The Cost of a Veto

How the governor cost Idaho millions of dollars with the stroke of a pen

In the final days of the 2024 legislative session, Gov. Brad Little vetoed Senate Bill 1314, which would have allowed the State Treasurer to invest up to 7.5% of Idaho’s idle money in gold and silver. In his veto letter, the governor wrote:

While the Legislature sought to provide additional flexibility for the state's investment portfolio, we have a fiduciary responsibility to manage taxpayer dollars with the utmost care and caution. This legislation and its fiscal note fail to take into account the many additional costs that will be borne by taxpayers for the storage, safeguard, and purchase of commodities such as gold or silver.

Democratic Rep. Ned Burns raised this concern during House debate on S1314, asking how much it would cost to store so much gold. Rep. Barbara Ehardt, who carried the bill on the floor, answered that the cost would be minimal, pointing out that $100 million worth of gold could fit in a garbage can.

While costs associated with storage and transportation of physical metals are not negligible, there were other reasons for politicians to oppose S1314. Rep. James Petzke warned about the risk of holding physical assets: if the state needed to liquidate for immediate cash, it could end up doing so at a loss.

But perhaps the sharpest critique came from Democratic Rep. Chris Mathias, who questioned who would be entrusted with storing hundreds of millions of dollars' worth of gold. He said that no more than four facilities would be willing, eligible, and capable of storing that much gold:

“Go look at these four facilities, evaluate their qualifications, the specifications—are they top of the line facilities?—and most importantly: who owns them. I’d urge your no vote.”

The elephant in the room that Mathias alluded to that day was Money Metals Exchange, a precious metals dealer headquartered in Eagle. The company has operated for 15 years and recently opened a state-of-the-art depository, the largest of its kind west of the Mississippi:

Owner and CEO Stefan Gleason is well known as a supporter of conservative causes and sound money policy. The Money Metals Substack is a reliable source of news and analysis on monetary issues. Both the company and its owners donate to numerous conservative candidates and organizations—including, earlier this year, this very platform.

Did Gov. Little veto S1314 because it might benefit someone he potentially views as a political adversary?

In economics, “opportunity cost” refers to the value of the alternatives you give up when you make a purchase or take an action. A Big Mac might cost $5, but the opportunity cost could be $5 worth of tacos, or putting that $5 toward a steak dinner. When evaluating the cost of something, we should consider not just the price tag, but also what else that money could have been used for.

What was the opportunity cost of Gov. Little’s veto of S1314?

The Office of the State Treasurer regularly reports on Idaho’s financial position. "Idle money" refers to public funds not immediately needed for daily operations—temporary surpluses held in state accounts. Rather than sitting idle, these funds are invested in low-risk, short-term instruments to earn interest for the state.

This policy is effective. In fiscal year 2024, the state earned approximately $250 million from these investments. After administrative fees, the net return was $249 million—money that didn’t need to come out of taxpayers’ pockets.

Yet how much more could the state have gained if Treasurer Julie Ellsworth had been allowed to place a small share of those funds into gold and silver?

Let’s look at the numbers. On July 1, 2024—the day the law would have taken effect—gold was trading around $2,400 per ounce. As of last Thursday, it had climbed to $3,400. Silver rose from $22 per ounce to $36 in the same timeframe.

The average yield on the state’s idle investments was around 4.3%, implying roughly $5.8 billion was invested over the course of the year. If 7.5% of that had gone into precious metals, it would equal $435 million.

Had that $435 million been invested entirely in gold on July 1, 2024, it would currently be worth $617 million today. Had it been invested entirely in silver, it would be worth $712 million right now. Had it been split 50/50, it would be worth $665 million.

For a proper comparison we need to subtract the 4.3% average return that money got in the more conventional investment vehicles that the treasurer currently uses, which comes to about $18.7 million. That means that the true opportunity cost of the governor’s veto, after accounting for lost interest income, is likely in the range of:

• $163 million (gold-only)

• $258 million (silver-only)

• $211 million (50/50 balance)

As far as “safe” investments go, 4.3% interest is pretty good, especially for money that would otherwise be sitting around in state coffers. Yet how much value is lost each year—even each month—to inflation, according to both the official numbers and the real numbers that are likely much higher?

Officially, the Consumer Price Index (CPI) rose between 2.4% and 2.9% from July 2024 to now. That’s nearly three cents of every dollar devoured by fiscal entropy. And many believe actual inflation is even higher, since CPI calculations don’t reflect all household costs.

During House debate on S1314, Rep. Elaine Price emphasized that the rising price of gold and silver is actually a symptom of the dollar’s declining value. She warned that if the dollar were to collapse, Idaho could be left exposed. I don’t pretend to grasp all the logistical complexities of storing and managing physical gold or silver as short-term investments, but I trust Treasurer Ellsworth could figure it out. And I do understand that Gov. Little’s veto of S1314 may have cost Idaho upwards of a quarter billion dollars.

To put that in perspective: House Bill 40, which reduced the income tax rate from 5.695% to 5.3%, represented a $253 million tax cut for the people of Idaho. House and Senate leaders boasted it was the largest tax cut in Idaho history. Even so, Democrats (and a handful of Republicans) debated against the bill, saying it was irresponsible to reduce general fund revenues by that much. Imagine of the Legislature could have doubled that tax cut with zero reduction to the budget.

Of course, Rep. Petzke and others who debated against S1314 were correct that gold and silver can be risky investments, especially in the short term. Had the governor signed the bill, and had Idaho lost hundreds of millions of dollars, then there would surely be recriminations all around. But that’s not what happened. With one stroke of a pen, Gov. Little denied the state the chance to earn hundreds of millions in additional value.

Maybe it’s time to think outside the box. Why shouldn’t the state explore a wider range of financial instruments? Gold and silver have served as hedges against inflation since the creation of currency. Perhaps the Legislature should revisit S1314, and consider going even further. Why not follow President Trump’s lead and create a strategic Bitcoin reserve for Idaho?

It’s a brave new world, and the sky’s the limit.