Joseph Krist

Publisher

NEW YORK STATE

The confluence of election year pressures, an uncertain economy, rising housing and utility costs are delaying the enactment of a budget for the State. Not to mention the holidays as well. The passage of an extension bill to fund operations was not unexpected. The immediate issues include a potential tax increase, energy policy and immigration.

The tax increase proposed on millionaires has been supported by New York’s Mayor who seeks the funds to deliver free buses and childcare in the City. The impact of the State’s 2019 climate legislation is a major sticking point. Massive increases in electric costs were felt across the state. Delaying the deadlines in the climate legislation are seen as a way to increase supply and lower costs. The immigration issues are policy-based rather than an issue of funding.

That actually means that the process is likely to extend well into the month. There will be little financial pressure to reach agreement, and these policy issues usually require prolonged negotiations. It could be a while

HOSPITAL MARKETS AND COMPETITION

It isn’t your imagination. Americans continue to be served by the most expensive healthcare system in the world. Charges continue to go up, insurance companies balk and medical bills are still the leading cause of individual bankruptcies. This comes in the wake of the consolidation of the hospital industry. That process has unfolded over the last decade and a half. The theory was that consolidation would lead to efficiencies which should have slowed the incessant growth in medical care inflation.

A recent study from the Kaiser Family Foundation (KFF) has shown that the reality of a consolidated hospital market has not generated cost savings while reducing choice. KFF finds that nearly one in five (19%) metropolitan statistical areas (MSAs) were controlled by a single health system, and more than one in four (27%) markets were controlled by two systems in 2024.

In more than four of five metropolitan areas (83%), one or two health systems controlled more than 75 percent of the market. These markets all met the definition of highly concentrated markets based on thresholds in current antitrust guidelines. One health system controlled at least half of the market in about three out of four MSAs (76%) and at least a quarter of the market in nearly every MSA (98%). These markets tend to be outside of the big cities and that data shows the relationship between population and service area choice.

In 79% of MSAs with a population of less than 200,000, one or two health systems controlled the entire market for inpatient hospital care in 2024. Virtually all (54 of 55) MSAs with a population of at least one million people had at least four health systems. Diversity does not necessarily lead to less concentration. In fourteen of these relatively large MSAs with four or more health systems, the two largest health systems controlled at least 75% of the market, and in 44 of these areas, they controlled at least 50% of the market. 

As for rural providers, the outlook remains negative. A $50 billion federal Rural Health Transformation Program was created under the OBBBA last July. It was intended as a bit of a bone thrown to rural areas to offset the planned Medicaid cuts under the bill. It will cut $911 billion in federal spending on Medicaid and CHIP over the next 10 years, according to estimates from the Congressional Budget Office. 

We came across the example of how the bill would impact small providers in the rural West. Montana rural hospitals can receive payments for implementing recommendations, “including right-sizing select inpatient services” to match demand. In Wyoming, any facility that receives funding must agree to “reduce unprofitable, duplicative or nonessential service lines,”. Colorado and Oklahoma health departments said no facility will be forced to end services. Mandates from the state in those two jurisdictions as to which services are “appropriate” in a small rural facility, however, can be just as effective in driving decisions to cut services or close facilities.

Almost half of the at-risk hospitals have special Medicare payment designations that are typically associated with hospitals that are rural or financially vulnerable and play a critical role in the communities they serve, including Critical Access Hospital (19%), Rural Referral Center (16%), Sole Community Hospital (9%), and Medicare Dependent Hospital (4%). Five states now have over a quarter of all their hospitals at risk: Connecticut, California, New York, Massachusetts, and Washington.

All of this is just another reason to approach the healthcare sector with caution. It’s not an accident that municipal analysts have cited the sector as one of primary concern for 2026. The merger gun has just about run out of bullets as costs continue to increase – especially for labor – while reduced choice for consumers has not necessarily led to bottom line growth.

WESTERN WATER

Nearly every snow basin in the Mountain West had one of its warmest winters on record and is well behind normal for water supplies. Denver Water announced Wednesday that it is seeking a 20% cut in water use, asking people to turn off automatic watering systems until mid-May and restricting the watering of trees and shrubs to twice a week. It is the earliest in the year that Denver Water has ever issued a restriction.

It follows a very dry winter in Colorado. There was much attention paid to the lack of snow and the impact that had on the ski industry and tourism. Now, the even more important impacts of that dry winter are clear. Snowpack is some 40% below historic levels and the lowest since 1981. Denver Water gets about half of its water from the Upper Colorado River Basin and the South Platte River Basin where snowpack was at about 42% of normal. The Upper Colorado River Watershed was at 55%.

Salt Lake City officials, preparing for drought, have temporarily banned the opening of any large non-residential developments that consume significant amounts of water. city facilities have been ordered to cut their water use by at least 10%, and residents and businesses have been asked to voluntarily conserve 10 million gallons. In the northern Colorado city of Erie, officials warned residents and businesses to halt any irrigation until early April, and they warned they could shut off water access to anyone caught wasting water on their lawns.

In California, state measurements on April 1, the closely watched date when snow levels historically reach their peaks show that snowpack in the Sierra Nevada, southern Cascades and Klamath Mountains is 18% of average. State water officials say the snowpack was at its largest point in February, more than a month before it has historically peaked.

