On Thursday, October 10, Patrick Tuohey joined the Ruckus panel to discuss KCATA bus service in KCMO, Jackson County property tax assessments, the KCI 1% art fund, and other local issues.
Tennessee Proposal Leading Medicaid Reform
Policymakers searching for ways to improve Missouri’s Medicaid program should look no further than Tennessee. A new proposal from the Volunteer State would reform the way the federal government pays for Medicaid services in Tennessee. Instead of the open-ended funding relationship currently used across the country, Tennessee has requested the federal government begin offering Medicaid dollars as a lump sum payment, or block grant. Though there are many details yet to be ironed out, the plan represents a promising approach for states to begin reining in Medicaid’s ever-growing costs.
If approved by the federal government, Tennessee’s proposal would be the first of its kind. Medicaid’s current funding relationship between states and the federal government is riddled with “misaligned financial incentives”. Medicaid currently uses a matching dollar structure. For every dollar Missouri spends on an approved service, the federal government will spend nearly two. Because there is no limit to the amount of federal Medicaid dollars Missouri can receive, the arrangement encourages further state spending which grows the overall cost of the program. This structure also discourages states from finding innovative ways to provide better care at a lower cost. Under Tennessee’s plan, the state would actually get to keep 50% of the money it saves as a result of more efficiently administering the program.
Block grants also provide the opportunity for states to improve quality of care. Once the anticipated program savings are achieved, the dollars saved could be invested back into the program for initiatives chosen by each state depending on individual state needs. And as Tennessee’s governor noted, there won’t be a change to eligibility requirements or a reduction in benefits under the block grant proposal. Advocates of the Tennessee proposal believe that by properly aligning Medicaid’s funding incentives and increasing local control of the program, up to a billion dollars per year could be saved.
Medicaid block grants are not a new idea; Show-Me Institute analysts have promoted block grants for years. But this idea remains as important as ever. It is not a coincidence that the cost of Medicaid has continued to rise each year since 2014 when the federal government expanded its role in the state/federal partnership. Missouri’s policymakers should pay attention to what happens in Tennessee, because a similar proposal may be the best way to fix Missouri’s Medicaid program.
Student Achievement Rises with More Charter Schools
Missouri has long resisted the expansion of charter schools into any suburban or rural area. Opponents of charter schools argue they threaten the success of students, but the research doesn’t support this claim.
A new study from the Fordham Institute found that a higher percentage of charter school enrollment (referred to as “charter market share”) among black and Hispanic students in large urban areas is associated with higher English language arts and math achievement. A similar result was found for Hispanic students in suburban and rural districts, and black students in rural districts. And these results are measuring overall achievement in an area—not just the students attending charter schools.
The study used data from the Stanford Education Data Archive containing student performance on NAEP, the National Assessment of Educational Progress exam. The data contained scores from both charter and traditional public schools. Further analysis of the individual geographic areas in the study could help determine if the effect of competition from charters on traditional public schools varies across regions. But the study does contradict the argument that charter schools only have higher achievement because the best students transfer to charter schools. If that were the case, then overall achievement would not rise.
Charter schools in Missouri wouldn’t be a threat to traditional public schools. They could provide educational opportunity for many students who do enroll in a charter school and also boost overall achievement. Missouri shouldn’t be afraid to offer students who happen to live outside of Kansas City and St. Louis opportunities like charter schools.
What Happened to Those 800 Dangerous Buildings?
Three and a half years ago, Kansas City leaders were so embarrassed by a KCPT documentary on urban blight they committed to tearing down hundreds of dangerous buildings. Were they successful?
According to The Kansas City Star back in February 2016:
City Manager Troy Schulte recently estimated it would cost $10 million to knock down all the most dangerous houses and other buildings in the city. That backlog of 870 buildings has built up because in the past, the city has only been able to spend about $800,000 annually to demolish about 100 houses, and more properties keep getting added to the list every year.
