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House Bill 2149 passed the Missouri Legislature this session and, among other things, the bill establishes Missouri as part of the Speech-Language Pathology Interstate Compact. I discussed this idea multiple times while it moved through the legislature as a part of various bills. Luckily, an early problem that I pointed out in the bill text (that the language seemed to override licensing reciprocity) was corrected in the final version that awaits the governor’s consideration.

If signed by the governor, Missourians will be able to benefit from licensing reciprocity and this license compact, expanding options for consumers and workers. Occupational licensing often creates arbitrary barriers for workers and raises prices for consumers, so it’s encouraging to see the legislature reducing these negative effects. Perhaps next year we will see even larger movement in the form of a sunset provision for other occupational licenses and reforms allowing greater use of telemedicine in Missouri.

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The cities covered in the report are:

• Ballwin
• Blue Springs
• Cape Girardeau
• Chesterfield
• Columbia
• Florissant
• Independence
• Jefferson City
• Joplin
• Kansas City
• Lee’s Summit
• O’Fallon
• Springfield
• St. Charles
• St. Joseph
• City of St. Louis
• St. Peters
• University City
• Wentzville
• Wildwood

Click here to read more, or download the report by clicking on the link below.

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The Institute for Justice recently released a report that analyzes the barriers to business in cities across the country. The authors used model businesses to demonstrate how difficult it would be to open a restaurant, bookstore, food truck, barbershop, and home-based tutoring business in St. Louis and other cities. The report examines three aspects of the regulatory process to evaluate the cities: cost, delays, and complexity. Here’s how St. Louis fared for each:

Cost: St. Louis doesn’t do well here because of the city’s fee structure. The city uses a graduated fee system based on the number of employees, so fees can become extremely expensive as businesses grow.

Delays: This report found that a general lack of clarity (and especially a lack of information online) leads to many delays and makes the process more complicated than it seems.

Complexity: The process of starting a business in St. Louis can be very complex, sometimes requiring dozens of steps, numerous forms, and multiple business licenses.

Can we really say that St. Louis has an inviting business environment when the city fares so poorly in all three aspects? Lawmakers say they want more opportunities for entrepreneurs and options for consumers, but actions speak louder than words. St. Louis lawmakers should make the city more appealing for businesses by lowering fees and simplifying processes. Starting a business is expensive enough without the city requiring exorbitant fees. And the fact that there is very little access to information online seems like an outdated problem that unnecessarily complicates the process.

If we want more business in St. Louis, we need to have an environment in which businesses can thrive. If the barriers are too high from the beginning, we’re not going to see entrepreneurs and new businesses coming to our city.

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While taxes create a lot of adverse incentives, those in favor of tax cuts often predict that a tax cut will create incentives that have a positive effect on the economy. Companies and individuals certainly consider the tax climate when making major decisions (like where to locate or what to invest in). States and cities with lower tax rates may find that many of those decisions work out in their favor.

A recent Wall Street Journal opinion piece gives a few examples of how a cut to the federal corporate income tax changed behavior and seems to have increased corporate income tax revenue. The article notes that corporate income tax revenue is up 22 percent from the previous year for the first six months of 2022. Though there are other variables, the piece concludes, “Lowering the rates while broadening the base by eliminating loopholes created incentives for more efficient investment decisions that paid off for shareholders, workers, and the government.”

States and cities may see similar effects if they cut taxes—like the earnings tax in St. Louis City, as one example. The 1 percent income tax and 0.5 percent payroll tax in St. Louis City only apply to those who live or work within the city limits. This tax incentivizes businesses to locate outside the city, taking their money and their workers with them. It’s understandable why businesses react this way, but it doesn’t help a city that seems to be shrinking every day.

While a reduction or elimination of the earnings tax would be a blow to St. Louis City’s tax revenue, it’s likely that this tax cut would sway business decisions in the city’s favor. Businesses would be more willing to locate in the city now that they wouldn’t be effectively cutting their workers’ pay by 1 percent. After a while, revenue collected from new businesses and workers through other taxes could offset losses from the earnings tax.

