Student Loan Forgiveness Isn’t Education Policy

Yes, we have a student loan debt crisis. And it’s growing. In Missouri, 58 percent of 2017 college graduates had debt when they graduated, and the average amount owed among those with debt was $27,108. Fortunately, creative ideas for getting out of this mess abound. Many of them revolve around more flexible payment schedules, improving the financial literacy of young people, making sure that colleges and universities have some skin in the game, or just making college more affordable.

And while loan forgiveness would provide immediate relief to debt holders, it’s important to make the distinction between debt relief and actual education policy. Loan forgiveness would be a very costly policy that wouldn’t expand access to college. In fact, a recent analysis of the costs and benefits of several forms of “free college” found that only one didn’t create education benefits that exceeded the costs. And that was loan forgiveness. Why? Because in this case, those who qualify have already received their education. The benefit of that education is there whether their loans are forgiven or not. So the benefit stays the same, and the cost goes up.

If a student loan holder truly didn’t understand what they were signing up for, they should have a broad array of repayment options tied to their salary. If they were scammed by a loan processor or for-profit college that was selling snake oil, by all means they should have recourse. But a plan to take one point in time and forgive all debt for all holders, regardless of their occupation, income, or repayment status is being floated in order to make headlines by those who make a living spending other people’s money on other people.

We can do better.

Many Missourians Are Moving . . . To Missouri

If you live in a rural community in Missouri and it feels like your neighbors are moving away, you might be right—but they aren’t going as far as you might think. A recent report from the Jefferson City News Tribune notes that according to the Census Bureau, at least 52 Missouri counties and St. Louis City lost population from July 2017 to July 2018. That means almost half the counties in Missouri had negative population growth.

But while population loss in roughly half of Missouri’s counties sounds terrible, there’s more going on here.

A great deal has been written about the growth of big cities across the country, but news outlets are slowly picking up on a trend that shows small and middle-sized cities gaining steam with young people. Think cities like Waco, TX and Knoxville, TN as opposed to Austin, TX and Nashville, TN—cities that aren’t necessarily state population hubs but that play an important role in their regional economies.

In fact, it seems that young people’s attraction to big cities is often overstated. Research increasingly suggests they are equally drawn to the less-costly option of smaller cities and suburban areas. Census Bureau data show that suburban growth is outpacing large city growth, with large city growth tapering off.

How is this playing out in Missouri? While most rural counties and Saint Louis City saw population declines, many medium-sized cities—Springfield, Columbia, and Lee’s Summit to name a few—have seen population increases according to the Census Bureau. Since Missouri’s total population only grew by a small percent, most of this population change is attributed to intrastate migration.

So while it is true that rural populations are dipping, it’s at least in part because of regional population consolidation in cities not far from where residents formerly lived.

And when you think about it, this migration trend makes a lot of sense. Small and medium-sized cities provide many employment, entrepreneurial, and social opportunities that may not always be available in rural areas, and these cities are often more affordable and community centered than big cities. While this trend isn’t great for rural counties—that is, the political subdivisions themselves—it is good for the people moving toward better economic and social prospects. As farms in rural areas become more productive and require fewer laborers, having access to city resources and opportunities will be all the more important for these residents.

Unfortunately, Missouri has struggled with overall population growth in recent years. During that same July 2017 to July 2018 time period mentioned above, Missouri was 29th in the nation in population growth, with a paltry 0.3% increase. This rate is consistent with the low population growth rates that we’ve seen for years. So, while this trend of intrastate migration is positive, we can’t forget that Missouri still struggles to attract new residents.

 

Kansas City Star Editorial Gets It Right on Tax Subsidies

Developers in Kansas City are asking for yet another subsidy, this time with a price tag of $63 million. One of the loudest opponents of the deal is the editorial board of the Kansas City Star—and they are right in their call to reject this proposal.

The proposal, which is being considered by the Kansas City Council, seeks funding to help build an office tower and parking garage combination (requiring $27 million and $36 million in subsidies respectively). The building site is at the corner of 13th and Main, right in the heart of downtown. Supporters of the project argue that the subsidies would help provide needed office space.

As ludicrous as the idea of government subsidizing private development in a popular area already is, it gets better—there are no tenants lined up to occupy the space. In other words, economic development officials want the government to spend $63 million on office space . . . just in case.

