The Facebook page for Save The Historic Pevely Complex references numerous prior plans to rehab the complex using historic tax credits (emphasis mine):

The Pevely Dairy complex is on the National Register of Historic Places. Under our city’s preservation ordinance, such buildings should not be demolished if they are structurally stable and have rehabilitation potential. The Pevely buildings are both, as evidenced by the numerous plans to rehab them using historic tax credits prior to SLU’s purchasing the site in August 2011.

A search of the Missouri Accountability Portal and the Show-Me Living tax credit tool, however, indicates that no development tax credits have been issued to SLU for this project. Imagine that. A new development project in Saint Louis apparently not in need of state tax credits!

As discussed in my previous post on this topic, the goals of social progress and economic growth direct our attention to the future. While a healthy respect for the past is not a bad thing, given the current state of the city’s economy, a new ambulatory care center is more important than a brick smokestack and a declining building. The sentimental value of the Pevely site and its smokestack, while endearing, pales in comparison to the value of a modern medical facility to the Saint Louis community.

So let’s continue to train our sights on the future, and leave the image of the Pevely site to scrapbook photo montages and warm reminisces.

The post Putting Land To Productive Use appeared first on Show-Me Institute.

Begin by thinking of a pension fund as a pool of investments (like stocks, bonds, etc.) that are purchased from money that employers contribute. These contributions and investments hopefully grow enough over time to cover the future retirement benefits of retired employees. But when employers fail to remit sufficient contributions, and when investments do not grow fast enough, the amounts of money available to pay retirement benefits fall short of the promised benefits. When this occurs, you have an unfunded liability. And because we are discussing public pension funds (where the government is the employer) future taxpayers are on the hook for the unfunded liability. And a looming fiscal crisis ensues.

We have reviewed the most recent comprehensive annual financial reports of five large statewide public pension funds in Missouri. The unfunded liabilities of each are listed below:

Missouri State Employees Retirement System (MOSERS): $2.4 billion

Missouri Local Government Employees Retirement System (MOLAGERS): $900 million

Public School Retirement System (PSRS): $5 billion

Public Education Employee Retirement System (PEERS): $500 million

County Employees Retirement Fund (CERF): $130 million

That is a total of just under $9 billion in unfunded liabilities that we owe to current and future public retirees! That is $1,500 per man, woman, and child in Missouri. And this includes only five public pensions (while these are among the largest public pensions in Missouri, there are approximately 130 public funds at the local and state level). This debt exceeds Missouri’s total general revenue collections for fiscal year 2011 ($7.1 billion, see the table on page 10 of the governor’s fiscal year 2013 executive budget). Taxpayer, beware. How many of the remaining 125 pensions operate in the red and how much do we really owe after they are accounted for?

Now, of course, if the economy and stock markets recover, the picture improves somewhat. But not by as much as you may suppose. Stay tuned for further discussions on that point.

The post A Steaming Pile of Pension Debt appeared first on Show-Me Institute.

My post last week discussed a lawsuit between the Kansas City Public Schools and five suburban school districts regarding the implementation of the Turner decision. In a nutshell, Turner requires surrounding districts to enroll students who live in unaccredited (failing) school districts (i.e., the Saint Louis and Kansas City public schools and the Riverview Gardens School District). In effect, this is a limited school choice option under Missouri law.

Practically speaking, one issue is, how can the suburban districts in Kansas City and Saint Louis handle the potential influx of urban students? A recent survey estimates that approximately 13,500 students may flee Saint Louis schools for Saint Louis County under the Turner law. That is close to one quarter of school-age children in Saint Louis city. Pressure to abandon the Saint Louis public schools is apparently growing.

While it is easy to get caught up in the apparent chaos, why don’t we disengage for a second and reflect on the deeper issues; specifically, the failure of urban education in the Saint Louis and Kansas City public schools. Perhaps the Turner decision is a blessing of sorts, compelling both the legislature and the courts to address head-on comprehensive school reform, not only for our urban districts, but for all districts in Missouri.

