On May 13, David Stokes joined The Gary Nolan Show to discuss a gas tax increase that is headed to the Governor’s desk and a trend in Missouri local government – taxing outsiders.
Excellent: Legislature Passes Bill Holding Local Governments Accountable
Congratulations to Rep. John Wiemann and others for passing House Bill 271, a now greatly expanded bill whose original language, carried by Rep. Wiemann, addressed a reform near and dear to my heart—local transparency. For the last few years, the Institute has been an active proponent of making state and local government checkbooks open to the public, and we’ve seen some progress with the creation of a great site that advances these ends in the Missouri State Treasurer’s office. House Bill 271 establishes a similar program in the Office of Administration, which takes us one step closer to the mandatory checkbook reporting we’ve long advocated. If local governments can take your money from you and spend it, they must report it, and if they can’t, well, that’s a problem. The bill moves us closer to fixing that problem.
The omnibus bill touches on other local government issues of interest to us, notably the manner and circumstances under which local governments can take away rights of association and commerce via pandemic “health orders” and lockdowns. Living in Chiefs Kingdom doesn’t make you Kansas City’s peasant, and the bill’s eminently reasonable restrictions on local governments’ ability to take draconian actions against Missouri residents were overdue. As with local checkbook transparency, the state has an obligation to ensure that local governments, which exist as a managerial convenience, are accountable for acts done in the state’s name. On health orders in particular, local governments far exceeded in the last year what the state should ever tolerate. Congratulations to Sen. Bob Onder for successfully attaching this limiting language to the bill and to Sen. Andrew Koenig, Rep. Jim Murphy, and others for adding fuel to the fire throughout the process.
House Bill 271 now moves on to the governor, who is expected to sign it. Congratulations to the legislators and advocates who achieved these objectives.
How Are We Recovering (Part 2)
As discussed in my previous post, our economy seems to be recovering quickly relative to other recessions, but employers are reporting increased hiring difficulties. This may be due to the changes in unemployment insurance (UI) and the effects on the labor market (the supply and demand of workers).
Generally, UI affects the labor market by changing job search behavior. UI decreases the gap in pay between working and not working. It creates an incentive for unemployed workers to take more time in their job searches, resulting in fewer job applications and longer jobless spells. On the other side of the labor market, the UI benefits that make it easier for workers to put off job searches and be more selective also make it more difficult and costly for businesses to hire, which reduces the incentive to post job openings. Ultimately, UI can damage both sides of the labor market.
Providing money to help someone between jobs isn’t inherently a bad thing, especially during difficult economic times. In fact, one justification for having an unemployment insurance system at all is that the added time spent searching for a job leads to the possibility of a higher-quality job fit, which has stabilizing effects on consumer spending. However, excessive generosity or duration of UI benefits can hamper the economic recovery following a recession.
Researchers have cited the extensions of unemployment benefits as playing a role in the slowest job recovery on record—the aftermath of the Great Recession—and other jobless recoveries. Similarly, eventual cuts to UI benefits after periods of extensions have led to large influxes of workers and decreases in unemployment levels.
All this research on the relationship between UI and the labor market makes me question whether our UI policy during this economic downturn has been optimal. The recent extension of unemployment benefits with the $300 weekly supplement may threaten to impede the pace of our current recovery as UI has in the past. Governor Parson has even decided to end Missouri’s participation in the federal pandemic unemployment benefits beginning on June 12th, saying that it’s time to get people back to work. The complicated topic of UI and our current recovery with be discussed in the next blog in this series.
The New Mayor Vetoes Two Tax Subsidies
In a welcome development, St. Louis Mayor Tishaura Jones vetoed two newly proposed tax subsidy bills. One is a small project and one is large, but what they have in common are generous tax subsidies for projects in areas that are doing just fine economically.
The main veto was for a new 300-unit apartment complex right by St. Louis University. The new apartments will be marketed toward students, of which there are many nearby because it is right next to a major university. The developers were asking for a 10-year, 95 percent tax abatement. A 95 percent tax abatement on an $80 million project is a lot of money for the developers, and that money will inevitably be offset by higher taxes on other residents and businesses. The idea that a development such as this at this location needs a huge tax subsidy is absurd. I commend Mayor Jones for these two vetoes and hope it sends a signal for the rest of her administration.
