The Kansas City Star Is Right

Posted on by Patrick Ishmael

A recent Kansas City Star piece excoriated the Missouri Senate for its behavior and failure in the recently concluded legislative session. I’ve certainly had my share of disagreements with the Star, but the Star is absolutely right about what our state Senators failed to understand in 2022—that “not doing bad things” isn’t quite the same as “doing good things.” From the Star:

Senators are not inherently wiser, or more patient, or more knowledgeable than their House counterparts. In a tweet Friday, state Sen. Lauren Arthur of Kansas City, a Democrat, defended the institution. “The Senate was designed to make it difficult to pass legislation,” she said.

Yet Arthur and her colleagues were unable to prevent the grotesque violation of Kansas Citians’ rights when the General Assembly imposed a 25% floor on police spending in its final day.

If your only goal is to prevent bad stuff, rather than pursue good stuff, failure can resemble success. But it’s still failure. [Emphasis mine]

Nebraska has a one-house state legislature. Perhaps the people skilled at gathering petition signatures can pursue a smaller Missouri General Assembly in 2023.

The Star is right about the philosophical importance of pursuing, and following through on “good stuff,” though I might disagree about what that “good stuff” would be. But for example, high among the alleged priorities of the state Senate leadership was passing a Parents’ Bill of Rights, and that priority was decidedly and bizarrely ignored throughout the session.

The Senate’s bias against its own priorities—debating key legislation last rather than first, and thus always risking its failure—isn’t new. Missouri voters have sent supermajorities to the House and Senate for a reason; it is not reasonable for the legislature to fail so emphatically and so often in enacting the reforms their constituents demand. In that, I agree with the Star.

Now, I’m not prepared to agree with the Star that Missouri should abolish the Senate entirely and adopt Nebraska’s unicameral legislature. But get back to me next year; maybe another year of failure will persuade me.

Tax Burden in Missouri’s 20 Largest Cities

Posted on by Corianna Baier

What do residents in Missouri’s largest cities pay in taxes, and what do they get for their money? This report explores these questions, breaking down various tax rates in each of the 20 cities examined in the context of the services provided to residents. Also provided is information about the fiscal soundness of each city (including pension obligations) as well as the amount of revenue each city gives up in tax abatements.

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.

The Price of Starting a Business in St. Louis

Posted on by Corianna Baier

Would you want to open a restaurant in a city that requires 35 steps, multiple licenses, and $3,750 in fees just to get started? That’s what researchers from the Institute for Justice found it takes to open a restaurant in St. Louis. Does that sound like an inviting business environment to you?

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.

Better Late than Never

Posted on by Susan Pendergrass

With just one day left in the session, the Missouri Legislature is on the verge of finally making it easier for Missouri families to choose charter schools and virtual education. By an overwhelming vote of 119 to 26, House Bill 1552 is now Truly Agreed (the House has approved Senate changes) and will be sent to the governor’s desk.

This bill will broaden choices for Missouri parents in two ways. First, it fixes the funding glitch for charter school students in Kansas City and elsewhere. Because more families in Kansas City have chosen charter schools than traditional public schools, Kansas City Public Schools (KCPS) doesn’t receive enough state funding to cover what’s owed to the charter schools. This bill fixes that by having the state make up the difference. It also ensures that charter school students have access to the same sources of local funding as students who choose their neighborhood school.

Secondly, this bill improves the way full-time virtual students in the Missouri Course Access Program (MOCAP) are treated. And it ensures that schools and districts stay out of the way of families that choose this option for their children. Full-time virtual providers will now be considered their own attendance centers and report student test scores instead of being part of a local district.

Tens of thousands of Missouri families are already choosing charter schools and MOCAP. These children shouldn’t be treated as second-class citizens just because their assigned public school doesn’t work for them. Fortunately, the Missouri Legislature has agreed.