The city sold bonds to raise the $10 million to pay for the demolition. Work started in June 2016 and it was to take two years to tear down about 800 buildings. In April 2018, Channel 41 reported that the city surpassed it goal and “taken care of” 895 buildings in two years. That is because many were sold and rehabilitated, not demolished.
According to city data, only 609 buildings actually have been torn down by the city in the three years since. While this is slower than initially planned, it represents good progress toward addressing blight.
As of October 7, 2019, there are 343 dangerous buildings remaining on the city’s list.
School Choice through Housing
No one bats an eye when you tell them you prefer buying one house over another because of the local school district. Obviously finding a good school for your child is important and moving into district boundaries is one way to effectively “pick” a school, albeit an expensive way. This is widely accepted, but opportunities that would allow Missouri families to stay in their current homes and communities—saving on the cost of moving—and have their child attend a school of their choice are barely available.
Nationally, 20 percent of parents surveyed in a recent National Center for Education Statistics report moved to a neighborhood for a public school (page 79). That’s one fifth of parents who are willing to relocate their family for a quality education, including in Missouri.
Moving across district lines can be particularly expensive when you’re moving into a high-performing school district. A 2013 analysis from Redfin looked at price differences among homes in a lower-performing school district (as measured by test scores) compared to a higher-performing school district. It found that homes nearly identical in size cost about $50 more per square foot in higher-performing districts. Some areas had a $130,000 price increase for a similar home just across the school district line. This is a significant barrier for families trying to access quality schools.
Not every family has the option to move for a school. Options like charter schools, education savings accounts, and even course access can provide families access to better education without the costly and disruptive process of moving. Attending a good school should be an option for every family in Missouri, regardless of where they live.
Want More Housing? Get out of the Way
If there is an affordable housing shortage in Kansas City, why is that so? Could the very housing policies meant to help actually be part of the problem? No less than Bob Langenkamp, the man formerly in charge of handing out economic development subsidies in Kansas City, said these subsidies were necessary to offset the increased costs of city regulation. This stayed with me because I suspect he is exactly right, and it occurs to me again as Kansas City contemplates policies to encourage more affordable housing construction. Rather than increase costs and then offer subsidies, the city ought to be reducing costs and staying out of the way.
Some were quick to argue last year that the greatest threat to affordable housing is the ending of low- income housing tax credits (LIHTC). This is demonstrably wrong. The program was fully funded up through the end of 2017; any current affordable housing shortage in Kansas City has nothing to do with a lack of state tax credits. And the data from the Missouri Housing Development Commission show that the number of housing units in the construction pipeline has not decreased since state funding for LIHTC was zeroed-out.
The simple problem in Kansas City, St. Louis and elsewhere is in part due to the high cost of housing regulations and city bureaucracy; it is simply too expensive to build so-called affordable housing.
A 2018 paper issued by the National Association of Homebuilders (NAHB) and National Multifamily Housing Council (NMHC) concludes that:
Regulation imposed by all levels of government accounts for an average of 32.1 percent of multifamily development costs, according to new research released today by the National Association of Home Builders (NAHB) and the National Multifamily Housing Council (NMHC). In fact, in a quarter of cases, that number can reach as high as 42.6 percent.
The table at the top of this post shows the impact on housing costs of several types of government-imposed costs such as changes in building codes or requirements over and above common standards. The NAHB paper goes on to say: “Over 90 percent of multifamily developers also incur costs of delays caused by sometimes lengthy approval processes.”
A study released in 2016 concluded: “. . . on average, regulations imposed by government at all levels account for 24.3 percent of the final price of a new single-family home built for sale.”
Sometimes, exactly because the government is trying to help solve a problem, the problem becomes worse. Seattle for Growth, née Smart Growth Seattle, published in 2015:
Affordable housing projects have many unique costs, and often cost more because of financing, construction, and labor requirements. Affordable housing projects can be more expensive than market-rate due to some of these unique costs.
