On Wednesday, the Public Service Commission granted Noranda Aluminum Company a $17 million annual reduction in its electric bill - and guess who's picking up the tab?
The PSC bought Noranda's pleas of poverty and bluff to close shop. The fear is that if Noranda shutters, ratepayers like you and me will pay even higher rates than under this bailout. But, if Noranda's strapped for cash, blame lies on their management.
As I reported last year, when Noranda initially made its request: Apollo, a private equity firm, purchased Noranda in 2007 for a little over a billion dollars, with only $214.2 million cash. Less than a month later, Apollo directed Noranda to borrow money to pay Apollo back its upfront financing. A year later, Apollo directed Noranda to pay a dividend of $100.7 million. In 2010, Apollo took Noranda public and reaped an additional dividend of $107.9 million and another $151.1 million from the secondary sale of the company's stock. Because of Apollo-related debt, Noranda pays roughly $50 million per year in interest.
This is like the 2008 bailout. Big Wall Street firms bungle a situation and then crawl to government begging for a lifeline. Concerning the Wall Street bailout, executives took risks with other people's money that undermined our entire financial system. Then Washington rescued them with little to no consequence to them. (It then passed new laws that hamstrung Main Street banks with additional burdensome regulations even though those banks didn't create the problem.)
Here, Apollo executives managed Noranda superbly for Apollo's purposes. They sucked an enormous amount of capital out of the company in a very short period of time. And now they're sucking money out of your pocketbook.
A Grinch in April
This Wednesday was Christmas in April in the Missouri House. Every year around this time, the House attempts to pass massive bills regarding local government and taxation. A simple bill with a broad title is identified as a good tree. It's brought to the middle of the House floor. Then everyone gathers around to place their amendment ornaments on it.
As amendments accumulate on the bill, the tree starts to lean. And yet even more representatives line up for their turn to hang their perfect ornament on our prized fir. It's always interesting to watch the action on these bills. The sponsor knows the more items that are added, the more no votes it generates. And yet, once the sponsor allows five or six colleagues to add their amendments to the bill, it becomes harder to resist requests from others.
Eventually, it's too much. The sponsor is doing their best to stabilize the base, but there are just too many heavy ornaments, and the tree topples over. It seems to happen at least once every year. And so it was this week.
A bill on local government was brought to the floor and had 17 amendments hung on it. I would have voted for a majority of the provisions in the bill. But a few bad amendments weighed the tree down.. Ninety-five of my colleagues agreed, and the bill crashed, crushing all of the little ornaments that had just been hung.
In my first years in the House, I took more of a go-along to get-ahead attitude on Christmas trees. It was the same with bills naming new official state "things." I've voted for official dogs, official greetings, and several times for an official exercise. Now in my third term, I've either grown wiser or become the Grinch of late-April. I refuse to vote for any new official things because the Legislature has far better things on which to spend its time. And I'm a near certain no on any bill that gains more than a dozen amendments.
Ethics bill paused - and why a gift cap is important
The ethics bill appears stalled out in conference committee. The House version included an immediate ban on the legislator to lobbyist revolving door and a cap on gifts to legislators. Several people have suggested to me that these measures don't really matter. I disagree.
Consider the case of the Zimbardo experiment: in the early 1970s, a team of scientists at Stanford created a mock prison in the basement of the school's psychology building. They wanted to see what happened when you "put good people in an evil place." So they recruited people of normal psychological health and assigned half to be prisoners in the mock prison and the other half to be guards. What happened next shocked the researchers. The experiment was planned for two weeks, but was called off after just six days because, in the words of Zimbardo, the well-adjusted people recruited to be guards "became sadistic" and the mock prisoners "became depressed and showed signs of extreme stress."
The General Assembly is not a mock prison. It is a collection of good people who are put in a highly unusual circumstance. They have considerable power and the opportunity to be showered with myriad gifts. Accepting a gift does not make someone a bad person. Nor does it mean they're corrupt. But an environment of unlimited gifts is a problem. As the Stanford experiment showed, environment can change people's behavior. Otherwise normal well-adjusted people may do things they otherwise would not ever do.
The House version of Senate Bill 11 attempted to take a reasonable position on gifts by capping them at $25. An average dinner or token gift (like a book) is not a corrupting experience or likely to lead to corruption. So far, however, there's been no agreement on how to proceed and it appears doubtful that there will be a breakthrough.
Predictions for the last two weeks
The Senior Savings Protection Act appears likely to pass. I was pleased to usher Senate Bill 244, sponsored by Sen. Eric Schmitt, through the House this week. It passed by a vote of 120 to 23 with minor changes.
The Medicaid Modernization Act is moving in both chambers. The House version was heard in Senate committee Thursday and the Senate version passed out of House committee the same day. I believe the bill is probable to pass.
Thanks to the hard work of State Rep. David Wood, R-Versailles, Sen. Schmitt and many others, it appears likely that an education transfer "fix" will pass this year.
Senate Bill 5, relating to municipal court and traffic ticket revenue reform, appears very likely to pass as well. This bill contains provisions substantially similar to legislation I filed - and, it too was sponsored by Sen. Schmitt.
Gov. Nixon vetoed the welfare reform bill on Thursday. I predict the Legislature will override his veto before regular session adjourns.
The Senate passed a two-cent gas tax Thursday that would not go to a vote of the people. I'm a double no. I'm a stand-on-the-railroad tracks and yell stop to a tax hike that doesn't go to a vote of the people. And I'm still a no (albeit quieter) on a tax hike that would allow you to weigh in. In any case, the bill is dead in the House this year.
State Rep. Jay Barnes, R-Jefferson City, represents Missouri's 60th District.