Teacher tenure reform, collective bargaining, charter school expansion, school closure, and expanded school choice are on the table. The legislative session is just beginning to heat up. Perhaps Turner was merely the first act in an unfolding multi-act drama. If so, the script should promote an increase in accountability for teachers and school districts, and an expansion of school choice, including choice of private and parochial schools for students in failing public schools.

The post School Reform: Have We Reached The Boiling Point? appeared first on Show-Me Institute.

But let’s not get bogged down in the legal details here. Instead, notice how the law represents one giant step for students, yet one small step for Missouri school choice (my apologies to Neil Armstrong). Why is this so?

First, under the law, the unaccredited status of a school district triggers the right to school choice. While this is fine as far as it goes, what about students who suffer academically in failing schools in accredited districts? If the evil to be remedied is students victimized by failing schools, then the law should target all failing schools, not merely schools in unaccredited districts.

Second, the Missouri law limits transfers to other public schools in close proximity. Why not extend school choice to any public or private school in the state of Missouri? In this way, students will have greater choice, and increased opportunities, to reach their dreams and to receive a first-class education. Ask yourself: Why not?

The post Clumsily Lurching Towards Comprehensive School Choice In Missouri? appeared first on Show-Me Institute.

In its effort to change the business climate in Missouri, the Missouri Chamber of Commerce and Industry has identified three broad policy initiatives for the current legislative session. According to Chamber president Daniel Mehan:

“Among the list are issues left unresolved last legislative session that will be advocatied (sic) by Missouri’s top business associations and employers: workers’ compensation reform, employment law, and tort reform,” Mehan says.

Within the context of these broader policy initiatives, the following topics are among the most important issues the Chamber addressed. As briefly discussed below, each deserves careful consideration as a reform measure that can foster economic growth in Missouri.

1. Making Missouri employment discrimination law consistent with federal law. Businesses face confusing and parallel obligations under federal and state laws. Making Missouri law consistent with federal law reduces confusion and lowers compliance costs for businesses, which in turn lowers the cost of doing business in Missouri. Consumers and businesses then share the benefits of lower costs.
2. Capping damages in employment discrimination cases. Caps make future business costs more certain and predictable. Although the plaintiffs’ bar does not favor this idea, no one is closing the doors to the courthouse. Policymakers should carefully weigh the benefits and costs and make the decision that best advances business competitiveness and the administration of justice.
3. Exempting co-employees from liability for injuries sustained in workers’ compensation cases. Currently, employees injured by co-employees at work may sue the latter for damages outside the workers’ compensation system. This gives rise to costly disputes among employees, disruptions in the workplace, and an increase in employer costs (not always monetary). Also, multiple lawsuits for the same injury may occur as the injured employee sues both his employer in workers’ comp and his co-employee in circuit court. Time, money, and effort may be economized by requiring injured employees to maintain a single suit in a workers’ comp venue.

Again, these are but a sample of current issues impacting the business climate in Missouri. These issues are important in that each imposes additional costs on businesses in Missouri. As a result, consumers and households may suffer because they will face higher prices, fewer goods, and lower employment. Remember, we are all in this together, despite what some others may say or imply. Isn’t it possible that sometimes what is good for business is good for the people?

The post Helping Business Help Us appeared first on Show-Me Institute.

The St. Louis Post-Dispatch recently reported the St. Louis Preservation Board’s denial of a demolition permit to Saint Louis University (SLU) to raze the vacant Pevely Dairy headquarters building at the corner of Chouteau Ave. and South Grand Blvd. (you probably recall the Pevely smokestack). SLU officials intend to build a surgical center at the site, but now claim that the historic building may scuttle their plans if the building is not leveled and removed.

