The Show-Me Institute’s 2021 Blueprint: Moving Missouri Forward presents 15 policy ideas covering issues ranging from education to health care, from public pensions to union reform, and from tax policy to transportation.
Watch our town hall featuring Show-Me Institute researchers discussing the 2021 Blueprint for Missouri:
Readers of this blog have seen me write before about the Missouri Department of Transportation’s (MoDOT) estimate that roughly $745 million in high-priority road and bridge transportation needs go unfunded each year.
But if generating an extra $745 million in revenue is what it would cost to keep our roads in good shape, what is it costing Missourians not to do so?
There are a few ways to look at this. From a road maintenance perspective, delaying needed road repairs results in paying more to fix them in the future. This is because road quality decays faster each year it is left untouched. A study from the Cornell Local Roads Program found that $1 spent to keep a road in good condition can save spending $4 to $5 in future repair costs (page 30). Other estimates put this ratio even higher at $1 now versus $5 to $15 later.
From a driver’s point of view, delaying road repairs results in drivers paying more money to take care of their cars. Roads in poor, mediocre, or fair condition present problems to drivers through potholes, rutting, or rough surface quality. The drivers, in turn, pay the price for this through additional vehicle repair costs, increased fuel consumption, and increased tire wear. MoDOT estimates that Missouri’s current road conditions cost an average driver $59 per month, and all drivers statewide $3 billion per year. While the methods for calculating these numbers may be debatable, what is not in question is that rough roads cost drivers money.
Delaying needed repairs on Missouri’s roads is a costly proposition. Kicking the can down the road may be the easiest decision, but it’s Missourians who end up paying both now and later.
Arizona voters recently approved a proposition to impose a 3.5 percent surtax on high-income individuals and joint filers to increase education funding. This measure will raise the top income tax rate from 4.5 percent to 8 percent, which changes Arizona’s top rate from the fifth lowest in the nation to the eighth highest. Voters were clearly supportive of the education initiative, but funding it by way of an income tax increase may set the stage for bigger problems in the future. People have been moving to Arizona to escape high-tax states in recent years, but economists say that this may change due to this income tax increase.
Economists Arthur Laffer, Stephen Moore, and Erwin Antoni predict that this tax increase will mean the migration of 700,000 fewer people, 237,000 fewer jobs created, and a $25.5 billion reduction in personal income growth in Arizona over the next 10 years. These predictions are staggering, and while they are predictions, any negative effects even close to these would be detrimental to Arizona’s economy.
Despite the evidence of the negative effects of income taxes, especially relative to other forms of taxation, old habits die hard. State and local revenues are expected to take a hit from the pandemic and economic shutdown, so income tax increases may be on the minds of many lawmakers. In Missouri, we’re already seeing localities toying with the idea of tax increases (though not necessarily income tax increases). Income tax increases have very real economic consequences and our state cannot afford them. In this case, Missouri shouldn’t follow in Arizona’s footsteps.
Earlier this year, Missouri took a huge step forward by allowing licensing reciprocity. But there are still problems with occupational licensing. Many of Missouri’s occupational licensing boards, such as the Cosmetology and Barber Licensing Board, are dominated by license holders, meaning that the regulators are also the ones being regulated. Economists call this regulatory capture, and a “captured” agency can negatively affect the industry and consumers.
Missouri’s Cosmetology and Barber Licensing Board is designed to consist of 11 members (though there are only 9 currently): 7 members who hold either a cosmetology or barber license (only 5 currently), 2 members who own accredited cosmetology or barber schools, and 2 members of the public. With these numbers, this board is dominated by license holders, and they have the influence to make one of two things happen: They could relax regulations and make things easier for themselves as licensed workers, or they could make regulations stricter and make it harder for others to enter into the industry. More often, we see the latter occurring because license holders don’t want more licensed workers in the market—that’s just more people competing with them for customers. And stricter regulations can translate into fewer options and higher prices for consumers.
Of course, those in the industry have specific knowledge, which could be helpful in creating rules and regulations for a given industry. However, it’s difficult to reconcile this with the fact that those in the industry have direct self-interest in keeping the barriers to entry high.
If regulators are creating and enforcing regulations based on their interest and not the interest of the public, we have a problem. This isn’t to say that this is definitively happening with the Cosmetology and Barber Licensing Board, but the incentive is there. Occupational licensing puts a burden on workers and consumers, and if there are additional problems such as regulatory capture, Missourians may be burdened even more. It may be time to rethink some aspects of occupational licensing, such as the structure of the boards or if these occupations need to be licensed at all.
