A new study from the Texas Association of Business Chambers of Commerce Foundation confirms what my NTU colleagues and I have been saying repeatedly: misguided efforts by some conservatives to push back against Environmental, Social, and Governance (ESG) policies are costing taxpayers big.
The study demonstrates that so-called “Fair Access” laws in Texas are raising public sector costs in the state by more than $270 million. These laws attempt to counter ESG policies in left-leaning states like California by effectively barring financial institutions from participating in municipal bond markets if they are deemed to discriminate against favored businesses or industries. Not only do such laws give a concerning amount of authority to elected officials and government regulators, they also substantially drive up the cost of government services.
The higher costs largely stem from a simple principle: less competition means higher prices. For instance, if you needed to replace your roof, you would likely get multiple bids to ensure you are getting good service at the lowest possible price. The same is true with government services. As noted in the study: “A significant potential consequence of fewer market participants in municipal finance is reduced competition leading to increased costs.”
In other words, when companies are blacklisted – not due to questionable business practices but simply because of ideology or the whim of a fickle politician – costs go up and taxpayers, as usual, get stuck with the higher bill.
In the case of Texas municipalities, forcing certain financial institutions out of municipal bond markets means that public projects are financed with higher interest rates and fees, saddling taxpayers with higher associated costs. And we’re not talking about chump change. In addition to the aforementioned $270 million in direct costs, the Fair Access laws will cause a loss of $669 million in economic activity and more than 3,000 jobs. On top of that, state and local governments will miss out on over $37 million in tax revenue. Unfortunately, far too many politicians try to raise taxes when revenues come in lower than expected, so this could position the state for more fiscal problems down the road.
Texas has been an amazing success story, attracting businesses and residents from all over the country who want to enjoy the state’s economic freedom and prosperity. The state’s recent attempt to push back on ESG policies has been a rare misstep – and a costly one.