Before moving on to more pressing matters, perhaps a brief review of the tax implications is in order. Saint Louis public records indicate that the two parcels in question (1001 South Grand Blvd. and 3626 Chouteau Ave.) generate approximately $93,000 in annual property tax revenues for the city. See here and here. The future tax status of the properties, however, is uncertain (I called SLU’s controller, Gregory Haney, but he declined to express his opinion or share his knowledge on the subject). If the properties fall under SLU’s non-profit status, then SLU may be tax-exempt (similar to SLU’s 200 North Grand property). On the other hand, if property ownership vests in a for-profit entity, similar to Tenet Health System’s ownership of property underlying Saint Louis University Hospital, then taxes will likely be assessed and collected.

In either case, the city still stands to gain revenues if the surgical center is developed. This would arise from earnings taxes on new jobs created at the facility (although we have advocated for the elimination of the earnings tax and for alternative payments in lieu of taxes from tax-exempt non-profits, this blog post deals with the facts and law as they currently exist). For the sake of example, at 1 percent on taxable earnings, 124 jobs at $75,000 annual salary generates $93,000 in revenues, which compensates for the loss of property tax revenues under the tax-exempt scenario, but provides additional incremental revenues to the city under the alternative scenario. In either case, both the economy and the tax base are increased, which is a good thing.

While the tax implications are interesting, perhaps the more fundamental question is why are preservationists so insistent on saving the aging Pevely headquarters building? The history of progress is replete with tear-downs and rebuilds. Progress necessarily implies creative destruction, replacing old with new. Sometimes you have to let go of the past if you are to embrace the future. The past is but a distant memory. Happiness, prosperity, and success are forward-looking concepts that reside, if at all, in the future. Saint Louis, embrace the future, not the past. The Preservation Board should reconsider its decision.

The post When Progress and Preservation Collide appeared first on Show-Me Institute.

Now, legal plunder can be committed in an infinite number of ways. Thus we have an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on. All these plans as a whole — with their common aim of legal plunder — constitute socialism.

Provocative enough for your tastes? Do you vehemently disagree? Is Bastiat a kook? Come join us for spirited discussion and snacks this Wednesday; Bastiat is our topic.

The Show-Me Institute’s Book Club meets the second Wednesday of each month at our headquarters, located at 4512 West Pine Blvd. in the Central West End. Meetings begin at 7 p.m. and typically last until 8:30 or so. See link for more information. 

Please bring a friend. Hope to see you there.

The post Show-Me Institute Book Club: Join Us This Wednesday appeared first on Show-Me Institute.

The post Sometimes Old Law Is Good Law appeared first on Show-Me Institute.

The city has issued an average of $35.4 million in permits per month since the tornado. Before the tornado, the city averaged just over $2.1 million a month in building permits.

Despite this evidence of a robust private market, the Missouri Housing Development Commission has:

. . . committed about $100 million in tax credits and loans over the coming decade to spark the construction of low-to-moderate income rental units and single-family, owner-occupied homes in the Joplin area.

[A] Sept. 30 revision of the federal wage rules significantly increased those amounts. For example, the federal prevailing wage for a carpenter in the Joplin area rose from $7.98 an hour to $21.47 an hour plus $12.65 in benefits. The federal prevailing wage for a roofer in the Joplin area rose from $7.25 an hour, which matches the general federal minimum wage, to $21.30 an hour plus $8.08 in benefits.

The post Special Interests Inhibiting Joplin’s Recovery? appeared first on Show-Me Institute.

In its opinion leading to the supreme court hearing, the intermediate court of appeals noted the following:

. . . no Missouri court has expressly interpreted Article I, section 29 [of the Missouri Constitution] to contain a duty of good faith . . .

If the Court, in a fit of judicial activism, writes a “duty to bargain in good faith” standard into the state constitution, school districts, once vested with substantial discretion from the legislature to manage their affairs, will suffer tremendously. For example, rejections of union proposals will now spawn threats of lawsuits. Districts will hire attorneys to assess the liability risks of decisions once left to the discretion of the districts’ officials. Good faith, in this context, is an invitation to litigate. And litigation diverts scarce resources and money from the districts’ core mission: to educate our children.

