What Comes After Farce?

Posted on by David Stokes

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

Posted on by Elias Tsapelas

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.

So about that Coronavirus Money . . .

Posted on by Michael McShane

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.

“It’s A Mess” Up There in Hazelwood

Posted on by David Stokes

[vc_row][vc_column][vc_column_text]The saga of the Hazelwood Mills Mall, also known as the St. Louis Mills Mall, is ongoing. The large tax-increment financing (TIF) plan that was proposed to help fund the mall’s development has failed. The nearly closed mall has not been able to pay the bonds it issued. The bonds were backed by the TIF and a transportation development district (TDD). So now the bonds are being paid by property assessments on businesses in the mall (there is nothing automatically wrong with that). But very few businesses are left in the development footprint. One business, the ice rink, says it can’t afford to keep paying off the bonds all by itself (not entirely by itself, but you get the point).

The case is complicated. My purpose here is not to get into the legal minutia of the lawsuit filed by the ice rink owners against the city of Hazelwood. But the broad strokes are important. The suit claims that the city has harmed the owners of the ice rink by taking ownership of much of the property in the mall. With the city owning much of the land, it becomes tax exempt, thereby making the ice rink pay even more of the bond debt. The suit also claims that the City of Hazelwood is dragging its feet on approving a youth sports center proposed for the site, and instead favors building an industrial park. The ice rink owners want the youth sports project to help share in the current tax burden, and clearly don’t want to wait for a possible industrial park years down the line.

The whole thing, as Marty Huggins might say, is a mess. SMI analysts have discussed this failure before and for good reason. The entire project from its inception is a perfect example of why local governments need to stay out of the economic development game, not get more involved in it. The mall is partly within a floodplain, in a struggling area, and was launched when indoor malls were already falling out of favor. The original project building the mall may well not have gone forward if Hazelwood and Bridgeton had not supported it with tax subsidies. If it had gone forward anyway, it would have done so with private money. But no, tax dollars—in the form of subsidies—helped propel this financial failure.

Hazelwood seems to be doubling down on its efforts by taking ownership of the land to promote its preferred use of the land. The city’s track record doesn’t justify such a move. A private entity wants to put a sports complex there now. Unfortunately, this sports complex will be getting some tax subsidies. But those subsidies are coming from St. Louis County, and they’ve already been approved.  The best Hazelwood can do at this point is get out of the way and approve the project—more taxpaying entities in the mall will help ease the unfair burden on businesses such as the ice rink. The city doesn’t need to try and do more—it has done enough damage already.[/vc_column_text][/vc_column][/vc_row]

Missouri Special Election Results, Sunshine Trouble in KC and Back to School

Posted on by Susan Pendergrass

Susan Pendergrass, David Stokes and Patrick Ishmael join Zach Lawhorn to recap this week’s special election, shed light on a KC City Council meeting that may have happened in the dark, discuss what to do with unspent stimulus money and school mask mandates this fall.

Listen on Apple Podcasts 

Listen on Sticher 

Listen on SoundCloud

Even Disney Magic Is Swayed by Tax Incentives

Posted on by Corianna Baier

Missouri’s own Walt Disney and his Walt Disney Company may create theme parks that are the most magical places on Earth, but at its core, Disney is a for-profit company. Like other companies, it can be swayed by lawmakers offering tax incentives or tax breaks. Recently, Disney announced to around 2,000 workers that their jobs would be moving from California to Florida. The reason? The company gets tax breaks for moving these jobs to Florida that could save it about half a billion dollars.

Apparently, getting Disney to move a small chunk of its workforce to Lake Nona (a mixed-use development about 20 miles from Walt Disney World) is worth $570 million over 20 years—that’s what Disney is estimated to receive for this move. That’s a lot of money to pass up, so I can’t blame Disney for making the move. However, lawmakers are taking this money away from taxpayers, and they certainly deserve blame for that.

Clearly, Missouri is not the only state that seems to be addicted to handing out money to “help” large companies make decisions. Lawmakers across the country can’t wrap their heads around this important point: Giving away hard-earned tax dollars (or not collecting tax dollars) to manipulate the market and pick winners and losers is a bad idea. The research shows that the broader economy of an area does not benefit from these types of incentives—but the company certainly will.

Missouri and Missouri cities give out and forgo hundreds of millions of tax dollars annually. We’re not the only ones to do this, but we should be the ones to end it. Perhaps we will soon know the “magic” of actually using taxpayer dollars to provide public services to taxpayers.

In-Person Legislative Update 2021 (Columbia)

Posted on by Claire Andrews

Please join us Wednesday, August 25 for a legislative update with Representative David Smith and Senator Caleb Rowden. Enjoy a delicious lunch while Rep. David Smith of the 45th District and Senator Caleb Rowden of the 19th District discuss the most recent legislative sessions in the Missouri House and Senate. Both will be available for questions following their presentations. Do not miss this chance to hear directly from your legislators!

Register Here

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