DNR Fee Increase Backfires

Politicians of all stripes are rooting around for fresh money to fulfill past, present, and future promises lately, figuring that the economy is so hot that their depredations will go unnoticed and have no consequences. Let’s take a look at a Michigan example: the increase in license fees for hunting and fishing which the Legislature authorized in 2013 and which took effect in 2014.

The most popular hunting and fishing license prices doubled under the new fee schedule, although a direct comparison is not possible because the licenses were restructured to ‘simplify’ the license schedule. Governor Snyder’s goal for these increases was to raise an additional $ 18.1 million dollars annually for the DNR. The Senate Fiscal Agency benchmarked the anticipated annual increase at $ 19.7 million.

These are fees, paid voluntarily, so why should we care? Only taxes matter? The State of Michigan has been reducing the amount of money appropriated to the DNR from tax revenues since 2000, a reduction that now amounts to about 70%. So fees are now required to replace taxes. A common story across the United States. Fees play better with voters than taxes.

At the time HB 4668 was passed, the universal assumption within Michigan’s government was that sportsmen and women would ante up and the DNR would receive an additional $ 11.4 million in the initial year and $ 19.7 million in subsequent years. The discrepancy here is due to the initial license year commencing before the State fiscal year, so the first year fee increase affected only seven months of the DNR license year.

So how did this work out? Not well. Instead of $ 11.4 million, the DNR’s revenue increase was only $ 7.8 million in the first license year. Sales of expensive (and thus very lucrative) nonresident fishing licenses were down 40%. Overall fishing license sales were down 5%. The period of increased fees excluded most hunting seasons, so we won’t get an accounting for hunting license sales until later this year.

The DNR is happy with the $ 7.8 million revenue increase, but they did reduce the key nonresident annual fishing license cost from $ 76 to $ 68. So they can’t be that happy. This was a license which cost $ 42 before the increase and still has to compete with a comparable $ 40 license in Ohio. Not likely that an $ 8 reduction will make much difference next year, but the jury is still out here.

Now for the really bad news which our mathematically challenged government and journalists missed. Or maybe just did not want to spell out for you. Sport fishing is a $ 2.5 billion economic contributor to the Michigan economy according to the DNR and, if the 5% decline in 2014 fishing license sales accurately reflects reduced sport fishing related expenditures, the DNR just cost the Michigan economy $ 125 million dollars to achieve a $ 7.8 million revenue increment.

Going one step deeper, that missing $ 125 million should have paid a lot of taxes into the State of Michigan’s coffers, and the U.S. Government’s as well. It represents wages, sales, and accommodation costs which would have occurred had the fishing license fees not been increased. Income, sales, restaurant, and hotel taxes which the State of Michigan did not receive. The Federal government also takes a hit here, because they also tax income, fishing gear sales, and gasoline sales. How much in total? Something upward of $ 10 million. So the fishing license fee increase winds up being a transfer of funds from one government entity to another with a net loss for all.

And there is a human cost as well. In 2013 (the last year for which there is USG data), The average American food service job represented $ 51,855 in GDP. The average sporting goods sales job represented $ 122,509. The average accommodation job represented $ 98,651. Pick a number, say $ 150,000 per job affected to be conservative. That $ 125 million loss in economic activity represents 833 lost full time equivalent jobs. At the time HB 4668 passed, the DNR was touting the addition of something in the vicinity of 50 jobs. But in actuality, Michigan residents lost a net 750 jobs or more. No politician is going to crow over this in a press release.

Taxes and their clandestine equivalent – fees – have consequences. Something to remember on May 5th.

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