board of Governors is responsible for overseeing the 12 regional Fed banks. The board is composed of seven members appointed by the president and confirmed by Congress.
  • The Fed banks function as the “banks for the banks,” providing services like loans, payment processing and other support to help financial institutions conduct business with individuals, businesses and governments.
  • The Federal Open Market Committee sets the target for the federal funds rate, which is the interest rate that financial institutions pay to the Fed banks for access to the resources necessary to respond to the financial needs of consumers.

A rule of thumb is that financial institutions will charge an interest rate to individual and business borrowers about three percentage points higher than the federal funds rate. When the federal funds rate is 1%, for example, banks charge around 4% to consumers. The Fed reduced the federal funds rate in March of 2020 from 1.75 to 0.25. This resulted in the interest rate to consumers falling from 4.75% to 3.25%. This was part of the Fed’s effort to spur consumer spending by making it cheap to borrow money.

The Fed is now adjusting the federal funds rate upward, trying to dampen consumer spending.  When the federal funds rate rises and it costs more for banks to secure assets, the interest rate for borrowers also increases. The intended result is a slowing of price increases as demand decreases. In June, the Fed ordered an increase in the rate to 1.75%. In addition, an increase in the lending rate makes it more attractive for consumers to save money because they get a better interest rate.

The Fed also influences how much in financial reserves that banks must maintain. For example, a bank has $100 million in deposits from customers. Instead of having to hold the $100 million and then use other assets for lending, a reserve rate might require the bank to keep 10% of the deposit amount on hand and can use the other $90 million for lending. In March of 2020, the Fed reduced the reserve rate to 0% to increase the cash banks had available to lend and decrease the cost of borrowing. The Fed can also increase the threshold for reserves, reducing the amount of money available for lending.

While many of the factors influencing inflation — supply chain issues and the war in Ukraine — are outside of the control of the federal government, the increased cost of borrowing money will hopefully ease price increases. Meanwhile, state governments are monitoring the impact of high prices on their citizens as the cost of living outpaces increases in wages.

State Responses to Rising Prices

State budgets are experiencing robust balances because of three rounds of federal investments to offset the impact of the COVID-19 pandemic and enable economic recovery. State budgets also benefit from the recent increases in employment and wages, strong consumer spending and rising prices. This is because most state governments rely on sales taxes, which reflect spending and the cost of goods and services. For example, states have unprecedented levels of savings in their rainy day funds, according to a recent report by the National Association of State Budget Officers.

States will be impacted in the near term in their own spending by increases in the cost of goods and services and the cost of borrowing. While the Fed can implement policies in an attempt to temper inflation, states have few options to combat prices because states operate in the midst of a national and global economy.

Policymakers may have several issues presented to them with few solutions available for a quick fix.

  • Borrowing will cost more. State governments do not borrow funds from a bank like a private consumer. As a result, state budgets are not impacted by the federal funds rate and resulting interest rate increases in the same way as households. However, states do issue long-term bonds and short-term notes to private individuals and businesses to finance larger capital projects like roads, school buildings and technology infrastructure. The cost of borrowing for states will increase because they will have to offer higher paybacks to potential bond and note purchasers.
  • Capital projects may cost more than originally anticipated because borrowing money is more expensive, wages for workers are up and supply chain issues will affect the availability of equipment, which may extend the timeline of projects.  
  • Pension obligations, which are often sustained by investments of available funds in stocks, will be affected by the recent decline in the value of such assets during the current market downturn.
  • Social services will be in greater demand as households continue to face rising prices from the fuel pump to the grocery store while wages are not rising as fast.

It is a delicate balance for states that are experiencing revenue surpluses while their residents are struggling to make ends meet. Policymakers have implemented or are considering actions to provide financial relief to their residents, such as sending direct cash payments or providing increased services.

However, inflation is a complex national equation and increasing the spending power of individuals can also contribute to the inflationary pressures by sustaining the heightened demand for goods and therefore prolonging higher prices.