Pittsburgh, Poster Child for Sloppy Housing Policy

Posted on by Patrick Ishmael

In the weeks and months ahead, researchers at the Show-Me Institute will be taking a closer look at housing policies in Missouri, with a particular emphasis on the low-income housing tax credit (LIHTC) program. Readers of this blog are familiar with common objections —LIHTC is expensive, doesn’t live up to its promises, and is mainly a sop to developers—but Institute researchers haven’t spent as much time on the broader subject the LIHTC program supposedly addresses, housing supply and affordability. The question of housing affordability is an enormously important one and deserves more attention, especially during a period of rampant inflation.

Some policymakers are starting to deal with the challenge of housing inflation thoughtfully. But some cities, like Pittsburgh, are adopting half-baked (but trendy) policies from elsewhere to solve a problem that, practically speaking, may not exist locally. As reported in the Wall Street Journal:

On Monday the mayor signed an ordinance . . . to expand the city’s inclusionary zoning requirements. Developers building 20 or more units in the gentrifying Bloomfield and Polish Hill neighborhoods will have to set aside at least 10% for affordable housing. Under the rules, a designated studio apartment could rent for no more than $742 a month, though the average rent for one is $1,300 in Pittsburgh, according to the housing search website Rent.com. . . .

[I]nclusionary zoning forces developers to set aside affordable housing whether or not they receive government incentives, so “the other 90% of the units have to subsidize that cost,” Mr. Eichenlaub says. “They are making the developer and the owners of those units, or renters, absorb those costs. Effectively, it’s a tax on housing.”

And when you tax something, you get less of it. Portland, Ore., introduced inclusionary zoning in 2017. Permits for residential buildings with 20 or more units plummeted 64% in 25 months as developers went smaller to get around the mandate. The nonprofit Up for Growth concluded that “rather than increasing the number of affordable units,” the zoning scheme “appears to be diminishing the supply of housing at nearly all income levels.” [Emphasis mine]

My colleague Elias Tsapelas has done, and continues to do, outstanding work digging into LIHTC. The Pittsburgh “inclusionary zoning” mandate is the same sort of government burden as the LIHTC, minus the incentives. As the Wall Street Journal editorial board astutely observes, Pittsburgh’s newly mandated costs are likely to metastasize not only into higher housing prices for other renters and owners, but also into overall housing supply degradations.

But Pittsburgh’s housing policy change is notable for another reason: by one prominent metric, the city is the only major metropolitan area in America that doesn’t appear to have an affordability problem. Wendell Cox is a prominent researcher on the issue of housing affordability, and he has published his “median multiple” index for many years now, ranking metropolitan areas worldwide based on how affordable their housing markets are. His 2022 edition of the index is illuminating, not only for the other findings (which I’ll get into in another blog post) but especially for Pittsburgh—which now ranks as the only purely “affordable” housing market in the United States. In other words, Pittsburgh is trying to fix a problem it doesn’t really have.

My colleagues and I will pull apart why housing costs can be artificially inflated by government interventions and why those interventions can nonetheless be politically popular, but Pittsburgh stands as a cautionary tale that Kansas City and St. Louis policymakers must be aware of and must refuse to emulate. There are numerous reasons that housing costs have risen nationally, and the solution to that challenge is neither simple nor monolithic. In its case, Pittsburgh should go back to the drawing board and ensure it isn’t about to create a problem that doesn’t meaningfully exist. Yet.

Inflation in America: The Role of the Fed and the Risk of Recession

Posted on by Aaron Hedlund

On May 10, 2022, Aaron Hedlund, chief economist at the Show-Me Institute, and Tyler Goodspeed, Kleinheinz Fellow at the Hoover Institution at Stanford University, discussed the impact of decades-high inflation on the economy, workers, and consumers, as well as the role of the Federal Reserve in solving the problem and the risk of the next recession.