Now, does a tax cut guarantee that a government will have more revenue? Of course not; there are many other factors that affect business decisions and tax revenue generation. But this is just some food for thought: lower taxes don’t necessarily mean less revenue.

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New options for Missouri consumers appeared to be under threat based on a bill currently in the Missouri House—but a recent change could fix serious problems with this proposal. House Bill 2138 seeks to establish Missouri as part of the Audiology and Speech-Language Pathology Interstate Compact. Joining the compact would allow for mutual license recognition between Missouri and other states in the compact for audiologists and speech-language pathologists. However, the original language of the bill seemed to allow this compact to nullify licensing reciprocity for this field, which was already established (for all occupational licenses) in 2020.

Licensing reciprocity vastly increased options for consumers by allowing licensed professionals from all other states to operate in Missouri without requiring an extensive relicensing process. If licensing reciprocity for audiologists and speech pathologists were nullified and replaced with an interstate compact, Missouri would only recognize licenses from states within the compact, not all states. This could result in significantly decreased options and higher prices for consumers. If you were looking for a speech-language pathologist to help with your child’s stutter, does it matter if their license originated in Colorado (a compact state) or Texas (a non-compact state)?

Fortunately, a positive change was made to the bill text. There is now language that appears to establish the compact while keeping reciprocity in place. This changes this bill from a step backward for consumers to a step forward for workers. If the legislature passes this bill (and that’s a big if) Missouri consumers will still have access to audiologists and speech-language pathologists in 50 states and Missouri licensees in these fields will now have access to customers in all the states within the compact. Increasing access creates more options for consumers and encourages competition, which lowers prices. Lawmakers made a good change to this bill; hopefully they can follow through and deliver on this legislation.

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A new study from the Institute for Justice finds that even though these things shouldn’t be the case, they are. Institute for Justice researchers studied 397 sunshine reviews (reports used by legislators that evaluate the need for new occupational regulations) from 15 states conducted from 1985 to 2017. They found that occupational licensing lobbies have driven the push for 84 percent of sunrise reviews and about 80 percent of these reviews declined to recommend licensing. What’s problematic is that legislators enacted licensing more often than recommended—twice as often as recommended in the reviews. These stats don’t instill confidence that occupational licenses were enacted to protect consumers, as is often claimed.

Missouri doesn’t require sunrise reviews and therefore wasn’t included in this study, but it does make one question whether Missouri’s occupational licenses were created under similar circumstances. Were Missouri’s various occupational licenses truly created to protect consumers? And are they still serving that purpose? We should have the answers to these questions.

A five-year sunset for all occupational licenses would give lawmakers new opportunities to assess the validity and necessity of occupational licenses. These licenses make it harder to get a job, which reduces supply and raises prices for consumers. Through a sunset process, unnecessary regulations (or even unnecessary licenses) that do not serve the purpose of protecting consumers can be identified and eliminated. A sunset provision would go a long way in supporting workers and consumers.

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As a reminder, states have the option of using stimulus funds to replenish their Unemployment Insurance Trust Fund. However, if the funds are replenished after April 1st, 2022, states will be subject to a maintenance of effort requirement for unemployment benefits through 2024. On its face, such language could limit the ability of states to take any action to reduce weekly unemployment benefits or reduce the number of weeks of benefits available until after 2024.

This is quite the string to attach. Who knows what the next two years will hold and whether states will want to adjust their unemployment benefits? There’s still time for lawmakers to act and avoid having their hands tied by this rule.

Read more about this issue here.

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Back in 2019, Institute researchers highlighted Fresh Start Act legislation that other states had passed before Missouri passed its own version the following year. The Fresh Start Act modifies occupational licensing regulations for workers with a criminal record to make it easier for the formerly incarcerated to find gainful employment.

What does that matter? Well, strict occupational licensing rules for those who have criminal records can make it harder for those with a checkered past to find work. Not only can that impede successful re-entry efforts, but it limits the supply of workers. The Fresh Start Act does not allow criminal records to disqualify an individual from receiving an occupational license unless the criminal conviction directly relates to the occupation (an individual with a conviction relating to children would not be able to obtain a teaching license, for example). But for the vast majority of former inmates, relaxing licensing rules is a good thing.

