Louisiana legislature tries again to implement pro-gun litmus test

The Louisiana House passed a bill Tuesday that would limit firms that "discriminate" against the firearms industry from getting government business.

House Bill 978 “provides relative to prohibition on certain governmental entity contracts with companies that discriminate against firearm and ammunition industries an act to ... prohibit certain discriminatory practices with respect to firearm associations, retailers and manufacturers.”

The House passed HB 987 by a vote of 71 to 26. It was sponsored by Republican Rep. Blake Miguez, a staunch supporter of gun rights. It now heads to the state Senate.

Last year, a similar bill was approved by the Republican-dominated statehouse only to be vetoed by Gov. John Bel Edwards, a Democrat. The legislature was unable to muster enough votes to override his veto.

During a November meeting of the Louisiana Bond Commission, J.P. Morgan Chase was disqualified from underwriting a bond refinancing due to unanswered questions about its gun policies.

State Treasurer John Schroder noted at the time that J.P. Morgan was only being disqualified from that offering and was not being removed from the state’s list of approved underwriters for negotiated deals. Competitive deals were unaffected.

J.P. Morgan had been originally chosen because it came in with the lowest cost bid, but Wells Fargo came in and told the state it would underwrite the bonds at the lower fee.

In January, the state came to market with the deal after it was delayed due to the changes. Wells Fargo priced the $651 million of Series 2022A taxable gasoline and fuels tax revenue refunding bonds. Bond Commission Director Lela Folse said the state was expected to see about $40 million in present value savings with the refinancing.

Bel Edwards veto last year was partially based on concerns about the bill and the possible costs to the state.

Implementation of a similar law in Texas that took effect last year has taken some previously active underwriters out of the market.
In Louisiana, Democratic Rep. Royce Duplessis said that in the bill's fiscal note language stating that it could cost the state money in the future by banning certain companies from doing business with it.

"I think this is a bad bill," Duplessis said.

Miguez disagreed.

"I think it sends the message to these big, large corporations that have taken on this policy — 'Stick to making profits for your shareholders and get out of the policymaking business.' We in the state legislature make policy," he said.

In March, Louisiana came to market with $121 million of bonds backed by gasoline and fuel taxes. In conjunction with the sale, swaps associated with the bonds were transferred to an interest rate swap based on the secured overnight financing rate. A spokesperson for the treasurer said the state was expected to save several million dollars over the life of the bonds and the swap.

Louisiana is the 25th largest state with 4.6 million residents and has the 26th largest state gross domestic product. It is heavily dependent upon the energy industry — oil and gas refineries being major industries.

In Texas, municipal bond underwriters have been operating since last year under a law that bans them from signing state contracts if their policies are said to discriminate against the firearms industry.

The law, signed by Gov. Greg Abbott, took effect Sept. 1 and prevents any company from receiving contracts from the state or other government agencies valued at $100,000 or more “unless the company verifies in writing that it does not have an internal policy or directive that discriminates against members of the lawful firearm or ammunition industries.”

Last month, Oklahoma lawmakers passed a bill that follows in the footsteps of Texas and would prevent banks from participating in municipal bond deals if they discriminate against the gun business.

Like Texas, the Oklahoma legislation would require a firm to provide written verification for contracts with state or local governments worth $100,000 or more that it does not have a practice, policy, guidance or directive that discriminates against a firearm entity or trade group.

According to Mark Oliva, public affairs director at the National Shooting Sports Foundation, similar bills have also been introduced in Arizona, Indiana, Kansas, Kentucky, Ohio, Oklahoma and West Virginia.

The fight to mandate financial industry support for gun manufacturers is only one of several hot-button issues that have begun to impact the financial services industry and municipal bond underwriting, with red state officials at the forefront of trying to require businesses to show fealty to their policies.
In West Virginia, state treasurer Riley Moore announced that the state's Board of Treasury Investments will no longer use a BlackRock Inc. investment fund as part of its banking transactions.

He said the decision was based on reports about BlackRock’s environmental, social and governance policies, where it urged other companies to embrace net zero investment strategies that Moore said would harm the state’s coal, oil and natural gas industries.

“As the state’s chief financial officer and chairman of the Board of Treasury Investments, I have a duty to ensure that taxpayer dollars are managed in a responsible, financially sound fashion which reflects the best interests of our state and country, and I believe doing business with BlackRock runs contrary to that duty,” he said.

In Texas, the implementation process for a state law aimed at financial firm boycotts of the fossil fuel industry led a municipal bond issuer to drop three underwriters from a deal last week.

Oklahoma enacted a similar law this week.

In Florida, Gov. Ron DeSantis has picked a fight with the Walt Disney Company.

In March, the Florida Legislature passed a law that DeSantis signed banning classroom instruction in public schools about sexual orientation or gender identity.

Opponents of the law call it "Don't Say Gay" and says the policy will hurt LGBTQ+ children. Supporters counter that it lets parents decide and how their children are taught about LGBTQ+ topics.

Disney came out against the legislation, saying it would fight to have it repealed.

After that the GOP-dominated state legislature approved legislation proposed by DeSantis that would dissolve special tax districts created before 1968, notably the Reedy Creek Improvement District, which Disney effectively finances and runs to serve its Orlando-area resorts.

In total, Reedy Creek has about $1 billion in debt outstanding.

Fitch Ratings has placed Reedy Creek’s utility and ad valorem ratings on negative watch while both S&P Global Ratings and Moody's Investors Service revised their outlooks to developing from stable.

In the blue states, social and environmental policies have largely intersected at the public pension fund level.

In New York, both the state and city pension funds have announced their disinvestment of securities in companies with ties to the fossil fuels industry.

In March, New York’s top financial stewards praised the Securities and Exchange Commission’s proposed rule to require companies to disclose climate-related financial risk. State Comptroller Thomas DiNapoli and city Comptroller Brad Lander lauded the SEC, saying environmental transparency is beneficial to the pension plans.

As of January, the funds had $265.9 billion in assets under management and were the fourth largest public pension plan in the U.S.

Three of the five independent city pension funds are divesting from securities related to fossil fuel companies. The police and fire pension funds are not involved in the action.

DiNapoli is fiduciary for the state Common Retirement Fund, which is the third largest in the nation. As of Sept. 30, 2021, the state pension fund had assets of about $267.8 billion and was 99.3% funded.

In California, a bill sponsored in the state Senate would make the state’s two biggest public employee pension funds divest their investments from fossil fuel companies.

The bill would give the California Public Employees' Retirement System and the California State Teachers' Retirement System until 2027 to divest a total of $9.9 billion from the “Carbon Underground 200,” a list compiled by FFI Solutions of those firms ranked by the potential carbon emissions content of their reported oil and gas reserves.

The massive funds have long been active in discourse beyond the ken of pure investing — a state law directed CalPERS to divest from apartheid South Africa in 1986, and both funds have made public commitments on climate change and social equity.