Opinion: Bill to limit contracts with companies that boycott is misguided
Iowa has a proud history of embracing free enterprise and supporting a friendly business environment. Unfortunately, the Iowa Legislature is considering a bill that could upend this tradition.
if enacted, Iowa Senate File 507 would prohibit public entities from contracting with businesses accused of boycotting certain industries. In practice, this will target companies simply for applying routine risk management policies, making it difficult for state and local governments to obtain necessary goods and services, ultimately wasting taxpayer money.
While the bill’s initial scope was narrowly tailored to state-run pension funds, the House amended it to apply to all state and local government contracts, not just public funds.
Simply put, the House’s amendments were rushed and did not receive proper scrutiny. If they are not removed from the bill, which is currently awaiting action in the Senate, it will lead to costly unintended consequences.
The legislation “requires each public fund to develop and maintain a list of scrutinized companies” accused of boycotting certain industries. Even though businesses are still serving the industries they are accused of boycotting, if a company ends up on even one of the numerous lists this bill creates, it will be banned from receiving contracts of $50,000 or more from any state or local government entity.
The standards for determining how businesses end up on a scrutinized company list are ill-defined. This will produce confusion among businesses and result in discrepancies between lists for no discernible reason.
Additionally, the bill will arbitrarily ban participants from the market for state contracts. The decreased competition will lead to fewer options and higher prices for taxpayers.
Anyone who took Economics 101 can tell you that when you limit competition, you increase prices, whether you intend to or not. When you’re talking about big public financing projects, a little increase means a lot of moola. And that’s coming out of taxpayer pockets. Texas recently enacted similar legislation to regulate its municipal bond market—taxpayers there are now paying as much as $532 million more.
Fortunately, there is time to prevent similar damage from coming to Iowa. Senators should remove the problematic provisions regarding state and local government contracting from the bill and send it back to the House. If this cannot be done, they should reject the legislation entirely.
As it stands today, Senate File 507 is wrong for Iowa and must be prevented from becoming law.
Jon Kallen is the managing partner of Jennings Kallen Advisors, a Des Moines based strategic practices firm focused on renewable energy, environmental infrastructure, agricultural technology and sustainable technology.
This article originally appeared on Des Moines Register: Opinion: Bill to limit contracts with companies that boycott is wrong
