Page 126 – Show-Me Institute

Movement on TIF Bill

Posted on January 28, 2022January 13, 2026 by Corianna Baier

There’s potential for tax-increment financing (TIF) reform this legislative session. My colleague David Stokes and I recently submitted testimony for a hearing on House Bill 1598 (HB 1598). In general, TIF takes tax revenue normally collected by taxing districts and municipalities and diverts it to developers. HB 1598 addresses one troubling consequence of TIF by requiring that local elected officials vote to approve the diversion of dedicated public safety taxes to subsidize TIF-related projects.

Taxing districts such as school districts and emergency service districts lose out on tax revenue along with cities when TIF projects are implemented. However, these taxing districts have very limited say, if any, in the overall process. This imbalance can have disastrous effects, especially when TIF is used for projects with a residential component. Residential developments can add dozens of new families to cities and thereby require increased spending on public safety measures, yet TIF can mean that public-safety providers do not receive any increase in tax dollars to account for these new families. (The impact of residential TIFs can be even more dramatic on school districts—SB 874 is a bill that proposes a similar measure for school districts.)

HB 1598 would be a step toward fixing some of the harms caused by TIF. The House Local Government Committee held a public hearing on this bill, and I’m interested to see if this bill picks up momentum during the legislative session. More taxes should be exempt from TIF, and greater reforms are needed to limit the negative effects that this economic development incentive can have on Missourians.

Missouri Needs More Free Market Activity in Electric Transmission, Not Less

Posted on January 27, 2022January 13, 2026 by Jakob Puckett

Two bills currently being considered in the Missouri Legislature would make building electric transmission lines more expensive and less competitive, leading to higher electric bills for Missourians.

Electric transmission lines carry electricity from power plants to your home or business. Too much electricity on a line increases the risk of frying a line, and as I’ve written before, several parts of Missouri have overloaded transmission lines already.

More transmission will need to be built, but these bills take the wrong approach to building more transmission lines.

The bills (which are identical House and Senate versions) would allow Missouri’s monopoly utilities to pre-empt any competitor that might build transmission lines for less. The monopolies would have the “right of first refusal” to build any transmission lines over 100 kilovolts (kV) if they connect to a facility owned by the monopoly, even if the location of that transmission line is outside the monopoly’s territory. Lines greater than 100 kV are used for long-distance transmission of electricity, in contrast to local distribution lines (the power lines you see by city streets and neighborhoods) which typically have capacity under 69 kV.

Why is the legislature proposing these measures? Removing any sort of competitive bidding process to construct transmission lines has made projects across the country more expensive. A study from the economic consulting firm The Brattle Group concluded that projects not subject to competitive bidding have cost over 34 percent more than the original estimates. In contrast, transmission line projects that were subject to competitive bidding have been on average 40 percent less expensive than original estimates. All transmission lines are built to standards set by the North American Electric Reliability Council, so competitive cost savings don’t come at the expense of quality.

Wouldn’t it be better for the legislature to propose subjecting transmission lines to competitive bidding, rather than shielding them from it? Since transmission costs are ultimately passed on to customers, it’s customers who bear the brunt, or receive the benefit, of cost-inflating or cost-saving policies.

Missouri will need more electric transmission lines built in the coming years. To build those lines at the lowest possible cost, Missouri needs more free-market activity in transmission projects, not less.

Springfield Does Not Need a Land Bank

Posted on January 27, 2022January 13, 2026 by David Stokes

A version of this commentary appeared in the Springfield News-Leader.

In government, nothing succeeds like failure. How else to explain Springfield’s attempt to imitate St. Louis and Kansas City with the creation of a city land bank despite the clear evidence of failure of the existing lands banks in both of those cities.

Land banks are local agencies empowered to acquire vacant, derelict, or tax-delinquent properties with the goal of returning them to productive use in the private sector. Land banks are authorized to be more proactive in acquiring property than traditional county land trusts. The goal of land banks may be laudable. Their record of performance is much less so.

Missouri created the nation’s first land bank in St. Louis in 1971 to help get control of vacant properties and return them to private use. Since that time, the St. Louis land bank has proven better at acquiring properties than at returning them to the private sector. In a struggling city like St. Louis, that isn’t surprising. More troubling is that the reluctance to get rid of the properties it owns has been no accident. Research by Show-Me Institute staff and others has documented the alarming frequency with which legitimate offers for property in the land bank have been rejected. Most commonly, the land bank has been rejecting offers in order to hold the land for future—often more politically connected—development. That development has seldom come to fruition, so thousands of land bank parcels have sat unused for decades.