Don’t get me wrong. I think taxes in the City of St. Louis are too high. But if Mayor Jones and the new generation of city leaders can substantially reduce tax subsidies for the lucky few and expand the tax base by doing so, then we might be able to get a tax cut for everyone. If the taxes on commercial development are too high, then lower the commercial property tax surcharge for all businesses. Giving away generous tax abatements to some (who, shockingly, tend to be politically connected) is not the solution.
This is a positive step for Mayor Jones’ term.
Charter School Students Are Public School Students
Imagine two teenage siblings with jobs—a rarity these days. Their parents require them both to pay for their own transportation with their earnings. One only has to pay for gas and the occasional oil change. The rest of their paycheck can be spent on other things. The other has to cover a car payment, gas, tires, car insurance, and any other expense related to keeping their car moving down the road. You can debate if this is good parenting, but clearly one teen will have to stretch their paycheck a lot further. And it doesn’t seem quite fair.
That is essentially how funding for charter school students differs from funding for other public school students. Public school districts can fund buildings, buses, maintenance, and other long-term costs by issuing bonds. Capital projects are funded with dollars outside of the stream of revenue that is received from federal, state, and local sources each year to educate students. Charter schools, however, have to fund everything—buildings, new roofs, HVAC systems, buses, gyms, libraries—using the same annual funding that traditional public schools can dedicate to the classroom. It’s very difficult.
Finally, some Missouri charter schools will have access to state funds for capital improvements. The recently passed education budget bill, House Bill 2, includes $5 million from the General Revenue Fund “for deferred maintenance grants for charter school facilities, provided that the charter school has been operating, with students enrolled, for at least ten years, further provided the charter school maintains twenty percent (20 percent) reserves, further provided that the charter school not be a part of a for-profit charter management organization’s network, and further provided the charter school owns or is purchasing the building or is occupying a building owned by the local school district.”
It’s not a ton of money, considering that there are more than 70 charter schools in the state, but it’s a start. It’s good to see the Missouri Legislature begin to chip away at the systems that work against families and their educational needs.
Suggested Change to Missouri’s Nuclear Construction Bill
A new bill in the Missouri Legislature proposes easing regulations on nuclear and renewable power construction. House Bill 261 would allow utilities to charge ratepayers for the construction of nuclear and renewable power plants before they’re operational. However, this would only apply to plants with the capacity to generate more than 200 megawatts of electricity per year.
This exemption would favor large, traditional nuclear power plants at the expense of cutting-edge nuclear energy technology—small modular reactors (SMRs). Putting aside the merits of the current monopoly structure—customers in other states benefit from competitive electricity markets—does it even make sense for a bill to promote traditional nuclear over SMRs?
Let’s put this in perspective. Few large, traditional nuclear power plants have been built nationwide in the past few decades. In recent years, multi-billion dollar cost-overrun debacles for new traditional nuclear plants in South Carolina and Georgia have put a damper on constructing new large nuclear plants. So what’s so special about SMRs?
SMRs are much smaller than traditional nuclear power plants (generating fewer than 200 megawatts of electricity per year) and are also cheaper to construct on a per-megawatt basis than traditional nuclear plants. NuScale Power, which is on track to receive the U.S. Nuclear Regulatory Commission’s first construction approval of an SMR this August, expects its SMR to produce electricity for $65 per megawatt-hour. That price is competitive with electricity from natural gas plants, which are also “baseload” power providers. (Baseload power is reliable, around-the-clock power, as opposed to the intermittent power provided by solar and wind.)
SMRs are also safer than traditional nuclear plants. The traditional way of generating nuclear power is already the safest form of electricity production available, even when considering disasters like Chernobyl or Fukushima, but SMRs come with enhanced safety features. For instance, traditional nuclear power plants cool their reactors by circulating water via electricity, meaning that in the event of a natural disaster that removes all possibility of power (such as what happened in Fukushima in 2011), the reactor could malfunction. SMRs use natural circulation rather than power to cool the reactor, meaning that a disaster like Fukushima is even less likely to happen with SMRs, and it is already extraordinarily unlikely.