Interestingly, the Missouri Legislature has rejected five attempts to statutorily adopt a good faith standard (see footnote 4 in court’s decision). Haven’t the people spoken through their elected representatives? The Court should heed this message and reject a duty to bargain in good faith standard for Missouri’s public school districts.

The post Good Faith – Bad Result appeared first on Show-Me Institute.

As a long-time teacher of economics in Missouri, I believe that Hayek’s words are just as apt today as they were 50 years ago. Here we live in a country that has been singularly successful both in creating material prosperity and enabling more and more people to enjoy the blessings of “life, liberty, and the pursuit of happiness.” Yet despite this unrivaled record of success, many of those entrusted with the education of our children regard capitalism, the engine of the nation’s prosperity, not as something to be celebrated, but as something deplorable or shameful.

I have seen first-hand how an aversion to free markets, competition, and economic logic permeates our classrooms. To cite one example, a good friend of mine once invited a professor of education to collaborate in designing a summer curriculum on entrepreneurship for disadvantaged youth in Saint Louis. The professor, a prominent member of his university’s college of education, was aghast. He told my friend that entrepreneurship is the very antithesis of education and the teaching of good citizenship. And over the past 12 years, that is the world view that he has inculcated in hundreds if not thousands of future teachers at all levels of education.

Consider the daughter of my friend. Her teacher, while discussing the environment and the spotted owl, denounced the meat and fur industries. The daughter, parroting her teacher, told her mother that the government should ban both industries. Noticing the obvious slant to the curriculum, mom challenged her daughter to compare the benefits and costs, including the loss of jobs and income. Daughter, resorting to ideological labels in lieu of reasoned response (a sure sign of educational neglect), declared her mother a “capitalist pig.”

Why this bias? Could it be that educators identify entrepreneurial free markets as win-lose zero sum confrontations? One’s gain must be another’s loss? Perhaps they imagine the violent overthrow of kind cooperation in favor of brutal aggression and profit. Self-esteem is sacrificed to the survival of the fittest. The very thought, however fanciful, rattles the nerves of educators.

Market competition, in fact, brings people together through voluntary exchange. You satisfy your own needs by discovering ways to satisfy the needs of others. This evolution from self-sufficient individuals to interdependent beings elevates social cooperation from a generous impulse to the essential linchpin supporting our means of survival. This should warm the hearts of educators everywhere.

Now consider what happens when governments replace entrepreneurs in picking the winners and losers. For example, analyze the multitude of tax credits that Missouri government gives away to insiders with lobbyists. Here, taxpayers are coerced into financing the Taj Mahals of wellconnected developers. Far from a cooperative game of willing participants, this is favoritism for the few, which eliminates competition and promotes waste.

Competition and free markets are the best assurances of social cooperation and peaceful coexistence. That is what we should be teaching our children. Even more, it is what we should be teaching our teachers.

Gregory Aubuchon is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri Public Policy.

The post Reappraising – and Praising – Capitalism appeared first on Show-Me Institute.

Questions to ponder if you dare:

Did Hamilton, Madison, and Jay overestimate the soundness of the federal design when advocating for the adoption of the U.S. Constitution? Why did Frederic Bastiat carry such a negative view of morality, law, and government? Has our federal government succumbed to many, if not most, of the corrosive influences Bastiat identified as likely to corrupt civil society?

Please join us for a lively discussion of life, liberty, and the pursuit of happiness. You may email the Book Club at bookclub@showmeinstitute.org. RSVPs are appreciated.

The post Did Hamilton, Madison, and Jay Overstate Their Case for Adopting the U.S. Constitution? appeared first on Show-Me Institute.

Kansas City recently began investigating its pension systems. You may access our previous coverage here and here. Recently, outside consultants to its Pension System Task Force recommended that taxpayers pony up an additional $23 million per year “to make the city’s pension funds more financially stable.” Apparently, the city may now make current and future taxpayers pay for the sins of prior administrations. They are passing the buck onto future generations of taxpayers and their children.