We are facing an educational crisis that we know very little about. Research tells us that the “summer slide” is real, meaning that when students are out of school for a few months they forget content that they had already learned. So what does a whole year gone look like? It’s hard to say.
NWEA, a testing organization that has been providing students assessments for 40 years, has preliminary growth data for 4.4 million students based on interim assessments given in fall 2020. These data indicate how much student growth occurred in reading and math between spring 2019 and fall 2020 compared to growth between spring 2018 and fall 2019.
The results aren’t terrible. All grade levels showed some growth in both subjects, with the exception of 5th- and 6th-grade math. The amount of reading growth was similar to the prior year, but the math growth was lower.
So, where’s the crisis? One in four students who should have taken the exam didn’t. Students didn’t take the exam for “economic, health, technological, or other reasons unknown to the educators and researchers.” An analysis of who took the exam and who didn’t revealed troubling results. Across all grades and subjects, the students who did not take the exam were disproportionately ethnic/racial minority students, students with lower achievement in the prior year, and students from schools with high concentrations of disadvantaged students. We’re losing track of our most vulnerable students. While these data are not directly attributable to Missouri, to think that this isn’t true here is to deny reality.
The impact of a full year out of school won’t be known for some time. But we know who is taking the brunt of the blow. Districts have been given a pass on tracking student attendance, even in the virtual-only districts that enroll almost 300,000 Missouri students. Holding districts harmless is harming students. We could be doing more to make sure that these students have an opportunity to stay on track this year.
I’ve said it before, I’ll say it again: 2021 is a year for big ideas and bold actions. All students should be able to use public education funds to go beyond their assigned public school district. All families should be able to access high-quality virtual education, create micro-schools, or enroll their kids in a private school, regardless of family income. Education savings accounts (ESAs) are no longer just a smart idea; they’re a critical need for our most vulnerable students.
This fall, Missouri public school districts scrambled to create plans to deliver education to families that needed virtual instruction and families that needed in-person instruction. They surveyed parents and let them pick one or the other. They tried opening buildings for the youngest students only.
Then COVID exploded, and many of those plans became irrelevant. As we head into the holidays, almost one quarter of Missouri public school districts have gone back to the fully remote mode of last spring’s shutdown. And most districts that are continuing to operate in-person are very small, such that fewer than 74,000 of the nearly 870,000 Missouri public school students, or around 8 percent, are still learning completely in person, while over one quarter of Missouri students are now in districts that are virtual only.
What I (and just about every parent) find most disturbing is how the numbers keep changing. In just two months, dozens of districts have switched from one mode to the other.
Parents have a right to be frustrated, and students have a right to gain a grade level of learning this year. How likely is the latter? The Missouri Legislature should be making immediate plans to make sure that every Missouri public school student has access to a virtual or in-person education of their choice. It’s time to stop forcing families to constantly adjust and have at least some state education funding available so everyone can find long-term solutions.
Missouri is still dealing with COVID-19, and the hole in the state’s budget is only getting deeper. Last week, the state legislature began its second special session of the year, and it is expected that this session will add more than a billion dollars to the budget. This new funding is on top of the record-setting $30-billion spending plan approved roughly six months ago. While most of this soon to be approved funding will come from the federal government, the extraordinary session offers an important reminder of the trouble that lies ahead.
The pandemic has already taken a serious toll on our government’s budget. The virus, combined with lockdowns and other restrictions placed on businesses, has drastically decreased economic activity, which in turn has lowered state and local tax revenues. For the fiscal year that ended on June 30th, Missouri’s collected 6.6 percent less in revenues than it did the year before. And this year, the governor has already restricted more than $400 million in state spending, indicating his budget staff believes the decline in tax revenues will persist for some time.
Over the past eight months, Missouri has been unable to spend hundreds of millions in state tax dollars that otherwise would have gone toward priorities such as education and public safety. At the same time, the cost of other state programs has increased as a result of the virus. It is true that some of these issues have been temporarily alleviated by generous federal relief efforts. But federal support cannot fill the hole created by COVID-19 for every state priority (the federal government places restrictions on where the money can be spent). More importantly, this funding is a short-term solution to a long-term problem.
Missouri was unprepared for the current situation in large part because state spending has been growing for years. We must also realize that it’s becoming increasingly likely the virus will be defeated before tax revenues return to pre-pandemic levels. For that reason, it’s time to start thinking about how our elected officials will respond once the state’s budget is no longer being propped up by federal aid.
In the coming months, Missouri’s policymakers should consider every option that could help contain the state’s runaway spending trajectory and shrink the size of government to match the revenue projections of the years ahead. There’s no doubt the task will be difficult, but it’s all but certain the cost of acting now will be lower than if we wait until it’s too late.
