Economics and Finance

CSG Midwest
As they met at an unusual time of year for legislative session — namely the middle of summer, due to the postponement of session days caused by the COVID-19 pandemic — Nebraska lawmakers faced a familiar challenge: How can we reduce the property tax burden for homeowners, farmers and businesses? Their answer was passage of LB 1107, a bill being hailed by proponents as a major breakthrough after previous years of trying to address this perennially high-priority issue.
CSG Midwest
As most states in the Midwest entered a new fiscal year in July, the unknowns about FY 2021, and beyond, far outweighed the knowns. Will more federal assistance be made available to help close budget shortfalls? How big will those shortfalls be? Will the economic effects of the COVID-19 pandemic be felt the entire fiscal year?
“It’s been very hard for states to forecast given the uncertainty of the public health emergency,” Shelby Kerns, executive director of the National Association of State Budget Officers, said during a July webinar of The Council of State Governments’ Midwestern Legislative Conference.
But she told legislators of one unmistakable fiscal reality: “States will be grappling with the impact of COVID-19 for years to come.”
The options to fix out-of-balance budgets fall into three broad categories: cut spending, raise more revenue or tap into savings. But some of the specific strategies traditionally used by legislators may not be available this time around. “What’s different about this fiscal crisis is the public health emergency, which can limit or change some of the options,” Kerns said. “In addition to increased spending being required to respond to the pandemic, some cuts may be impossible, or least unwise.”
CSG Midwest
An ESOP is a type of tax-qualified retirement plan, one that states such as Iowa have identified as a tool for helping retain businesses when owners decide to sell some or all of their interests in a company.
Here is how an ESOP generally works: A privately held company contributes its stock, or money to buy its stock, to a retirement plan for employees. Each worker participating in the plan has his or her own account, and an ESOP trust is created to hold these shares of company stock. ESOPs can be a mechanism for allowing partial or full ownership of a privately held company to be transferred to employees (when the owner retires, for example). In contrast, the sale of a business to an outside entity increases the risk of lost jobs.
According to the National Center for Employee Ownership, other potential benefits of ESOPs include improving retirement security, reducing a company’s tax burden, bolstering worker morale, and giving employees a voice in management. Since the passage of legislation in 2012 (HF 2465), Iowa has provided a tax incentive to encourage the sale of in-state businesses to employees: Owners get a 50 percent deduction from income taxes on any net gains from the sale; the transaction must result in the employees (via the ESOP) owning at least 30 percent of the company. Iowa also reimburses 50 percent of the costs for businesses that conduct studies on the feasibility of setting up an ESOP.
CSG Midwest
In May, trends in U.S. unemployment appeared to take a positive turn, one unexpected by many economists. And as the Midwest’s legislators learned on a webinar that same month, changes in this closely watched economic indicator have huge impacts on states’ bottom lines.
“When the national unemployment rate goes up by one percentage point, there are budget shortfalls across all states of about $45 billion,” Michael Horrigan, president of the W.E. Upjohn Institute for Employment Research, said during the webinar hosted by the Midwestern Legislative Conference Economic Development Committee.
“The other estimate that we’ve come up with is that if a state unemployment rate goes up by one percentage point, states lose about 7 percent in tax revenue.”
Though the May numbers were promising — the result of factors such as the end of stay-at-home orders, business reopenings and an influx of federal dollars that, in part, encouraged businesses to retain workers — unemployment rates remain historically high.
CSG Midwest
Even as the U.S.-Canada border shut down earlier this year to all but trade and the movement of essential workers, the strength and durability of the relationship between the two countries was on display.
“[They] worked as partners to restrict, but not [totally] close, the border,” Chris Sands, director of the Canada Institute at the Woodrow Wilson International Center for Scholars, said during a May webinar for state and provincial legislators.
This cooperative effort (which included Mexico, via a separate border agreement with the United States), he said, was “historic.” And looking ahead, as the border begins to “reawaken,” he views the North American trading relationship as potentially more important than ever before.
According to Sands, one of the likely takeaways from the COVID-19 pandemic will be a push to change supply chains for essential goods such as medical equipment and supplies — away from producers in markets such as China to those in North America. Not only will this be a deliberate policy shift among governments, he said, some manufacturers “will no longer want to put their supply chains at risk.”
CSG Midwest
Since early April, Rep. Dave Greenspan and 23 other members of a specially formed Ohio House task force have been meeting, sharing ideas, and getting the perspective of business owners across various sectors and geographic areas.
One question above all else is guiding his work on the task force: What can we do to help businesses reopen, and remain open, safely?
“We’re not looking at the same things that the governor is looking at as far as public health protocols,” Greenspan says. “Our attention is on what we can do either directly through legislation or by facilitating, through other bodies, actions that allow [businesses] to open.”
That Economic Recovery Task Force in Ohio is an example of the important work being done by the Midwest’s legislatures, even during a time when the powers of governors have been strengthened due to the public health emergencies caused by the COVID-19 pandemic.
CSG Midwest
On a given day, an average of $2 billion in goods and services travels between the United States and Canada. In the middle of much of that cross-border activity: the Midwest’s states and their neighboring Canadian provinces.
The month of March 2020 will be remembered as a historic one in that relationship.
In response to the coronavirus outbreak, the two countries closed all nonessential traffic at the border. Though these rules did not apply to most trade, automakers (central to cross-border trade and supply chains in this region) subsequently shut their factories.
Somewhat overshadowed by these extraordinary actions, though, was the start of an important new chapter in U.S.-Canada trade relations. On March 13, the Parliament of Canada approved the United States-Mexico-Canada Agreement, or USMCA, thus ensuring that this successor to the 26-year-old North American Free Trade Agreement will go into effect. (The USMCA already had received formal approval by the U.S. and Mexican governments.)
CSG Midwest
As of early March, Wisconsin was set to become one of the first states in the nation to expand incentives for private investments in federally designated Opportunity Zones. Under AB 532, which passed with bipartisan support in the Assembly and Senate, Wisconsin would double the tax credits for investors supporting projects in financially strapped, low-income communities across the state. (The bill had not yet been signed by the governor as of early March.)
CSG Midwest
With the governor’s signing of HB 2 in early 2020, Ohio deepened its commitment to “upskilling” the state’s workforce, a policy objective that lawmakers say will help employers fill high-demand jobs and prepare individuals for better-paying jobs.
CSG Midwest

In September, the California legislature passed Assembly Bill 5 (AB 5) requiring gig economy workers to be classified as employees. The law, which went into effect Jan. 1, is intended to make it more difficult for companies to hire workers as contractors. AB 5 affects more than 1 million low-wage workers in California as it transforms a range of industries from trucking to technology. [1]

In order to remain classified as a contracted worker, the company must prove...

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