Perhaps greater Missouri should pay heed. According to the Cato Institute’s recent work, Missouri’s public pension plans are grossly under-funded when accounting for reasonable expectations of future economic conditions. Think about the impact this may have on the tens of thousands of state employees and retirees and their families, if and when they are unable to support themselves on their broken pensions. They deserve better. Taxpayers have reason for concern as well. Ultimately, the state loses credibility when it breaks its promises. And under that scenario, everyone is a loser.

Kansas City and Missouri are far from alone. WLBT TV-3 out of Jackson, Mississippi, reports that the state pension fund, the Public Employees Retirement System (PERS), is now guided by a 12-member commission. The commission is empowered to:

…examine the financial, management and investment structures as well as determining the legality of modifying the system. All in an effort to dodge a potential problem in the long run.

Mississippi Gov. Haley Barbour notes that PERS is funded at only 60 percent of where it should be and pays out benefits that exceed its structural limits. Kudos to Mississippi for beginning the discussion on sustainability and reform.

Fortunately, some of our sister states have gone pro-active, confronting the looming crisis. The Center for State & Local Government Excellence has just released a study of five successful pension reforms in Iowa; Oregon; Vermont; Gwinnett County, Georgia; and Houston, Texas. Although not perfect, these reform efforts provide some hope that pension stakeholders can meet and iron out their differences. Here’s hoping that Missouri joins the party before midnight strikes. Better late to the party than dead broke on the outside looking in.

The post Missouri’s Ticking Pension Time Bomb? Will the Money be There? appeared first on Show-Me Institute.

While many states and cities are altering their defined benefit plans because of money woes, Kim doesn’t sound that worried.

•Kansas City task force chairman Herb Kohn has said the city should aim to have its pension systems funded at 90 to 100 percent. As of 2010, though, three systems were under 80 percent, a far cry from the 96 percent average in 2002.

Kim isn’t nearly that aggressive.

In May, when talking about the 78 percent funding average for state pension plans, Kim said that “78 percent is a number we’re very comfortable with.” In fact, he has indicated that a 70 percent level is fine, too, because Fitch Ratings considers that adequate.

Counterpoint: The Government Accountability Office calls for at least an 80 percent funding level. So do many pension managers.

Kansas City taxpayers deserve honest answers to a host of questions, not least of which is whether the city’s pension managers have adopted a reasonable discount rate in determining the current funding levels needed to sustain future payouts to retirees and their families. In today’s uncertain financial environment, is an 80 percent funded level benchmark reasonable? Should the pension systems continue to assume historical market return averages of 8 percent when determining current funding levels? If one were to substitute a more reasonable rate, given market performance over the last decade, of say 4 percent, then the degree to which the systems are currently underfunded grows.

Our children deserve our immediate attention to this matter. Missouri currently has approximately 130 state and local public pension plans.  What assurances are there that these are solvent in the mid- to long-term? Of course, one may counter, the systems are audited under the law. But so was Enron!

You may trust, but first verify.

The post Kansas City’s Continuing Fight for Pension Sustainability appeared first on Show-Me Institute.

City Manager Troy Schulte was appropriately blunt recently discussing Kansas City’s troubled pension system. He proposed good changes that could affect thousands of current and future city employees, while saving taxpayer dollars along the way.

“I don’t think our pension system is sustainable in the current structure,” Schulte told [the Pension System Task Force] evaluating the city’s retirement programs. The panel, which meets again today, should pay close attention to his recommendations.

The Task Force is presently comparing its systems (police, firefighters, and city employee systems) to those of a peer group of eight cities, including Oklahoma City, Denver, and Minneapolis.  And what are some of the preliminary findings? First, Kansas City taxpayers contribute an amount equal to 12.88 percent of a civilian employee’s salary towards his/her pension plan. This contribution rate is greater than rates in each of the peer group cities.

