Economics and Finance

Gag clauses are at the forefront of state policy decisions as state policymakers attempt to reduce the cost of prescription medications. Gag clauses are established in PBM-pharmacy contracts prohibit pharmacists from informing consumers, unless asked, about cheaper ways to purchase prescriptions or access more effective alternatives, i.e., a lower cost generic drug or newer brand name drug with better outcomes. From 2016 to 2018, 22 states enacted legislation to prohibit the use of gag clauses to provide consumers and pharmacists more ability to communicate about cheaper options. Another nine states have legislation still pending. Eight states have legislation regulating pharmacy benefit managers, or PBMs, through audits, licensing and maximum allowable cost statutes that do not directly address gag clauses. More than eight states have Maximum Allowable Cost (MAC) statutes and auditing and licensing procedures enacted, however they also address gag clauses or claw backs specifically in their bill.

The Supreme Court held 5-4 in Janus v. AFSCME that state statutes allowing public sector employers and unions to agree that employees who don’t join the union must still pay their “fair share” of collective bargaining costs violate the First Amendment. The Court also held that employees must “affirmatively consent” to join the union. More than 20 states authorize “fair share” for public sector employees.

In Abood v. Detroit Board of Education (1977) the Supreme Court held that the First Amendment does not prevent “agency shop” arrangements where public employees who do not join the union are still required to pay their “fair share” of union dues for collective-bargaining, contract administration, and grievance-adjustment. In Janus, the Supreme Court overruled Abood.

In South Dakota v. Wayfair the Supreme Court ruled that states and local governments can require vendors with no physical presence in the state to collect sales tax. According to the Court, in a 5-4 decision, “economic and virtual contacts” are enough to create a “substantial nexus” with the state allowing the state to require collection.  

In 1967 in National Bellas Hess  v. Department of Revenue of Illinois, the Supreme Court held that per its Commerce Clause jurisprudence, states and local governments cannot require businesses to collect sales tax unless the business has a physical presence in the state.

Twenty-five years later in Quill v. North Dakota (1992), the Supreme Court reaffirmed the physical presence requirement but admitted that “contemporary Commerce Clause jurisprudence might not dictate the same result” as the Court had reached in Bellas Hess.

States continue to take significant actions in attempts to lessen barriers to workforce entry caused by occupational licensing. CSG currently facilitates a consortium of 11 states looking at occupational licensing reform as a part of the Occupational Licensing Assessing State Policy and Practice project in partnership with NCSL and NGA, funded by the US Department of Labor. However, the examples below come from states not currently participating in this project’s consortium, signifying that occupational licensing reform is a priority for states nationwide, and not just the 11 states participating in this CSG project.

An uptick in concern about digital privacy is sweeping the nation. Incidents such as injury law firm advertisements targeting emergency room patients based on location, smart home assistants recording conversations unbeknown to their owners, and Facebook’s Cambridge Analytica scandal have all contributed to concerns about digital privacy.

The home sharing industry is booming and the sharing economy is more than established in many cities across the United States. Companies like Airbnb and Uber are leading the way for the industry’s boom. As expected, property rights will be a hot topic surrounding these companies and property owners for years to come. Efforts made by the states to regulate this industry, promote economic growth and protect the best interests of their constituents will continue to be under a microscope.

A commonly cited argument for occupational licensing reform states that licensing results in restricted employment growth and higher wages for licensed workers, which in turn increases consumer costs. Higher wages benefit licensed workers, but wage disparity leads to inefficiency and unfairness, including reducing employment opportunities and depressing wages for excluded workers.

CSG Midwest
In 2017, because they lacked the authority to require the collection of sales taxes on remote sales, states and local governments lost up to $13 billion. With one Midwestern state leading the way, this legal and fiscal landscape could change soon, depending on how the U.S. Supreme Court rules in South Dakota v. Wayfair.
For now, a 1992 decision, Quill Corp. v. North Dakota, is the law of the land. It says that, minus congressional action, a state can only require businesses with a substantial presence, or nexus, to collect and remit the sales tax. That ruling has affected not only state tax bases, but the competitiveness of Main Street businesses as well — particularly with the rise of electronic commerce (see line graph).
Four years ago, The Council of State Governments, in partnership with the State and Local Legal Center and members of the Big Seven organizations representing state and local governments, filed an amicus brief critiquing Quill, which prompted Justice Anthony Kennedy to ask for a case to overturn the ruling.
CSG Midwest
No state in the Midwest requires that a certain percentage of contracts be given to minority- or women-owned businesses. (Outside the region, Connecticut requires that 6.25 percent of the value of state and local government contracts go to companies owned by women, minorities or disabled individuals.) However, at least three states have specific goals set in statute: Illinois, Ohio and Wisconsin.
CSG Midwest
In some rural parts of Ohio, access to broadband seems a long way off, with entire areas lacking access to high-speed internet service. For other businesses and residents, the infrastructure is frustratingly close, but out of reach.
“We have a marbling effect throughout the rest of the state — even in suburban and urban areas — where we have a street over here or a cluster of homes over there that cannot get broadband infrastructure built out to them,” Ohio Rep. Rick Carfagna explains.
Two separate bills are being considered this year to address those two distinct problems associated with Ohio’s digital divide.
Under HB 378, the state would use some money from its existing Third Frontier Initiative ($50 million for each of the next two years from the proceeds of bond issues) to help fund broadband infrastructure projects in underserved areas of the state.

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