TIF for Tat Two

Posted on by Patrick Tuohey

Back in December 2018, the Show-Me Institute published TIF-for-Tat: The Relationship Between Political Contributions and Tax-increment Financing Awards. A new nationwide study reaches similar conclusions about incentives offered at the state level.

The Institute paper, written by myself and Elias Tsapelas, looked at political campaign giving in Kansas City and found that:

The number of donations made to the campaigns of public officials who have decision-making power for TIF awards appears to increase in the election cycle in which developers apply for a TIF and then fall off in the election cycles afterward.

Companies might describe political giving as a sign of good corporate citizenship, and that may be true. But the fact that the contributions drop after a tax-increment financing (TIF) plan is awarded suggests something more akin to a quid pro quo.

A new study by Cailin Slattery at Columbia and Owen Zidar at Princeton/NBER also links economic development incentives to political campaign activity. They find:

The interaction between an incumbent governor and an election year is highly correlated with increases in incentive spending, suggesting a strong role for political determinants of incentive provision. In the raw data, per capita incentive spending increases by more than 20% in half of the cases in which it is an election year and the Governor is up for re-election versus one-fifth of the cases otherwise.

This study also finds, as do many other serious studies of economic development incentives, a “lack of clear spillovers and equity benefits.”

If a particular public policy shows no substantial benefit to taxpayers, and yet seems to rise and fall based on relationships to political contributions and campaigning, it is reasonable to conclude that there are darker motives at play than the public good. Isn’t it about time Missouri and its various municipalities rein in these incentives in the name of good and efficient government?

New Paper Suggests Kansas and Missouri on the Right Track with Truce

Posted on by Corianna Baier

If you need a reminder regarding the negative consequences of economic development incentives, look no further than this paper published by the Mercatus Center at George Mason University. This all-encompassing paper lays out the many reasons these incentives don’t work. The authors then propose a solution that may ring a bell to those in Kansas City: an interstate compact. Though it’s not an interstate compact per se, the evidence in this paper supports the theory behind the border truce (last year, Missouri and Kansas leaders agreed to a truce in the economic development subsidy arms race) between Kansas and Missouri.  The authors argue that the truce could do more for economic growth than all the incentives combined (if it’s actually followed, of course).

The evidence against economic development subsidies (which this paper defines as “any government-granted privilege that creates exclusive economic benefits for its recipient(s)”) is stacking up. Research shows that subsidies may benefit the specific firm or industry that receives the privilege, but most subsidies don’t result in any measurable improvements in the broader communities that pay for them. In fact, they may reduce economic development in the broader community if states fund them with tax increases or reduced spending on public services, two things that drive away economic development. There’s also little evidence that economic development subsidies sway a company’s decisions to relocate or expand.

So why do policymakers still give out these subsidies?

The paper identifies a few reasons, but one seems particularly relevant to Kansas City’s situation: Policymakers feel pressure and may view it as politically advantageous to offer subsidies if surrounding states are also offering them. This seems to be a driving force in the Kansas–Missouri border war; each subsidy offered by Kansas policymakers encouraged policymakers in Missouri to offer one, and vice versa. As the paper points out, “[between] 2011 and 2018, Kansas and Missouri paid a combined $335 million to subsidize the relocation of around 12,000 jobs from one state to the other, with most companies moving only five to seven miles.”

These researchers propose an interstate compact as a solution, the specifics of which can be found in the paper. The current truce between Kansas and Missouri is a small step in the right direction, in theory. But in practice, it has numerous problems and hasn’t produced the hoped-for results. If lawmakers are serious about ending wasteful economic development incentives and promoting economic growth, they should take some notes from this Mercatus paper and truly end the border war for good.

Are Teachers Essential or Not?

Posted on by James V. Shuls

When the COVID-19 pandemic began, everyone was sent home—everyone except essential workers. Health care workers continued to take care of patients. Police and firefighters continued to patrol streets and fight fires. Grocery store workers continued to stock shelves. Even workers in meatpacking plants, where some outbreaks occurred, continued to do their jobs. They continued to work because they were “essential.” Their jobs were so important to the lives of others that we asked them to take additional risk to continue providing their goods or services to us. Now, as schools are slated to reopen, the essential question we must ask is whether or not teachers are “essential.”