In 2012, Kansas City followed St. Louis with its own land bank. At the time, the Show-Me Institute published research documenting the failures of the St. Louis land bank as a warning to Kansas City. Disregarding the history and evidence, the state approved a Kansas City land bank, which was started up that year.

Fast forward to 2022, and the Kansas City Star has recently published a major investigative article on problems at the Kansas City land bank. Needless to say, the Kansas City land bank has not lived up to its promises. Its executive director was removed in 2018 after accusations of political favoritism and other problems. The family of the Jackson County Executive received a special deal on certain properties, which raised plenty of eyebrows. As in St. Louis, the Kansas City land bank has been plagued by conflicts of interest and poor management.

The final Missouri city to institute a land bank in Missouri is St. Joseph, in 2019. Thus far the land bank has proceeded laboriously. After two years, it owns just five properties. It may be too early to make a final judgment, but based on its slow start and the lack of success in other cities I’d say the prognosis for the St. Joseph land bank is poor.

Land banks have fundamental problems. Ideally, they would work quickly and efficiently to place properties they own back into private hands. But that very speed is what can make them subject to abuse by those with political connections. In order to guard against such problems, they can become a typical bureaucracy—slow and difficult to deal with. But in that case, few in the private sector will want to work with them. So, the choices are to operate quickly and accept some level of malfeasance, or to operate bureaucratically and drive away your own potential customers. Finally, land bank employees have little incentive to do their jobs so well that they find themselves out of one.

Supporters may claim that Springfield would operate its land bank more effectively than St. Louis, Kansas City or St. Joseph. I don’t dispute the sincerity of the promises—just the likelihood that they’ll be kept.

Springfield needs a new city land bank about as much as it needs the return of bushwackers and bald-knobbers. The city would be better off not creating a land bank and letting Greene County dispose of tax-delinquent properties in its longstanding manner. If Springfield does create a land bank, I fully expect to read a News-Leader investigative report of its failures in the next few years.

Flood of Federal Money Is Not a Free Pass for a Spending Binge

Posted on January 26, 2022January 13, 2026 by Aaron Hedlund

A version of this commentary appeared in the Columbia Daily Tribune.

Jefferson City is awash in taxpayer cash. Missouri’s state government is slated to receive $2.7 billion in federal stimulus funds from the American Rescue Plan Act along with $9 billion from the “bipartisan” infrastructure bill. In addition, the state expects to bring in nearly $2 billion more in net revenues compared to just before the pandemic. What is disconcerting is how quickly some lawmakers—including self-proclaimed fiscal conservatives—have shed sound economic principles in their rush to find ways to spend the money, forgetting the wise words of Nobel Prize winning economist Milton Friedman that “there is no such thing as a free lunch.”

The simple, alluring, and false logic is as follows: either Jefferson City spends the money or the funds get sent back to the federal government to misspend on other boondoggles. But Missouri does not have to choose whether Jefferson City or the federal government gets the privilege of misspending taxpayer money. There is another way—one in which state lawmakers apply a strict cost–benefit test to all proposed spending and in which Missouri taxpayers are the beneficiaries of direct fiscal relief from any unused funds that fail to pass such a test.

To begin, it is crucial that lawmakers be aware that misspent money today—even if it has the false appearance of being “free”—can saddle Missouri with fiscal obligations, a weaker economy, or both, in the future. Because the funds are a one-time injection rather than a reliable stream of future revenue, Jefferson City must avoid engaging in spending that creates long-term future commitments (for example, in the form of unfunded maintenance). Lawmakers should also be wary of any government investment that crowds out private-sector investment. Infrastructure spending ought to enhance the private sector, not compete with it.

The other obstacle to sound cost–benefit analysis is the mistaken belief that the cost of the stimulus and infrastructure funds is zero because Washington, D.C., will both supply the money and reclaim any unspent funds. After all, the message to lawmakers has been that states cannot use the money to offset tax cuts. But this is an oversimplification of the options available to state officials. For starters, as long as state revenues stay above their inflation-adjusted 2019 level, the American Rescue Plan Act provides a safe harbor that deems states to be in compliance with the restriction against using stimulus funds for state tax cuts. That inflation-adjusted revenue threshold is likely to be around $10.8 billion in 2023, which is $600 million less than the $11.4 billion in revenues the state is projected to take in. Thus, state lawmakers immediately start out with a cushion of $600 million that they can provide in tax relief without risking stimulus funds.