Their smaller size also means that SMRs may be deployed in places where it wouldn’t make sense to build an enormous, traditional nuclear power plant, such as in remote towns or industrial sites. SMRs can operate individually as well as being grouped together, again in contrast to traditional nuclear plants. This allows for more flexible operation and even expansion if population or industry requires it.
SMRs are nearing full approval by federal regulators and are already being built in several countries. Putting aside the concerns about the monopoly powers Missouri utilities currently have (which are not insignificant), wouldn’t Missouri be better off focusing on the future of nuclear energy technology rather than the past?
The School Choice Victory in Missouri Was a Long Time Coming
The political theorist Max Weber said that politics is “the slow boring of hard boards” and boy, school choice legislation in Missouri has been a hard board.
I wrote my first piece arguing for education savings accounts in Missouri in the fall of 2015 and first testified in favor of them during the 2016 legislative session.
Before me, James Shuls was advocating for school choice (and wide, garish ties, it appears) back in 2012.
In fact, the Show-Me Institute has been advocating for school choice since its inception, and finally, at long last, an education savings account bill is headed to the governor’s desk.
It is a time for celebrating. This is a huge win for Missouri’s children. Thousands of students will have access to educational opportunities that they would not have had without the creation of this program.
At the same time, this is just the beginning. We know that the educational establishment will do everything that it can to torpedo this program. Even though its funding is a fraction of a fraction of total school spending in Missouri, and even though piles of federal cash are being shoveled into public school districts, we are going to hear that this program is the death knell of public education and that it must be stopped at all costs. Expect administrative chicanery and legal trickery.
It is now incumbent upon advocates to do the hard work of making sure this program is successful. That means recruiting donors to fund the scholarships. That means making families aware of the opportunities available to them. That means working with schools and other educational providers to open seats to eligible students. That means constant vigilance for administrative malfeasance. It will be arduous and complicated and frustrating. And it will be worth it.
Here’s to a new day for education in Missouri. ‘Ere, the sun rises!
SMI Podcast: It’s Always Infrastructure Week Somewhere with Brian Riedl
On this episode of the Show-Me Institute Podcast, Susan Pendergrass is joined by Brian Riedl.
They discuss his recent piece in National Review titled Four Principles for a Conservative Infrastructure Alternative
Brian Riedl is a senior fellow at the Manhattan Institute, focusing on budget, tax, and economic policy. Previously, he worked for six years as chief economist to Senator Rob Portman (R-OH) and as staff director of the Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth. He also served as a director of budget and spending policy for Marco Rubio’s presidential campaign and was the lead architect of the ten-year deficit-reduction plan for Mitt Romney’s presidential campaign.
Listen on Apple Podcasts
A Huge Win for Missouri Families
Thankfully, the Missouri Legislature has recognized that one size does not fit all when it comes to education. The House and the Senate have passed a bill that will allow Missouri families to receive scholarships to customize their children’s education outside of their assigned public schools. Once the legislation is signed by the governor and people begin donating to the fund, students in the St. Louis, Kansas City, Springfield, and Columbia areas can apply for an Empowerment Scholarship Account (a kind of ESA) to pay for private school tuition, tutoring, virtual education, micro-schools, or educational therapies. This is a huge win for Missouri and for Missouri families.
The scholarships will be funded by donations to non-profits. Donors to the scholarship-granting organizations will receive a 100 percent credit on their state taxes for the amount donated. The next step is to encourage Missourians to change a child’s life by donating to the organizations. The scholarship-granting organizations can raise up to $50 million each year.
Missouri joins several other nearby states, such as Oklahoma and Iowa, that have also created school choice programs this year. No doubt the experiences of the past year—when parents were put in the driver’s seat—brought to light that kids need choices. As Show-Me Institute analysts have repeatedly pointed out, parents support school choice, parents need school choice, and the states that give parents school choice outperform those that don’t.
It’s the dawning of a new era of parental empowerment in Missouri. Hopefully, this is just the beginning.