Regardless of where you stand on the issue of schools reopening, there are some fundamental facts here. First, putting kids together with 20 plus students in a classroom and crowded hallways undoubtedly increases the risk of spread. We can debate how much kids transmit the virus or how few deaths occur among children below the age of 18. These are all important conversations to have. Nevertheless, we cannot deny that schools packed with children are a petri dish where germs (and viruses) are spread. Kids will be kids. They will not effectively social distance and they will not wear their masks with fidelity. Without question, teachers in schools would have a much higher risk of catching COVID than teachers working from their living room.

The second unmistakable fact is that not opening schools will lead to large disruptions in the workforce. Parents without other options will be forced to quit their jobs or work from home as they help their children navigate the new online educational environment. This disruption will lead to decreased productivity and could have long-term negative impacts on the economy. Again, there are other issues we could debate, but there is no denying that closing schools will impact the livelihoods of many families.

We ask essential workers to face greater risks because the products of their labor—their service to us or the goods they produce—are integral to the lives of other people. We do not deny that they increase their risk by going to work. We do not deny that sending essential workers home would impact the lives of others.

It does feel strange that the clearest voices arguing that teachers are not essential are the teachers themselves, while the most persuasive essay arguing they are essential that I have read comes from a nurse.

So, I return to the central question—are teachers essential? I’ll let you, dear reader, determine the answer to this question yourself.

Walter Blanks Jr. Joins The Show-Me Institute Podcast

Posted on by Show-Me Institute Staff

On the most recent Show-Me Institute Podcast, Dr. Susan Pendergrass is joined by Walter Blanks Jr. Walter is a communications associate at the American Federation for Children (AFC). Before joining AFC full time, Walter was chosen for the first cohort of the American Federation for Children Future Leaders Fellowship, a year-long advocacy and professional development program for graduates of private school choice programs.

Listen here: https://bit.ly/3a7ctvj

For more of the Show-Me Institute Podcast, visit sound cloud at soundcloud.com/show-me-institute and subscribe on Apple podcasts.

 

As a Parent, You’re Going to Hear Me Roar

Posted on by Jessica Gatewood

I grew up with a mom who was a true lioness. She would march up to the school and advocate for my brothers and me. I am forever grateful that she stood up for us and helped us thrive academically. I am determined to do the same thing for my children, but I am flying blind. It’s been a hard year and homeschooling was no easy task last spring while my husband and I were working from home. We now feel our children are behind academically. The school districts in Missouri were clearly not prepared to deliver sustained virtual learning. School districts have had all summer to get their act together and they haven’t.

The lioness mom in me is concerned. I haven’t heard anything about professional development over the summer preparing teachers to effectively teach virtually on a new online platform. I don’t know if the teachers will bring the same level of care and passion when teaching virtually. And I don’t know how my kids will handle full-time virtual learning.

I also can’t ignore that, to the school, my children represent funding; there is an incentive for the district to keep them enrolled in our school. The district provided no information about the proven virtual alternatives available via the Missouri Course Access and Virtual School Program (MOCAP). If I wanted to enroll in something like K12.com, which was “designed as an alternative to traditional ‘brick and mortar’ education for public school students from kindergarten to 12th grade,” I would need my school district’s permission and would have needed to start the process weeks ago. Many schools are just now announcing their plans for fall 2020, which leaves parents with little time to react and explore alternatives. On July 29 we learned the district will now be going all virtual for at least the first nine weeks.

I am very concerned about my kids falling further behind typical grade-level expectations and forever playing catch up if I simply go with the flow. I realize that teaching my kids is no small task, and as their parent I am responsible for ensuring they get what they need. For my fourth-grade son, we plan to join a few families with fourth graders and create a micro-school. The district’s virtual learning program will be facilitated by one of the moms and we will include some other programming. For my sixth-grade daughter, we are going to do both virtual education with our school district and hire a tutor. If and when in-person learning is possible at our school, she will return to the in-classroom format, which we believe is best for her learning needs.

The pandemic has highlighted the need for parents to direct the education of their children and take responsibility to ensure they have every opportunity to academically thrive. Many will figure out a way to make something work this year because most parents are tireless when it comes to figuring out what’s best for their children. But it didn’t need to be this difficult. I don’t think parents will forget—or forgive—what they had to endure this year because of the failings of the education establishment in Missouri.

Debunking the Myth of a Costless Medicaid Expansion

Posted on by Elias Tsapelas

As published in the Columbia Tribune

On August 4, Missouri voters will decide whether the state should become the 38th to expand Medicaid. Proponents of the measure suggest expanding the program would “save” the state money, but a closer analysis suggests the opposite is true: Not only will the program cost the state money, but it will come at the expense of other important budget priorities.