Licensing burdens are, of course, a problem for many seeking work, but those with criminal records are particularly at risk for being written out of entire sectors of the economy. State legislatures have started addressing this problem; since 2015, 38 states, including Missouri, have reformed their occupational licensing laws to make it easier for ex-offenders to find work in industries in which the state requires an occupational license to operate.

The Fresh Start Act may seem like a small thing, but for the formerly incarcerated, it could mean the world. More should be done on licensing in general—including the regular sunsetting of all licensing regimes —but this legislation was a good step.

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The image below outlines the four spending options and how they all change behavior.

Spending your money on yourself is when you economize (reduce expenses) and seek the highest value, as you are both the one losing the money and receiving the product. The exact opposite is spending someone else’s money on someone else. You don’t economize or seek high value because it is neither your money nor do you receive the product; you have very little invested in the decision.

Unfortunately, that’s the scenario that most closely resembles lawmakers spending stimulus money; it’s someone else’s money that they are spending on someone else. Of course, lawmakers are always spending someone else’s money in the form of tax dollars, but stimulus money is even farther removed because it doesn’t just come from their constituents.

This theory doesn’t paint a promising picture for spending the billions of stimulus dollars that Missouri received. Taxpayers do not want billions of dollars being spent in a way that is inefficient and wasteful. Lawmakers will need to be mindful of this incentive structure when deciding both what to spend these one-time funds on and whether to spend some of these funds at all.

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Apparently, the problems that led to the initial postponement of the project have been overcome as the plan for the $27 million development with retail, restaurant, and office space is moving forward. The land for the proposed development was only annexed into the City of Springfield in June 2021.

The obvious question is: Why would the city annex an area only to spend millions of taxpayer dollars subsidizing the development of the land?

I’ll admit that the area seems to be in pretty bad shape, so it may legitimately be considered “blight,” a designation that would qualify the project for TIF. (Blight designations for TIF projects are frequently not legitimate.) But there are other programs intended for environmental remediation that the land’s private owners could pursue that are much less harmful to taxpayers.

Economic development incentives such as TIF put taxpayers on the hook to increase private business profits. While passing this TIF proposal may make Springfield lawmakers look like they are “fixing” this eyesore, it’s at the expense of taxpayers. Lawmakers should focus on keeping tax rates low for everyone instead of playing favorites and artificially lowering them for a chosen few.

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Now House Bill 2138 seeks to establish Missouri as part of a licensure compact, which is an agreement between and among states that establishes mutual recognition of specific licenses and is overseen by a third-party regulatory group. This specific compact, the Audiology and Speech-Language Pathology Interstate Compact, would establish mutual license recognition for audiologists and speech-language pathologists in the 15 states in the compact.

There are two main benefits to joining a compact: licensed workers in other compact states can more easily relocate to your state, and licensed workers in your state can more easily relocate or expand their reach to other compact states. Missouri lawmakers have already provided an expanded version of the first benefit, but some Missourians could profit from the second point.

However, the current licensing reciprocity statute states that licensing reciprocity “shall not apply to an oversight body that has entered into a licensing compact with another state for the regulation of practice under the oversight body’s jurisdiction.”  On its face, this language indicates that the license compact would overrule licensing reciprocity to the injury of Missouri consumers.

Here’s another way to think about it. With Missouri’s current licensing reciprocity, Missouri consumers have access to professionals in 50 states and Missouri licensees have access to 1 state (Missouri). (Of course, they may have access to other states with reciprocity, but that is not controlled by Missouri lawmakers.) If Missouri were to enter the Audiology and Speech-Pathology Interstate Compact, it seems that consumers seeking audiology or speech pathology services would have access to professionals from only 16 states (the 15 in the compact plus Missouri), and Missouri licensees would have access to customers in 16 states. While this change gives a small benefit to licensees, Missouri consumers lose out.

Entering this compact with the current licensing statute in place would be a bad idea. Missourians benefit from reciprocity in many ways—reciprocity creates more options for various services, breeds more competition which lowers prices, and encourages businesses and entrepreneurs to move to Missouri, which makes the Show-Me State more prosperous. Because of this, entering a compact would be a step backward for regulatory policy in Missouri.

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