David Stokes, Patrick Ishmael and Susan Pendergrass join Zach Lawhorn to discuss the recently released census data, Florida’s expansion of school choice and a Missouri school district said “no thank you” to millions in stimulus money.
It’s Back to . . . Wait, What?
Mid-August is back to school time. Kids are getting new backpacks and school supplies. Teachers are decorating their rooms. A month ago, we were on a glide path back to some type of normal, and then the COVID-19 Delta variant hit. Instead of a fresh start in a critical year for so many children who lost ground educationally last year, it’s mayhem.
Once again, many, many parents are completely fed up with district leadership. In addition, teacher union leadership is whipsawing in what it does and doesn’t support for teacher safety. Most schools figured out how to safely provide in-person instruction by the end of the last school year. Now it seems like they’re scrambling for solutions. Last year districts were forced to create functional virtual education programming. This year they risk losing state funding if they bring it back.
Parents have been loudly expressing their frustration for at least a year and a half with having just one option for their children. Yet districts still think they can issue edicts (must mask/mask optional) that apply to each and every kid and expect that parents will just get in line? Those days, in my opinion, are over. Parents are suing. Parents are protesting. Parents are packing school board meetings.
One thing is clear: It is not only possible but also necessary to have a varied portfolio of schools from which parents can choose. It’s time to give parents access to public education funding to find a good solution for their families. That may be an education hub (or pod) at the YMCA. That may be a private school. That may be a neighboring school district with different policies. That may be homeschooling.
Florida is expanding its Hope Scholarship program to families who don’t want to send their children to schools that have mask mandates. At the end of August, Missouri will have a scholarship program for students with disabilities and low-income students. That program could be ramped up and publicly funded. Missouri’s Department of Elementary and Secondary Education (DESE) has received nearly $3.5 billion in federal stimulus funding. It’s time for real leadership.
The Start of a New School Year with Ray Domanico
Susan Pendergrass is joined by Ray Domanico to discuss the challenges that students, parents and schools face as the 2021 school year begins.
Ray is a senior fellow and director of education policy at the Manhattan Institute. His career has spanned the public and non-profit sectors, in research and advocacy roles. Most recently, Domanico was director of education research at New York City’s Independent Budget Office, where he led a team tasked with studying and reporting on the policies and progress of America’s largest public school system.
We’re Not in Last Place—We’re Not Even in the Race
The release of the 2020 Census Bureau numbers brought bad news: The St. Louis Metropolitan Statistical Area (MSA) has dropped out of the top 20 largest MSAs in the country. We’ve been in a so-called “race to the bottom” for a long time, but now it feels like we’re not even in the race.
The growth of the St. Louis MSA, which contains 7 counties in Missouri and 8 counties in Illinois, has been stagnant for years, driven in no small part by poor population growth in St. Louis City. While some lawmakers were pleasantly surprised that our 2020 numbers weren’t worse, I’m disappointed at what has become of a once booming and prosperous Midwestern region.
What is it that keeps St. Louis out of the race?
Maybe it’s the sales tax rates that can be over 11 percent. Or the earnings tax in St. Louis City. Perhaps it’s the poor public schools and lack of school choice. Or the crime. It’s likely a mix of all these things and more; anything that makes St. Louis a less attractive place to live, work, or start a business has negative effects on population growth. You would think that years of stagnant growth would inspire lawmakers to take steps in the right direction, but we’ve seen little change. Maybe this fall from the top 20 will finally light a fire under lawmakers.
The Sales Tax Holiday Is Not Great Policy
Missouri had its back-to-school sales tax holiday last weekend. Friday through Sunday, Missouri waived the state sales tax on a handful of back-to-school items. While it’s nice if you were able to save a few bucks on school supplies, schemes such as these complicate the tax landscape and distort the market.
Generally, taxes should be low and broad. Low tax rates mean people can keep most of their hard-earned money. A broad tax base lessens distortions in the market from people trying to avoid taxes and mitigates volatility in the revenue stream. A low sales tax rate with a broad tax base would mean a simple tax code that collects stable revenue while minimizing economic distortions.
Missouri is nowhere near that ideal sales tax.
The plethora of special taxing districts in the state certainly plays a large part in Missouri’s complicated sales tax landscape, but sales tax holidays and other exemption schemes do too. The holiday adds tax complexity, which means additional tax compliance costs as consumers and businesses try to figure out what is best for them. Allowing municipalities to opt out of the sales tax holiday makes it even more complex.
The holiday also distorts the market by only lasting one weekend and discriminating among products. This causes consumers to change their normal behavior, shifting their spending from other weekends to the holiday weekend and shifting purchases to products that qualify from products that (often arbitrarily) do not.
Show-Me Institute researchers have recognized the sales tax holiday for what it is for years—a taxing scheme that complicates the tax landscape while doing very little to actually give taxpayers a break. Saving a few bucks one weekend a year is nothing compared to permanently lowering tax rates. It takes real tax reform, not a weekend gimmick, to help taxpayers. While it’s great if you were able to save last weekend, I hope that holidays and other tax schemes become a less frequent occurrence in Missouri.
What Comes After Farce?
The quest for a new St. Louis County Auditor has entered a phase that is hard to name.
For a long time, the county had a county auditor. That part is the history. In 2017, the county hired a new auditor who, unfortunately, had no experience with auditing. That part is the tragedy. In the ensuing four years, the auditor has not 1) demonstrated growth in the job, nor 2) hired talented assistance, nor 3) resigned, but has continued to serve as the auditor of the largest county in Missouri without performing any audits. Let me repeat this, the auditor’s office does no audits. This, obviously, has been the farce.
But the latest turn is that the St. Louis County Council has finally decided to replace the auditor, and, lo and behold, it’s proving difficult to find anyone to take the position. That is the part that is yet to be named.