Second, the American Rescue Plan Act only prohibits state governments—not local governments—from using stimulus funds to offset tax cuts. Moreover, it explicitly allows the state to transfer some of its funds to localities. Nothing in principle stops Jefferson City from distributing money to localities on the condition that they use the money to enact temporary local sales or property tax cuts. When using such transferred funds, localities must abide by any restrictions that apply to the state, but the American Rescue Plan Act does not impose any restrictions on local tax cuts. To create an even more secure legal hedge, Jefferson City could come to an agreement with localities that they use much of their own $1.2 billion in earmarked local stimulus funds for tax cuts, and the state could transfer some of its funds to localities to put toward sound public investments. This way the funds allocated originally to Jefferson City would be used on public investments, while localities would focus on tax relief.

Lastly, the American Rescue Plan Act allows state and local governments to apply stimulus funds toward mitigating the negative economic consequences of the pandemic, chief among which is the decades-high inflation that Americans are suffering through. Seven percent inflation in 2021 caused real wages to drop 2.3 percent, which amounts to an almost $900 “inflation tax” on the average worker. Jefferson City could simply opt to send direct fiscal relief to Missouri workers to offset this tax.

With coffers flush with cash, it is true that state lawmakers have a rare opportunity to make pivotal public investments to improve private-sector productivity. However, they would be wrong to view the money as “free” or the cost of spending the funds as zero. Instead, they should apply the same cost–benefit test that they would use for spending financed from state tax dollars with the knowledge that any unspent money need not go back to Washington, DC—it can end up directly in the pockets of struggling Missouri families.

Watch: Increasing Accountability in Education

Posted on January 26, 2022January 13, 2026 by Susan Pendergrass

Michael Q. McShane, Director of National Research at EdChoice, Susan Pendergrass, Director of Research and Education Policy at Show-Me Institute, and Patricia Levesque, Chief Executive Officer of ExcelinEd discuss the state of accountability in education, why state leadership is critical, and how Missouri and other states can reform their accountability systems.

Accountabilty Matters

Missouri schools are failing to teach the core subjects of reading and math and the most recent test scores show that students are falling further behind. Missouri’s Department of Secondary and Elementary (MO DESE) has not offered the level of transparency regarding student performance that is necessary to create an education system focused on higher standards, reducing achievement gaps, and results-based accountability. The status quo is leaving thousands of students behind without the fundamental skills to pursue higher education or compete in the modern labor market. In response to DESE’s failure to perform one of its most basic functions, we launched The Missouri School Rankings Project and MoSchoolRankings.org.

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Tax Credit Bills Are Lurking in the Legislative Session

Posted on January 26, 2022January 13, 2026 by Corianna Baier

Two tax credit bills are making their way through the legislature this session. SB 733 would establish a tax credit for the music production industry and SB 732 would reauthorize the film industry tax credit. The evidence against tax credit programs is considerable, so it’s concerning and disappointing to see these bills filed in Missouri.

My colleagues and I submitted testimony for the public hearing for these bills, and our testimony echoes what Show-Me Institute researchers have said for years: Tax credits are often a bad deal for Missouri taxpayers.

Tax credit programs rarely generate enough economic activity to justify their use. Over the past few decades, Missouri has foregone billions in state tax revenue due to a host of narrow incentive programs that have consistently yielded poor results. Targeted economic development programs are just another way for lawmakers to pick winners and losers, a job that is better left to consumers in the market. When tax breaks are given to some, other taxpayers must make up for the lost revenue.

The tax credit programs that would be created through these bills would be bad deals for Missouri taxpayers. Hopefully lawmakers will do right by businesses and taxpayers and stop providing tax benefits to their favored few.

Will a Missouri Parents’ Bill of Rights Be Added to the State Constitution?

Posted on January 25, 2022January 13, 2026 by Patrick Ishmael

When we released our Missouri Parents’ Bill of Rights (MPBR) late last year, we did so because we thought parents (and taxpayers) needed to have their rights reaffirmed with regard to K-12 education in Missouri. In fact, our Show-Me Curricula Project—featuring thousands of records requests to public schools and districts—demonstrated two troubling facts very clearly: that critical race theory was appearing in curricula across the state, and that many, many schools and districts were not being forthcoming about what they were teaching kids and, in my judgment, obstructing necessary transparency.

Parents deserve to see what their kids are learning, and taxpayers deserve to know what they’re paying for. If that’s going to happen, however, at a minimum state law needs to be updated to empower these stakeholders to assert those rights.

It will take champions of reform in the Missouri legislature to carry such bills forward, but fortunately there are already several good proposals circulating at the Capitol, including an especially strong one that I testified on this morning. House Joint Resolution (HJR) 110, introduced by Rep. Phil Christofanelli, would put key language from the MPBR directly into the Missouri Constitution—including curriculum transparency, performance transparency, and a host of other items. As a Constitutional item, Missouri voters would also have their final say on the proposal at the ballot box later this year, and I’m optimistic it would succeed with the public. Accordingly, I felt it was important to testify to the House Elementary and Secondary Education committee (which heard the bill) to share my research.