Second, the cost of living adjustment for retirees is three percent per year, higher than six of eight peer cities. Finally, the two percent per year multiplier is greater than those in seven of eight peer cities. Thus, retirees with 30 years of service receive 60 percent of their final average pay upon retirement.  In Indianapolis, by comparison, a retiree would only be entitled to 30 percent, based on a one percent per year multiplier.

While Kansas City’s self-analysis is fine so far as it goes, greater Missouri has approximately 130 government employee pension programs, ranging in size from the gargantuan Missouri State Employees’ Retirement System to the relatively miniscule Antonia Fire Protection District Pension Plan.  That’s right, 130!

Perhaps Kansas City is not alone, as the entire state of Missouri could be sitting on a pension time bomb.

Because public pensions are largely funded by Missouri taxpayers, taxpayers and their elected representatives need to address numerous issues in an open forum.  For example, are present and future liabilities underfunded, and if so by how much? Will future shortfalls be funded in the form of taxpayer legacy costs (i.e., future tax increases), by increased employee contributions, or by some combination of both? Should we begin now to require government employees to contribute to their pensions from current wages, thus tamping the insatiable demand for increased future benefits that arises when pension beneficiaries are not required to bear the costs? Have the managers of these pension funds reasonably estimated future portfolio returns, thus assuring that today’s contributions adequately support tomorrow’s payouts?

One may easily imagine a host of further questions that need to be asked.  That dialogue should occur soon, before time runs out.

The post Kansas City: Grabbing the Pension Bull by the Horns? appeared first on Show-Me Institute.

The St. Charles County Council voted on July 25 to require a doctor’s prescription when purchasing cold and allergy medications that contain pseudophedrine. Unfortunately, the ordinance imprudently inserts doctors into meth makers’ raw material supply chains. It is difficult to imagine, much less believe, that this ordinance will effectively diminish meth production in Missouri. With a sufficient profit motive, meth makers will seek out alternative arrangements for the procurement of pseudophedrine, perhaps by recruiting doctors as critical prescription suppliers.

In essence, the ordinance will turn otherwise law-abiding doctors into accessories to crime, unwittingly or not. Some will no doubt embrace the temptation to write fraudulent prescriptions, thereby corrupting the practice of medicine.

But this is only the tip of the iceberg. With the resulting increase in the demand for prescriptions, the ordinance further taxes an already over-burdened medical reimbursement insurance system. In an era when concerns for healthcare costs predominate, why should St. Charles County compound the problem by dumping a multitude of cold and allergy sufferers onto the bloated calendars of busy doctors?

And what about consumers? Certainly, the monetary and inconvenience costs of traveling to — and paying for — doctor’s visits and the time exhausted circumventing the ordinance by purchasing medications in non-regulated jurisdictions are substantial. The St. Charles County Council has voted, in effect, to shift meth-related law enforcement costs onto the backs of innocent cold and allergy sufferers.

This cost shift acts much like a tax on the purchase and consumption of cold and allergy medications. As with a tax, the “effective” price for these medications rises for consumers. Similar to a tax, the result is a deadweight loss as consumers ultimately consume less than the optimal amount of medications.

Seriously, is the real purpose of the “prescription mandate” to engineer a local law enforcement database to better monitor the activities of private citizens? If so, shouldn’t someone conduct a detailed cost-benefit analysis comparing the expected benefits with the known costs? After all, pharmacists are already required to request and to enter personal information into a database tracking consumers of pseudophedrine-based medications.

And what can be done to alleviate the competitive disadvantages and inherent inequities dogging those pharmacies who happen to be located wholly within a prescription mandate jurisdiction? They will certainly lose business to competitors fortunate enough to be situated in non-mandate counties and municipalities. Although a statewide mandate would address this latter concern, it nevertheless would still give rise to the corruption of medicine and tax-imposed deadweight losses, as discussed above.

The war against meth is not a free task. The costs associated must ultimately be borne by taxpayers. The issue is whether the selected means for conducting that war are wise and efficient, implying that all costs and benefits have been carefully weighed and compared.

The post Paging Doctor Meth appeared first on Show-Me Institute.