Regulations regarding health and safety are necessary, and one does not need to argue that housing construction should go unregulated to suggest that some obstacles are not worth the expense. Some of these obstacles, such as time spent waiting on permits and approvals may simply be due to city offices being overworked and understaffed. Cities ought to understand the barriers to housing construction and the additional costs of regulation before they act to add even more regulation or spend limited tax dollars on subsidies.
Does Building Market-Rate Condominiums Help the Affordable Housing Market?
Affordable housing was a big issue in the recent Kansas City mayoral race, and there may be more legislation coming to address the issue. As Kansas City figures out how to increase the stock of affordable housing, many—including this author—have bemoaned the focus Kansas City has placed on subsidizing luxury market-rate high rises downtown. Some recent research, however, suggests that building market-rate units, even luxury ones, helps increase housing stock at all levels.
A new paper by Evan Mast of the W. E. Upjohn Institute for Employment Research concludes:
The short-run effect of new market-rate housing on the market for middle- and low-income housing is crucial to the current policy debate, where government intervention and market-based strategies are often pitted against each other. My results suggest that new market-rate construction loosens the housing market in such areas and, moreover, could do so in less than five years. This implies that market-based strategies can play an important role in improving housing affordability for middle- and low-income households.
In other words, building housing of all types helps those seeking middle- and low-income housing. This is a promising conclusion and largely intuitive. If there is more of a thing available, prices go down. Perhaps Kansas City and St. Louis really need to focus on building housing of all kinds, knowing that this alone will increase the availability of affordable housing.
Still, there will be advocates for more government subsidies to try to direct the housing market to provide for so-called affordable housing, such as a state low-income housing tax credit (LIHTC) to match the federal program of the same name. Despite the lofty intentions, research shows the state version of the program is largely ineffective.
To borrow from a common phrase regarding energy, Missouri governments ought to encourage people to “build, baby, build!” Governments don’t need to offer subsidies, but they ought to review their building codes and permitting processes with an eye towards reducing the burden on builders. Government has demonstrated it cannot solve the housing shortage; it ought to get out of the way and let the private market do what it does best: meet demand.
Kansas City Hotel Privately Built?
Several outlets in Kansas City have reported that Choice Hotels International is planning a six-story, 149-room hotel in downtown Kansas City. An official of the Economic Development Corporation of Kansas City (EDCKC) confirmed to me that the company has not sought any economic development incentive from the EDCKC.
This is good news. If the company really is building the hotel on their own, without incentives or tax credits, it represents a real investment in Kansas City. Next time someone argues that without such taxpayer subsidies, “we may as well put up a sign that says Kansas City is once again closed for business,” be aware that they might just be shilling for wealthy developers.
CID Transparency in St. Charles County?
Ever wondered why you pay way more in sales tax at one store than at another store just down the street? St. Charles County shoppers might soon get the answer, as some want increased transparency for Community Improvement Districts (CIDs). CIDs are political subdivisions that were originally intended to fund public improvements through taxes and fees. Unfortunately, CIDs are now often used in ways that primarily benefit private developments. St. Charles County recently announced the introduction of a bill that would inform consumers about the extra sales taxes they pay in those districts and the benefit the owner received from their tax dollars.
This bill would require businesses located in CIDs to display signs at public entrances and point of sale areas that state the rate of the tax imposed or increased at the business by the CID. The signs must also include the direct benefit received by the owner of the property on which the business resides and the expiration date of the tax.
According to the news release, the bill is intended to:
. . . highlight that often a small number of property owners can authorize sales taxes that are paid by all shoppers in the CID, and that businesses in a CID can be forced to collect a sales tax that does not directly benefit the property on which it is located.
Analysts at the Show-Me Institute often discuss these very problems with CIDs. Consumers are typically unaware of district locations and voters hardly ever get a say on CID sales taxes. The information on these signs would provide people the information they need to make informed decisions as consumers.
Increasing transparency for CIDs would be a good thing for the shoppers of St. Charles County, but why are reforms like this confined to one county? Special taxing districts like CIDs will continue to take tax dollars from uninformed citizens until these districts are reformed statewide.