If passed by the legislature and the public, the Constitutional amendment would be an enormous leap forward for both educational reform and transparency. I hope the entire Legislature and eventually the public will have an opportunity to weigh in on this important proposal.

MetroLink Light Rail is MetroWaste

Posted on January 20, 2022January 13, 2026 by Randal O'Toole

A version of this commentary appeared in the St. Louis Business Journal.

Between 2014 and 2019, ridership on St. Louis Metro buses and light-rail trains dropped by nearly 25 percent. Thanks to the pandemic, ridership in recent months has only been half what it was in 2019, and thanks to increased numbers of people working at home it may not ever return to 2019 levels.

This suggests that St. Louis doesn’t need to spend hundreds of millions—or billions—of dollars building new light-rail lines. Yet that is exactly what St. Louis Mayor Tishaura Jones wants to do, not because St. Louis needs it, but because federal funding might become available for it. That federal funding would depend on local matching funds, meaning St. Louis taxpayers would have to pay higher taxes for train rides few of them will take.

St. Louis’s light-rail record is unimpressive. In 2001, Metro opened the 17-mile MetroLink College extension, doubling the total number of miles in the system. Metro carried fewer bus and light-rail riders the year after opening this line than it had carried the year before. The same thing happened when it opened the 3.5-mile Shiloh-Scott extension in 2003. The 8-mile Shrewsbury-Lansdowne MetroLink extension gained some new riders, but all of those riders were lost after the 2008 financial crisis, and most never came back.

Overall, light rail has failed to boost the region’s transit ridership. In 1993, before the region’s first light-rail line opened, buses carried 40.3 million riders. Since then, Metro has spent around $2.5 billion building 45 miles of light-rail lines. In 2019, buses and light rail together carried 36.1 million riders, 11 percent fewer than before light rail.

Part of the problem is that light rail is functionally obsolete: just about anything light rail can do, buses can do better for far less money. Counting capital costs, Metro spent $12.80 per light-rail rider but only $8.30 per bus rider in 2019.

The current proposal to expand MetroLink with a new north–south corridor line through downtown fails on two key fronts. First, while transit advocates say spending more money on transit helps low-income people, the fact is that most low-income people do not take transit to work. Census Bureau survey data show that only 4.4 percent of St. Louis–area workers who earned less than $25,000 a year took transit to work in 2019. Meanwhile, the sales taxes used to support Metro buses and light rail are highly regressive, meaning the 95.6 percent of low-income people who aren’t dependent on transit are disproportionately paying taxes to support rides they aren’t taking.

Second, cities that have successful rail transit have a high concentration of jobs in a central business district, and St. Louis is not one of those cities. The percentage of regional jobs in downtown St. Louis has been declining for years. It is currently down to about 60,000 employees downtown, very few of whom take light rail to work. Expanding MetroLink on the proposed north–south route will be a very expensive attempt to take people who don’t use light rail for work to jobs in an area where they don’t work.

The places in downtown St. Louis that benefit from MetroLink (the stadiums, convention center, etc.) already have it. The money Metro wisely spent adding and improving stations at Cortex and Barnes Hospital cost a fraction of the amount of a new line and served an area where people of all incomes actually use MetroLink to go to work. (The Barnes/Central West End stop is the busiest stop in the system.)

Meanwhile, while we debate MetroLink’s further expansion, Metro’s bus system is “disintegrating,” says engineer Richard Bose at the pro-transit NextSTL website, because the agency can’t find enough drivers to keep it operating. Jones and other city and regional officials should devote their efforts toward helping Metro run the system it already has rather than trying to expand it. Federal and local funds spent on an effective bus system offer a better solution to address the needs of the people who live in North St. Louis County. Otherwise, people might get the idea that the real purpose of light-rail transit is not to move people, but to move dollars from taxpayers’ pockets into the hands of light-rail contractors.

Podcast: Parents’ Role in Education with Dr. Matthew Spalding

Posted on January 19, 2022January 13, 2026 by Susan Pendergrass

Matthew Spalding is the Kirby Professor in Constitutional Government at Hillsdale College and the Dean of the Van Andel Graduate School of Government at Hillsdale College’s Washington, D.C., campus. As Vice President for Washington Operations, he also oversees the Allan P. Kirby, Jr. Center for Constitutional Studies and Citizenship and the academic and educational programs of Hillsdale in the nation’s capital.

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