Nearly a year has passed since the Florida legislature passed H.B. 7117, handing over $100 million in subsidies to the renewable energy industry, and Gov. Rick Scott is seeking proof the taxpayer dollars are actually benefiting Florida’s economy.
Putnam Claims Economic Benefits
In April 2013, Scott, a Republican, appeared poised to veto H.B. 7117, but he allowed it to become law when Agriculture Commissioner Adam Putnam produced an “independent economic analysis” Putnam claimed “proves” the bill would benefit the Florida economy. Putnam produced the analysis on the morning state law required Scott to make his veto decision.
Deferring to Putnam’s “independent economic analysis” and Putnam’s vigorous support for the bill, Scott allowed it to become law without his signature, taking the unusual step of issuing a public statement expressing deep concern about the bill and saying he expected the legislature to repeal it if the promised economic benefits do not materialize.
“I am concerned whether the taxpayers of Florida will receive a return on the targeted tax credits in the bill,” Scott wrote in an April 13 public statement.
To secure Scott’s decision not to veto the bill, Putnam pledged to provide an annual economic analysis of H.B. 7117. In Putnam’s most recent “Office of Energy Annual Report,” he pledges to produce his first annual economic analysis by March 2013.
“I look forward to reviewing the analysis of returns to the taxpayers as a result of these tax credits,” Scott said in his statement. “In considering this analysis, it is my goal to ensure that any investment on behalf of Florida taxpayers in renewable energy would afford them the kind of return they would expect of their tax dollars. Absent clear documentation that the proposed tax credits have produced a sufficient return or provided significant cost savings for the state’s taxpayers, I will request their repeal.”
Secretive Economic Report
Putnam gave no advance notice he would be producing an independent economic analysis of H.B. 7117. Accordingly, when Putnam presented the analysis to Scott on the morning state law required Scott to make his veto decision, Putnam ensured that no third-party economic analysts could review his report.
Economists Find Many Flaws
In the months after H.B. 7117 became law, several energy economists reviewed the study and found it flawed in many key areas. Among the flaws, the analysis provided no verifiable data on the relative costs of renewable power versus conventional power, provided no documentation of its underlying procedures and core assumptions, dubiously assumed any government subsidies for any industry benefit the overall economy, and employed questionable economic multipliers to estimate job creation spurred by government spending without employing similar economic multipliers to job creation destroyed by taking money out of the private sector to pay for the government spending.
The Beacon Hill Institute at Suffolk University presented the most comprehensive review, concluding the analysis ignored many negative consequences of the subsidies.
Under H.B. 7117, economic “losses arise because the tax breaks provide incentives to induce the overproduction of less efficient energy sources and less productive investment. Moreover, the analysis fails to account for the opportunity cost of investment that was diverted to less efficient industries from more efficient ones,” the Beacon Hill Institute reported.
Putnam Hid Author’s Background
Even more troubling, documents emerged showing the author of the economic analysis, John Urbanchuk, is a paid consultant for at least half a dozen renewable energy lobbying organizations. According to an article published in Biofuels Journal, “Some of his [Urbanchuk’s] clients include the U.S. and Canadian Renewable Fuels Associations, the National Biodiesel Board; National Corn Growers Association, American Soybean Association and United Soybean Board; the Iowa Renewable Fuels Association; and private firms.”
A press release by Urbanchuk’s firm, Cardno ENTRIX, emphasized the importance of Urbanchuk’s study on Scott’s decision not to veto the bill.
“Due to conservative opposition, Governor Scott was hesitant to sign” the bill, stated the press release. “… However, after Agriculture Commissioner, Adam Putnam, released Urbanchuk’s analysis of the bill, Scott recognized the potential revenue growth the legislation will create for Florida’s economy.”
Grassroots Leaders Take Action
Florida grassroots conservative leaders plan to seek meetings with Scott administration officials in the weeks leading up to the planned release of Putnam’s annual economic analysis.
“We want to make sure Gov. Scott doesn’t forget his promise to demand proof that the renewable energy subsidies are benefiting Florida taxpayers and not just politically connected renewable energy companies,” grassroots leader Norm Knighton said.
“We feel betrayed that Commissioner Putnam didn’t give any of us a heads-up that he was going to present his economic analysis, and then waited until the very morning of Scott’s decision so that nobody could point out the analysis’ obvious flaws,” Knighton explained. “It was an even bigger betrayal that Commissioner Putnam hid the fact that the author was a paid mouthpiece for the renewable fuels industry.”
He added, “We want to make sure this year’s report is authored by an objective, universally respected energy economist. If Commissioner Putnam refuses to retain one or more respected free-market economists to produce the report, then Gov. Scott should reject the report or commission his own report authored by respected free-market economists.”
James M. Taylor ([email protected]) is managing editor of Environment & Climate News.
“Review of ‘Impact of Proposed Energy Tax Plan for Florida,'” The Beacon Hill Institute at Suffolk University: http://news.heartland.org/sites/default/files/beacon_hill_urbanchuk_study_1.pdf