Listen to the podcast:

Listen on Apple Podcasts 

Listen on Sticher 

Listen on SoundCloud

 

Missouri Missing Telemedicine Opportunity

Posted on by Elias Tsapelas

Time’s running out on this year’s session, and Missouri’s legislature has yet to act to preserve key telemedicine reforms. A few months ago, I wrote about the regulatory and statutory changes needed to keep the telemedicine momentum going, and I even expressed optimism that one of the many bills filed on the topic would make it across the finish line. In the weeks that followed, those bills appear to have lost traction (along with many other legislative priorities). With just a few days left before legislators head home for the year, time is of the essence if our elected officials want to avoid missing this golden opportunity.

There haven’t been many silver linings to the COVID-19 pandemic, but one is the rapid growth of telemedicine services. Of course, the ability to see your healthcare provider from the comfort of your own home was available prior to 2020, but various laws and regulations kept the service from becoming a popular option. But once the pandemic began and most of the unnecessary barriers were waived as part of Missouri’s response to the virus, the service surged in popularity.

Now that the pandemic is receding and telemedicine is much more popular, Missouri’s legislature needs to act to allow the service’s growth to continue.  As I wrote a few months ago, state statutes need to be changed to allow health care providers to more easily write prescriptions for patients they’ve seen remotely. It should also be easier to establish a doctor–patient relationship remotely. While telemedicine may not be the answer to every health problem, it’s clear the service provides tremendous value in many circumstances, and government should not stand in the way.

As we near the end of the 2022 legislative session, lawmakers now face the tough task of deciding which bills will or won’t make the cut this year. I hope our elected officials act on what was learned over the past two years (besides how to spend more taxpayer money than ever before) and permanently enshrine the COVID-era telemedicine access provisions into law.

Death on the Vine in Jeff City

Posted on by David Stokes

Every legislative session, there is plenty of bad legislation introduced. But each year, there often seems to be a few especially terrible pieces of legislation that stand out.

Perhaps the thing that makes bad legislation into terrible legislation is when legislators try to implement programs that have clearly proven to be failures elsewhere (or previously). This is exactly the case for a few bills I have been following closely that seem close to passing this year.

There are many poorly designed tax credit and subsidy plans. Out of all of them, film tax credit programs are among the most studied, probably because of their more high-profile nature. People find films to be more interesting than soybeans, I guess. Those studies are clear in their conclusions: film tax credits do not succeed in growing the economy and do not generate the tax revenues to justify the subsidies. Missouri used to have a film tax credit program and we removed it—how often does that happen?—because it was clear it was not working. Yet, once more, there is legislation moving to reinstate a failed program. Why in heaven should Missourians pay millions of dollars to watch Ben Affleck drink coffee on Main Street for a few days? Missouri is better off without film tax credits. If the people of Georgia or California want to subsidize the shows and movies we watch, go ahead and let them. (Related bills are SB 961 & SB 732, primarily SB 961 at this point.)

Closely related to the zombie-like film tax credit program is the proposed Entertainment Industry Jobs Tax Credit that will provide tax subsidies for businesses that provide rehearsal and touring studios in Missouri. This entire program is aimed at one new company opening in Chesterfield, one that has already received other state and county tax subsidies. Apparently, that is not enough, as this proposal would have taxpayers further fund this new studio and entertainment center. It is simply awful policy for the state to decide that this particular type of business deserves a subsidy as opposed to a thousand other types of businesses. Taxes should pay for public goods such as parks, police, and transportation. There are other public goods, too, but however you define it, a private recording studio doesn’t make the cut. A new business coming to Missouri and, first and foremost, investing in a massive lobbying effort to get taxpayers to fund its operations represents everything that is wrong with our current system. (Related bills are SB 961 & SB 733, primarily SB 961 at this point.)