Jon Stephens, CEO of Port KC (which is currently an active participant in this proposal), attempted to explain this reasoning: “The demand for ready-to-occupy space has been proven in other markets. The demand appears to be present here.”

The editorial board is asking the correct questions in response to Stephens’ comment. If the demand is there, why are taxpayer dollars needed? If the demand isn’t, why would you ask taxpayers and government to take on that risk?

If downtown Kansas City is attractive to a company, then the company should pay for building its own office space. Private developers should be building based on market forces, without being cushioned from risk by taxpayer subsidies.

The Star’s editorial board is right: “It’s time for downtown projects in Kansas City to stand on their own merits, not on public dollars subsidizing private development.”

 

Band-Aids Can’t Fix the LIHTC

On last week’s Politically Speaking podcast, State Treasurer Scott Fitzpatrick indicated the governor would stick to his pledge of not reviving the state’s low-income housing tax credit (LIHTC) program until it is reformed. This is welcome news, but now lawmakers need to decide what constitutes adequate reform.

As I’ve discussed before, there are many problems with Missouri’s LIHTC program. The LIHTC program doesn’t actually increase the amount of available affordable housing across the state, making it a bad investment for Missouri taxpayers. Last month, Fitzpatrick concurred and stated, “The long-term benefit of making some meaningful change to the program outweighs the short-term cost of there being a backlog of people wanting housing.”

During this past legislative session, both chambers separately passed measures intended to improve the program, though neither became law. Ideas for reform included allowing transferability of credits, improving the program’s transparency, and providing a cap on credits the state could authorize yearly. While each change would be an improvement, none of them address the program’s core issues.

Reviving a low-income housing program in which barely forty cents of each dollar actually goes toward building new housing for low-income individuals is simply not a good use of taxpayer dollars. Any effort to provide “meaningful change” to the program must address this glaring concern. For ideas on substantive reform, why don’t lawmakers begin by examining how other states have been able to do more for less?

Minor tweaks won’t make the LIHTC a good investment for Missouri. It is time for a major overhaul.

 

What’s Wrong with St. Louis Economic Development Incentives? Everything

Growing a business is difficult. Business owners who have successfully overcome all the usual obstacles have my respect. Policymakers can help entrepreneurs by making sure regulations are minimally intrusive, taxes are least disruptive, and the marketplace is open and fair.

Unfortunately, that isn’t usually what happens in practice when government tries to help business.

Consider a recent story in the St. Louis Business Journal about the owner of the Civil Life brewery and his effort to use taxpayer subsidies to expand. Everyone seems to be well meaning, but good intentions aren’t enough in designing good policy.

The business owner sought special tax treatment from the city in order to expand his business. The St. Louis Development Corporation (SLDC) agreed, and the businessman thought he had a deal. Before the 33-member St. Louis Board of Aldermen—and you thought presidential primaries were crowded—could approve the deal, one member introduced a resolution seeking a slightly better deal for the city. The owner objected to this new deal and scrapped the expansion plan.

The executive director of the SLDC told the Journal, “Generally, most of the aldermen are very comfortable with our analyses.” I cannot understand why this would be the case. The SLDC’s own examination of its economic development incentives concluded, “. . . it is clear that the City gains no net benefit from an extremely costly program with no real economic development impact.” The SLDC’s point is that they are necessary to help save the city from enacting bad programs. But if that’s the case, why is St. Louis rife with extremely costly programs with no real economic development impact?

In the Journal piece, Megan Green, the alderwoman who sought a better deal in this particular case, made an excellent point about the business in question:

If their business model is such that they cannot expand and pay a few thousand dollars more in taxes, the difference between a 95 percent and 90 percent abatement, after having a 100 percent abatement for the last eight years, then the business model needs to be re-evaluated.

Unfortunately, this statement didn’t go far enough. If the business needs any subsidy at all then the business model may need to be re-evaluated. After all, if a business is seeking a subsidy, the business owner in question has an idea that private investors do not think is a good one. If private investors won’t invest their own money, why should taxpayers invest theirs?

This whole episode speaks to the utter dysfunction of economic development policy in St. Louis. If the alderwoman can be faulted for anything, it isn’t standing in the way of this deal; it’s for not standing in the way of every deal. Her reasoning is correct; it just needs to be more widely applied.