How do proponents create the illusion of savings? Let’s take a look at the numbers.

Today, Missouri’s Medicaid program covers nearly 940,000 people and costs around $11 billion per year. The federal government pays about two dollars for every dollar the state spends, yet the program still consumes nearly 40% of the state’s budget.

If Medicaid were expanded, Missouri’s Department of Social Services projects that more than 285,000 able-bodied adults would enter the program within the first year at a cost of around $2.7 billion. For these new recipients, the federal government’s match would be more generous, at $9 for every dollar Missouri spends instead of the usual $2. But even at that higher match rate, Missouri’s share of the expansion cost would be significant.

To find “savings,” then, expansion advocates rely on several dubious assumptions.

First, federal funding for Medicaid is treated as “free money.” Although Missouri taxpayers are also federal taxpayers, the cost to the federal government is discounted in the “savings” analysis. And with the federal government in a period of historic deficit spending, new Medicaid spending will be debt for our kids and grandkids to pay off.

Second, proponents’ models assume an increase in expansion enrollment that is much lower than what Missouri’s own Medicaid agency expects. We don’t have to look far to see states that have been burned by their pre-expansion estimates of enrollment and associated costs. Illinois, Arkansas, and Louisiana saw initial expansion enrollment dramatically exceed their estimates. If Missouri sees enrollment slightly above the current estimates from the state’s Medicaid agency, the savings vanish even in the pro-expansion models.

Third, advocates forecast the cost for each new enrollee to be less than similar individuals who are already enrolled in the state’s Medicaid program. By underestimating the cost per beneficiary, expansion supporters shave even more costs from their estimates—even though the state knows they’ll cost more.

And fourth, the most dubious of all, expansion advocates assume the number of disabled Missourians on the program will drop by more than 20 percent over the next four years. By enrolling more individuals under the expansion guidelines (where the federal government pays a higher share), supporters assume they can shift some of the state’s existing Medicaid costs to the federal government. The problem is, this type of maneuver is not allowed. Missouri cannot enroll people who are already eligible for Medicaid into the expansion population, so the idea that the number of disabled Missourians in the program could drop by more than 20 percent is simply unrealistic.

We should also keep in mind that when supporters of the proposal say Medicaid Expansion will save Missourians money, they don’t literally mean the program will cost less. The cost of the program grows year after year, even now. What supporters are saying is that they think it will be less expensive to the state than if the state didn’t expand at all.

There are other important unknowns that must be taken into account, including the risk that taking more federal dollars today may put our state in an even worse budgetary bind tomorrow. For instance, if the federal government finally decides to rein in the deficit by reducing its match on the Medicaid expansion population, state taxpayers may be left holding the bag.

Balancing Missouri’s budget around Medicaid is already an incredibly difficult task, especially amidst an economic downturn. Balancing the budget after expansion would be even more painful, because state legislators will have to come up with hundreds of millions of dollars annually to address both traditional Medicaid and the expansion’s costs. These tough decisions are sure to put priorities like education, roads, and public safety funding at serious risk. Suggesting that the state could save money by spending more on Medicaid was always a dubious proposition, but at some point forecasting gimmicks have to give way to common sense.

 

Thinking About Homeschooling in Missouri this Year?

Posted on by Michael Q. McShane

Given the uncertainty surrounding the upcoming school year, tens of thousands of families around the country are considering homeschooling for the upcoming year. EdChoice’s monthly public opinion tracker poll (which surveys a nationally representative sample of Americans) found that 25 percent of school parents are “much more favorable” to homeschooling and 37 percent are “somewhat more favorable” to homeschooling as a result of the coronavirus. In Nebraska, homeschool filings are up 21%.

For Missouri families that might be considering homeschooling, I’d like to share a couple of potentially useful resources.

First, and perhaps most important, is the Homeschool Legal Defense Association (HSLDA). HSLDA offers lots of resources on its website, including a state-by-state guide of laws and regulations related to homeschooling. For families worried about running afoul of the law, they can join HSLDA for $130 a year and get access to legal advice and protection as well as a host of other homeschooling resources.

Second, there is Khan Academy. Started as a series of YouTube videos Sal Khan created to tutor his nieces and nephews, Khan Academy has grown into a huge free online repository of lessons and projects for students. It has really stepped up during the coronavirus, creating a fully articulated school schedule for students with all the lessons and supplemental videos and articles necessary to complete it. Again, this is all available for free.