There are hundreds of millions of dollars coming into St. Louis County government from COVID stimulus, on top of the billion-dollar budget it already has. The county needs a qualified auditor and appropriate staff to help oversee that money and account for it. There have been at least two major embezzlement scandals in county government that I can remember, and that does not even count Steve Stenger’s various issues.
The county council offered the job to someone, but the person turned it down, even though the candidate had gone through the entire application process. Precisely why the person refused is unknown. Whatever the council has to do to attract qualified candidates, it should consider it. Raise the pay? If necessary, fine. Remove the CPA requirement? Fine (but keep the auditor certification requirements). Lower the pension vesting rules? Well, no, keep those as they are. Most importantly, just make sure whoever gets the job can document a history of doing real audits of government bodies or closely related things (such as large businesses).
But do what it takes to get someone in that office who can property do the job. Until that happens, I don’t know what to call the phase the county is in.
Perhaps “befuddlement?”
Missouri Supreme Court Revives Medicaid Expansion
The Missouri Supreme Court has weighed in on Medicaid expansion. The court determined the state’s initiative petition to expand Medicaid was in fact constitutional. The decision reverses the Cole County Circuit Court’s finding and paves the way for those newly eligible to begin enrolling in the coming days. The court’s opinion is an unfortunate blow for those of us worried about the extraordinary taxpayer costs that will accompany expansion. But there’s reason to believe Missouri’s fight over Medicaid funding is not over quite yet.
In last month’s lower court ruling, Cole County Circuit Judge Jon Beetem found the initiative expanding Medicaid unconstitutional because it failed to include a funding mechanism. As I’ve written before, a constitutional amendment that requires new state expenditures should include measures for funding the expenditures. In my opinion, absent such a requirement, an amendment would infringe on the constitutionally delegated power of Missouri’s legislative branch to appropriate state spending. The state supreme court disagreed, but with one huge caveat.
The court ruled that the amendment doesn’t violate the constitution because it doesn’t specifically appropriate funds. In other words: Missouri’s constitutional amendment can require the state’s Medicaid program to enroll those eligible under expansion, but it can’t compel the legislature to appropriate the funds necessary to cover their costs.
If this sounds confusing, that’s because it is. Missouri’s highest court in the land drew a fine line to determine constitutionality but left obvious and important questions unanswered. The legislature thought its refusal to include expansion funding in this year’s budget meant the policy wouldn’t be implemented, but Missouri’s Medicaid budget lines do not include language indicating who the funds cover. As a result, the court concluded the budgeted funds are available to all who are eligible and that would include those covered by the expansion. The decision means that Missouri must start incurring new costs despite not having a plan to pay for them. Until the legislature acts, the cost of covering new enrollees will need to be paid for out of funds specifically set aside for those currently enrolled in Missouri’s program. If this occurs, the Medicaid program will run out of budgeted funds much sooner than anticipated.
So, what should the legislature do? The supreme court’s decision appears to give legislators the authority to continue refusing to provide funding for expansion. Not providing funding for new enrollees would likely require amending the current budget to make clear that the already approved Medicaid budget lines do not apply to expansion enrollees. This action could lead to another court challenge. Lawmakers could also choose to approve expansion funding. But where will the money come from? That’s the multibillion-dollar question. Even though the federal government has currently agreed to pick up 90 percent of the billions in expected expansion costs, all spending needs to be appropriated, and Missouri’s share would still be significant.
It will be interesting to see what our elected officials decide regarding funding the state’s Medicaid program going forward. It seems safe to say there won’t be any easy answers.
In-Person Legislative Update (St. Louis)
You are invited to join us for a discussion with Rep. McCreery and Sen. Onder on the bills passed, pending, and defeated this past legislative session. Both will be available for questions following their remarks. Register early to claim your spot!
Register Here
So about that Coronavirus Money . . .
The three coronavirus relief bills Congress passed funneled just under $200 billion into America’s K-12 public schools. This is a huge sum of money, several multiples of what the federal government spends on K-12 schools each year.
As more than a year has passed since the first bill’s passage, and almost nine months have passed since the second, we can start to figure out how the money is being spent. A new report from the American Enterprise Institute crunches the numbers and tells us the answer: it isn’t.
The first relief bill—the CARES Act passed in March of 2020—allocated $13.2 billion for K-12 schools. The Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA), the second bill, was signed into law in December of 2020 and allocated another $54.3 billion. The third bill, the American Rescue Plan (ARP), was passed in March of 2021 and allocated $122 billion.
According to the AEI report, to date only 70 percent of CARES Act dollars have been spent, and a mere 7 percent of CRRSA dollars have been spent. (Not enough time has passed to know how the ARP dollars have been spent.)
Missouri has spent 84 percent of its CARES Act dollars but 0 percent of its CRRSAA dollars. If we combine the total dollars, it means that Missouri has only spent 16 percent of the money it received in the first two relief bills.
As it turns out, reopening schools was not nearly as expensive as some school advocates said it would be. State and local tax coffers were not hurt nearly as much as some had predicted. Some money was necessary, but it was a fraction of what Congress allocated.
And here comes the kicker: The real money is in the ARP, and it is just starting to show up. If schools haven’t spent down the funds from the first two bills, and schools start back up without the need for any additional pandemic-mitigation measures, the money from the ARP is just going to start piling up. Ultimately, the report estimates that between $78 and $123 billion of the coronavirus education funds will be spent on non-pandemic related expenses. And it isn’t just AEI making these predictions—the Congressional Budget Office (quoted in the report) predicted that only $6.4 billion of ARP dollars will be spent in 2021, and the rest will be spent over the next seven years.
The bottom line: If we hear from K-12 school leaders about underfunding at any time in the near future, we should know that they are misrepresenting reality.