Another program that has consistently failed in Missouri is land banks. Show-Me Institute researchers produced significant work years ago on how the St. Louis land bank succeeded in accumulating property, not disposing of it (as was the plan), and empowered local politicians further by politicizing the land bank decisions. When Kansas City wanted to institute a land bank, Institute analysts warned those failures would be repeated there. According to investigative reports by the Kansas City Star, that is precisely what happened. The Kansas City land bank has favored local politicians at the expense of local communities, among many other problems. Despite that record, there are bills to now allow any city or county in the state to institute a land bank. This bill would empower local governments to proactively seize or purchase private property under the guise of assisting development. This would be highly troubling even if land banks had a successful track record, but the track record is terrible in St. Louis and Kansas City. (Related bills are HB 2177, SB 1089, and SB 724, primarily HB 2177 and SB 724 at this point.)

In government, nothing succeeds like failure. There is nothing quite as frustrating as watching legislators—many of whom would consider themselves supporters of limited government—trying to pass bills that propose policies with a proven record of failure.

I like a nice vineyard and a good glass of wine as much as anyone, but for these spoiled grapes, I’m hoping they all die on the vine in the last week of the session.

The Kansas-Missouri Border War Isn’t Over

Posted on by David Stokes

A version of this op-ed was published in the Columbia Missourian.

Missouri and Kansas are no strangers to border conflict. No, we’re not talking about the chaos that inspired ‘The Outlaw Josey Wales.’ The fear today is over cross-border job poachers. However, that doesn’t justify giving Fidelity Security Life Insurance $12.7 million just to stay in Kansas City. No one gets a gold medal in a race to the bottom — but politicians will waste endless taxpayer dollars trying to tell you that they’re ‘winning.’

Fidelity’s new headquarters — less than a mile from its current home — will be luxurious. The real estate is the most desirable in metro area, overlooking greenspaces in Penn Valley Park and Union Cemetery and sitting on a “transit node” of the expanded streetcar route. One-third of the office space will be rented out at the highest price in the area — more than double the average rate for Class A office space. The building will use less than half of the site, allowing for another high-rise in the future.

But should the public fund a project that overwhelmingly benefits one company? What if the company would likely be successful without subsidies? And why do local leaders even consider subsidizing these kinds of projects?

The answer won’t surprise you: it’s just a sad symptom of the larger problem exemplified by border-hopping businesses. Kansas City politicians might have worried that if they didn’t offer subsidies, Fidelity could be stolen by a suburb, much like how they nearly poached Waddel & Reed from Overland Park, Kansas.

There have been hopeful signs that everyone is tiring of these border wars. In 2019 and 2020, city and state leaders took the first steps to limit the misuse of subsidies. The two state governors agreed to end subsidies that lure businesses across the state line, and then Kansas City reduced its own subsidy program to mirror that offered by Kansas suburbs. More, however, remains to be done.

Denver offers a good example of how to escape metropolitan economic warfare. Since 1987, the mayors of municipalities around the city have met every month to ensure they are cooperating on shared economic growth, rather than undercutting each other.

Moving forward with similar ideas along the Missouri-Kansas border is important for multiple reasons.

First, subsidies generally harm the local economy. Every dollar spent on a subsidy is one that can’t be spent on social services or broad-based tax cuts for all businesses. This creates a negative economic impact that rarely outweighs the projected benefits of the subsidized project. Worse, only one-in-eight subsidies is material in changing a company’s decision of where to locate or expand, as Kansas City recently discovered with BlueScope Construction’s vacuous threat to relocate to Kansas. That means most subsidy spending is a waste.

Second, Missouri’s and Kansas’ existing subsidy reforms are tenuous and temporary. Kansas’ participation in the truce relies on an executive order, meaning it’s only as durable as the next governor’s goodwill. Missouri’s olive branch is a bit sturdier, since it was implemented through statute, but the law expires in 2025. Plus, while the agreement has limited the subsidies local governments can offer, it does not eliminate them entirely.

Third, this is a national problem. State and local governments waste $100 billion every year in an anti-growth competition over jobs. However, a growing coalition of policymakers is working to develop an interstate compact — a more sophisticated and durable version of Missouri’s and Kansas’ “gentlemen’s agreement” — that would provide a sustainable solution.

Both states have a good reason to join in, because without a more holistic and permanent agreement, the border war is almost certain to restart.

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