Third, Study Island by Edmentum offers a full self-paced online curriculum for students aligned to state standards. For those families thinking that homeschooling will be temporary and that their children will return to their traditional public school next year, keeping up with state requirements is important. Study Island provides its service for around $180 per student per year (though they do offer a free trial for folks looking to check it out). It is not free like Khan Academy, but is plug-and-play and standards-aligned, two key features that parents under pressure might think are worth the cost.

The fourth resource is Carol Topp, the Homeschool CPA. “Pandemic pods” are cropping up as a popular option for families to link together and share resources as they homeschool for the upcoming year. How can families set one up and potentially hire a teacher or set of tutors without running afoul of non-profit or employment law? This is where a knowledgeable CPA can help. Even for those who are homeschooling independently, tax questions can frequently arise. Her website has lots of free content, and she also offers one-on-one consulting services to help families navigate the homeschool landscape.

If you’re thinking seriously about homeschooling in Missouri this year, you are not alone. There are lots of families in the same boat, and lots of resources out there to help.

If you know of any other resources, particularly Missouri-based ones, please feel free to share them in the comments below.

The Danger of an Equity Only Lens in Education

Posted on by James V. Shuls

There is a danger in looking at life through only an equity lens. Kurt Vonnegut shows this exceptionally well in his grim short story Harrison Bergeron. Set in a dystopian future where everyone must be made equal, poor Harrison Bergeron is exceptional. He is too strong and must wear weights to slow him down. He is too good looking and must wear a mask to cover his appearance. He is too smart and must have a transmitter that interrupts his thought process. In a quest to make everyone equal, the government strips away everything that makes someone exceptional.

Milton Friedman warned us about this kind of thinking: “A society that puts equality before freedom will get neither.” Absurd as it sounds, we are approaching that level of thinking.

Take for instance the rise of “pandemic pods” that parents are creating in an effort to educate their children amid COVID-19 school closures. Pandemic pods are taking all kinds of shapes, but generally consist of a small band of parents organizing themselves (and sometimes even hiring private teachers) to oversee the education of their children. These enterprising parents are doing exactly what we would want any rational, thoughtful person to do. Indeed, they are doing the very thing that Alexis de Tocqueville lauded Americans for in “Democracy in America.” After traveling to the United States in the 1830s, de Tocqueville noted, “Americans of all ages, all stations in life, and all types of disposition, are forever forming associations.” They were taking initiative to solve the problems around them.

From that day to today, we have seen this desire to join together for common cause and address societal ills as a good thing. For some, it seems, that view has now changed. Rather than celebrate parents who are finding innovative ways to make the most of the current situation, some are disparaging them and warning that their actions may cause irreparable harm.

In a Barron’s commentary, for instance, R. L’Heureux Lewis-McCoy suggests “Pandemic pods are a classic example of opportunity hoarding.” He goes on to argue: “like other forms of opportunity hoarding,” pandemic pods “tend to look as if individuals are simply making the best choices for their family, when in fact their actions will quickly concretize and widen inequalities.”

Similarly, in a Washington Post piece J.P.B. Gerald and Mira Debs equate pandemic pods to white flight. They warn, “These personal decisions, however, have a collective consequence.”

It seems Lewis-McCoy, Gerald, Debs, and others are viewing this issue through an equity lens only. On one hand, their analysis is right. When some individuals take an action that is in their own interest, it may very well create inequity. Indeed, that is the very nature of action! Any time one individual or group of individuals undertakes an activity that is designed to improve their life, they are by definition going to create some form of disparity between their station and other people’s station. Greater inequity will arise here if only affluent parents are able to organize better learning opportunities for their children.

It is in the solution, however, that these folks fall short. Lewis-McCoy has suggested we should “dissuade” parents from forming these pods. Gerald and Debs argued that instead of trying to address the problem themselves, parents should “stay and fight” for a better educational system.

Like the government handicappers of Harrison Bergeron, their solution is to stifle the creativity and opportunity of some individuals. This is what happens when you look at things ONLY through an equity lens.

Societal change and improvement are made by encouraging innovation and free association, not by stifling them. Our goal should not be to stop affluent parents from attempting to help their children, but to empower less-affluent families to do the same. We do this by increasing educational options, not by decreasing them.

Don’t get me wrong. Equity is important and we should all care about the health and welfare of the least advantaged in our society. To finish the Friedman quote: “A society that puts freedom before equality will get a high degree of both.”

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