The U.S. Bureau of Reclamation, which runs the Central Valley Project and its flagship reservoir, Shasta Lake, announced last week that it expects to provide only 20% of the water requested by irrigation agencies in the San Joaquin Valley, the state’s farm belt. The State Water Project, which serves mainly urban communities, including spots in the Bay Area, is planning to meet just 30% of the water requests of most cities and towns.

TRIBAL SOLAR RIGHTS

Minnesota’s Upper Sioux Community constructed a solar array two years ago on tribal land with the intention of using that power for its casino and resort. It is  engineered so the power would stay on tribal land and off the local power grid.

As existing customers, tribal leaders expected to stay plugged into the larger grid and remain part of their local rural electric cooperative, Minnesota Valley Cooperative Light & Power Association even as they made their own electricity.

The utility, though, responded by threatening to shut off power to the tribe if it switched on the solar farm, arguing the project violated state law and the tribe’s obligations as a member of the nonprofit co-op.

Now, the dispute is in front of state regulators. An administrative law judge is reviewing the case and will make recommendations to the Minnesota Public Utilities Commission. Minnesota Valley Cooperative Light & Power has exclusive rights to sell electricity in its service territory. Like other state electric cooperatives, its board limits its members only to small energy projects up to 40 kilowatts, generally enough to power a small convenience store or a restaurant. 

Minnesota Valley says its rules require members who generate more than 40 kilowatts to sell their power to an outside buyer at a near-wholesale rate, pay the cooperative what’s known as a wheeling fee to transport it — and then continue buying all their electricity from the cooperative at the standard retail price. The solar array was designed to offset about 30 percent of the casino’s electricity consumption at lower cost economically and environmentally.

At the core is the reaction to past practices by the Cooperative. Minnesota Valley’s own 2024 study — commissioned by the cooperative to evaluate its rates and costs — showed that it was overcharging the Upper Sioux Community by as much as 11 percent for power. A 1995 federal court decision from North Dakota involving the Devils Lake Sioux tribe, in which a judge found that state utility service territory boundaries cannot be used to take away a tribe’s right to choose its own electricity provider for businesses on tribal trust land. The Upper Sioux have cited the same decision in their filings.

CARBON PIPELINES

Summit Carbon Solutions, the company facing regulatory hurdles to its construction of a pipeline for carbon sequestration has decided to use the carbon for fossil fuel extraction. Summit now says its pipeline will be used to drive domestic oil and gas production in a process known as enhanced oil recovery (EOR), which would inject the CO2 directly into wells. 

Carbon captured for use in enhanced oil recovery also qualified for tax credits—though slightly smaller ones, up to $65 per metric ton under the terms of the Inflation Reduction Act. The One Big Beautiful Bill Act of 2025 increased tax incentives for CO2 emissions captured and used in enhanced oil recovery. Now, whether a project captures carbon for permanent storage or to drive fossil fuel production, it receives the same credits.

This month a North Dakota judge revoked a permit issued to Summit that would have allowed it to store CO2 underground in the state. Summit is now considering destinations in Nebraska, Wyoming, Colorado and Kansas for sequestered carbon. Summit petitioned the Iowa Utilities Commission in September 2025 to amend the terms of its permit and remove mentions of a specific route or destination. 

MILLIONAIRES TAX

Washington Gov. Bob Ferguson signed historic legislation creating an income tax. The bill imposes a 9.9% levy on households with income above $1 million a year. Collections would begin in 2029 and generate around $3 billion a year from an estimated 21,000 filers. The state has historically been known for a high level of regressivity in its tax structure. This is an effort to address the issue in an era of affordability being top of mind.

It is also not unexpected that the conservative Citizen Action Defense Fund announced it plans to sue, arguing it is unconstitutional and conflicts with the state Supreme Court precedent set in 1933 when it invalidated a voter-approved income tax. Another conservative political committee – Let’s Go Washington – filed a referendum to give voters a chance to repeal the law this fall. However, because the new law contains a so-called “necessity clause” preventing a referendum, the Secretary of State’s Office formally rejected the filing this week.

Tax opponents will sue to remove the language and allow such a ballot challenge.

If the law stands, companies grossing less than $300,000 a year will be exempt from paying the state’s main business tax. Sales tax for diapers, personal care products, like shampoo and deodorant, and many over the counter drugs will be eliminated on Jan. 1, 2029. And most retail sales taxes lawmakers adopted last year on services will end on Jan. 1, 2029. 

CANADA

The impacts of the hostile environment towards Canada by the Trump administration are having real world economic consequences. North American Transborder Freight decreased 5.5% in January 2026 from January 2025 according to the US Bureau of Transportation Statistics. Freight between the U.S. and Canada: $52.8 billion, down 18.4% from January 2025.

Just look at the three primary methods facilitating Canada-US trade. Trucks moved $84.6 billion of freight, down 3.5% compared to January 2025. Railways moved $12.2 billion of freight, down 19.6% compared to January 2025. Pipelines moved $9.3 billion of freight, down 10.3% compared to January 2025.

Detroit, Port Huron, and Buffalo are the top truck ports for U.S. freight flows with Canada. Chicago, Port Huron, and Minneapolis are the top pipeline connection regions for U.S. energy freight flows with Canada. Port of Boston, Arthur, and Portland are the top water port connections for U.S. energy flows with Canada. Declines in tourism continued to impact communities like Palm Springs, CA and Las Vegas. In Las Vegas, a dismal 2025 saw the number of visitors decline 7.5 percent. That is the worst annual decline outside of the pandemic since the Great Recession of 2008-9. 

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