  • California is considering an $8 billion relief program funded from the budget surplus to provide a $200 cash rebate for each taxpayer and $200 per child.
  • The Colorado Cashback program is providing a $400 dividend from the state surplus for direct relief to households.
  • Georgia adjusted the income tax credit for 2020 and 2021 to redistribute some of the state’s budget surplus. Depending on the individual filing status, the amended individual income tax refund received ranged from $250 to $500.
  • Hawaii will provide $300 to each taxpayer and dependent in households earning less than $100,000 and $100 to each taxpayer and dependent in households earning less than $200,000.
  • Kansas eliminated the sales tax on grocery items.
  • Maine recently approved a supplemental budget that uses half of the state budget surplus to provide $850 direct relief payments to individuals who filed a 2021 income tax return. Maine retirees — who are often on a fixed income — will receive an increased exemption from tax on their pension income. Maine has also increased the Earned Income Tax Credit to benefit an estimated 100,000 low- and middle-income working families.
  • Michigan appropriated $4 million for the Food Security Council in the budget that begins in October 2022.
  • Minnesota Gov. Tim Walz proposed a $500 rebate for each taxpayer.
  • New Mexico sent $200 million in direct economic relief payments to households. Individual tax filers received $250 and joint filers received $500 payments in June, with a similar payment set for August. Additionally, New Mexico set aside $20 million for economic relief payments for households that did not file income tax returns due to their income levels.
  • Pennsylvania Gov. Tom Wolf wants to utilize the American Rescue Plan funds to send $2,000 to each taxpayer.
  • Utah enacted a property tax program that allows individuals over the age of 75 and with income below 65,000 to defer their property tax payments until there is a transfer of ownership. Utah policymakers also reduced cell phone bills by eliminating fees that were directed to public safety communications, appropriating general fund resources to support those services.

CSG Announces Henry Toll Fellowship Class of 2022

Forty-eight state leaders were chosen for the selective program

Forty-eight state government officials from across the U.S. have been selected for The Council of State Governments distinguished Henry Toll Fellowship. The program is the nation’s premier leadership development opportunity for state leaders.

Elected and appointed officials from the executive, legislative and judicial branches in 32 states will meet at the CSG national headquarters in Lexington, Kentucky (Aug. 26-30), for an intensive, five-day leadership boot camp that is designed to stimulate personal assessment and growth while providing priceless networking and relationship-building opportunities.

“While the CSG Henry Toll Fellows come from every region of our nation, from both political parties and all three branches of state government, they share one thing in common — they are all people of purpose with a passion for public service,” said CSG Executive Director/CEO David Adkins, a former Kansas state senator and 1993 Toll Fellowship alumnus. “Toll Fellows are selected based on their demonstrated commitment to solve problems, to work collaboratively to get things done, and their belief that state government can and must be a force for good.”

The CSG Henry Toll Fellowship is not a traditional professional development or policy program — it’s an intense leadership experience that challenges participants to move out of their comfort zones and take an introspective look at how they view themselves as leaders. There are more than 1,300 graduates of the Toll Fellowship, which began in 1986. Distinguished alumni include five state/territorial house speakers, three sitting state supreme court justices, ten sitting members of Congress, five sitting governors and 200 Toll alumni currently serving as state/territorial legislators.

The 2022 fellowship graduates will be honored during the 2022 CSG National Conference in Honolulu, Hawaii, in December.

“Congratulations to the 2022 Toll Fellows for being selected to participate in the premier state government training program in the country,” said Washington state Sen. Sam Hunt, who serves as CSG National Chair for 2022. “As part of a very selective group chosen from state governments across the country, they are in for a rewarding experience. As a former Toll myself, I know they will sharpen their skills in making government more effective.”

The following leaders have been selected for the 2022 CSG Henry Toll Fellowship:

  • North Dakota Treasurer Thomas Beadle
  • Jace Beehler, chief of staff, North Dakota Office of the Governor
  • Mississippi state Rep. Christopher M. Bell
  • Eric C. Berthel, deputy Senate Republican leader, Connecticut
  • Rhode Island state Rep. Nathan W. Biah Sr.
  • Georgia state Rep. Rhonda Burnough
  • Dr. Antonina Capurro, deputy administrator, Nevada Department of Health and Human Services, Division of Health Care Financing and Policy
  • Jesse Chadderdon, chief of staff, Delaware Senate Majority Caucus
  • Maine state Rep. Kristen S. Cloutier
  • David D’Arcangelo, commissioner, Massachusetts Commission for the Blind; council member, National Council on Disability
  • Illinois state Sen. Dale Fowler
  • Hilary Franz, commissioner of public lands, Washington Department of Natural Resources
  • Illinois state Sen. Ann Gillespie
  • Maine state Rep. Lori K. Gramlich
  • Alabama House Minority Whip Jeremy Gray
  • Pennsylvania state Rep. L. Elizabeth F. Hanbidge
  • Illinois state Rep. Sonya Harper
  • Jay D. Hartz, director, Kentucky Legislative Research Commission
  • Hawaii state Rep. Troy N. Hashimoto
  • Taylor Hawk, policy director, Delaware Senate Majority Caucus
  • Kentucky state Rep. Samara Heavrin
  • Beverley Henry, supervising committee administrator, Connecticut General Assembly Office of Legislative Management
  • Ohio state Rep. Paula Hicks-Hudson
  • Louisiana state Rep. Jason Hughes
  • Nebraska state Sen. Megan Hunt
  • Kathleen James, assistant House majority leader, Vermont
  • Sandra Jauregui, Assembly assistant majority whip, Nevada
  • Alaska state Rep. DeLena Johnson
  • Jennelle H. Jones, general counsel, West Virginia Office of Technology
  • Shawn Jurgensen, special counsel to the chief justice, Kansas
  • Washington state Sen. Patty Kuderer
  • Tennessee state Sen. London Lamar
  • Idaho state Rep. Laurie Lickley
  • Alaska state Rep. Daniel H. Ortiz
  • Oklahoma state Rep. Daniel Pae
  • Tennessee state Sen. Bill Powers
  • South Dakota state Rep. Taylor Rehfeldt
  • Chris Reykdal, state superintendent of public instruction, Washington
  • Minnesota state Rep. Ruth Richardson
  • Jen Robison, chief of staff, Office of the Lieutenant Governor, Utah
  • Arkansas state Rep. Jamie Scott
  • Daniel Shannon, director, Wyoming Department of Corrections
  • Delaware state Rep. Michael F. Smith
  • Wisconsin House Minority Caucus Chair Lisa Subeck
  • Kansas Senate Minority Leader Dinah Sykes
  • Missouri House Minority Caucus Policy Chair Sarah Unsicker
  • Connecticut state Rep. Quentin “Q” Williams
  • Nevada District Court Judge Bita Yeager, Department 1, Eighth Judicial District Court

Associates in Action: ExxonMobil Announces Ambition to Achieve Net-Zero Emissions by 2050

By: Victor Montgomery

ExxonMobil, a CSG Associate and one of the largest publicly traded international energy companies, is leading the transition to a lower-emission energy future. In cooperation with the Paris Climate Accords, ExxonMobil revealed one of the most ambitious and wide-reaching plans to achieve net-zero Scope 1 and 2 greenhouse gas emissions by 2050 in its Advancing Climate Solutions 2022 Progress Report. The report details concrete steps the company plans to take to drastically reduce emissions while meeting the world’s evolving energy needs.

“ExxonMobil is committed to playing a leading role in the energy transition. Advancing Climate Solutions articulates our deliberate approach to helping society reach a lower-emissions future,” said Darren Woods, chairman and chief executive officer at ExxonMobil. “We are developing comprehensive roadmaps to reduce greenhouse gas emissions from our operated assets around the world, and where we are not the operator, we are working with our partners to achieve similar emission-reduction results.”

As part of the company’s commitment to sustainability, ExxonMobil also announced plans to invest more than $15 billion toward initiatives focused on lowering greenhouse gas emissions. Funds are targeted at accelerating the development, deployment and scalability of lower emission technologies, which will support industry-wide leaps in carbon capture and storage, hydrogen and biofuels.

ExxonMobil expects to finalize most of its detailed roadmaps on achieving net-zero emissions by the end of this year, completing the remainder in 2023. For more information on ExxonMobil’s commitment to the transition to sustainable energy, including the most up-to-date information on ExxonMobil’s net-zero emissions progress, please visit ExxonMobil’s Advancing Climate Solutions webpage.

U.S. Census Bureau Resources on ‘Challenge’ Processes

The U.S. Census Bureau recently published two flyers that outline programs that governmental units can use to review their census counts.

One flyer concerns the Post Census Group Quarters Review, and the other offers a helpful comparison of the Count Question Resolution, Post Census Group Quarters Review and Special Census programs.

View those resources:

2020 Post-Census Group Quarters Review

This document provides a mechanism for governmental units in the U.S. and Puerto Rico to request that the U.S. Census Bureau review their population counts of group quarters they believe were not correctly counted as of April 1, 2020.

Learn more: click here

Options for Governmental Units to Review and Update Population Counts

The U.S. Census Bureau offers several options for governmental units that would like to review their 2020 Census counts or update their population totals between decennial censuses. This document is a tool for governmental units to determine which option best suits their needs and describes the similarities and differences between these programs and operations.

Learn more: click here