 

Mississippi Does What Missouri Won’t for Students with Disabilities

Hundreds of students with disabilities in Mississippi have a much-needed opportunity:  the option to choose a school that serves their needs. In 2015, Mississippi enacted an Education Scholarship Account (ESA) program for special needs students. The program provides scholarships so students can attend a school of their choice. The program served just under 200 students in its first two years and about 350 students in 2018 and 2019.

Unfortunately, students with disabilities here in Missouri don’t have the same options. Just a year after Mississippi’s program was passed, Missouri passed an ESA program called Bryce’s Law for students with disabilities. But the program was not properly designed, so not one student has benefitted from it. In Missouri, unless a family can afford a private education, students with disabilities must remain in their assigned schools.

The difference between Missouri and Mississippi in educational freedom for students with disabilities grew even starker this year. The Mississippi state legislature recently approved an additional two million dollars of scholarship funding for the next school year. This funding will support scholarships for students who have been on the program’s wait list.  

Students with disabilities face unique obstacles. Finding a school with the right programs, services and resources is vital. States like Mississippi are supporting their students with disabilities through ESAs. Meanwhile, Missouri has a scholarship program with no scholarship money. Bryce’s Law will sunset at the end of this year, giving the legislature an opportunity to pass a properly funded scholarship program next year. Isn’t it time for Missouri to support students with disabilities by allowing them greater opportunities to get the education they need?  

 

What Does the Research Say about Earning Industry-Recognized Credentials?

As we learn more about the effects of industry-recognized credentials (IRC) for high schoolers, the more impressive these credentials appear to be. 

IRCs are awarded by third-party industry organizations and certify that students have mastered skills needed for a particular job such as a welder, automotive technician, certified nursing assistant, or software developer. Recent research from ExcelinEd shows that, in addition to improving employment prospects, earning an IRC is associated with increases in graduation rates, college enrollment, and earnings.

In the study, which was released this month, researchers looked at outcomes for hundreds of thousands of students and found overall positive outcomes for IRC earners. In Florida, Indiana, and Kentucky, earning an IRC was positively associated with graduating from high school on time. Students in Florida and Kentucky who had earned an IRC were more likely to receive an associate’s degree if they enrolled in community college. The researchers also observed up to a 12 percent boost in wages for full-time workers after high school in Florida and Indiana.

The only potentially negative effect the researchers observed was that credential earners in Kentucky were less likely to graduate with a bachelor’s degree if they enrolled at a four-year college or university. One possible explanation they provided is that “the opportunity cost of each additional year of education is higher for credential earners than non-earners.” In other words, students just may not have thought it was worth finishing a bachelor’s degree and would rather be working.

Unfortunately, high schoolers in Missouri earn only about 8,000 IRCs each year, meaning that only a small fraction of the over 180,000 high school students who participate in a career and technical education program earn an IRC.

Some states have enacted policies that reflect the value they see in credential-earning, and Missouri should take note. For instance, Florida implemented a bonus program for teachers awarding them $25 or $50 for each student who earned an IRC. During the 2007–08 school year when the program started Florida high schoolers earned only 803 credentials total. Last year, they collectively earned over 121,000 IRCs.

Missouri policymakers have already shown a willingness to invest in our workforce—the legislature just passed Fast Track this session to help adults who want to pursue degrees in high-demand fields—but are they funding programs that are proven to work? Clearly, financial incentives have worked to get more students IRCs in Florida, and students have benefitted. With such a payoff for a relatively small investment, teacher bonus pay looks like a win-win-win for the state, teachers, and students.

Listen to our podcast on this subject here.

Building Bike Lanes to Encourage Cycling Is Not Sound Policy

Cycling advocates in Kansas City have been looking for any good news to help trumpet the $400 million-dollar plan to expand bike lanes. BikeWalkKC seems to think it has found one such bit of good news when it comes to daily rider counts on Armour Boulevard:

The increase from 7 to 44 people on bikes might not seem like much, but it’s still early days and Armour is a short corridor that does not yet connect to any other bike lanes or trails. Upcoming projects like Charlotte/Holmes and The Paseo will start to create a network out of isolated pieces of infrastructure.

BikeWalkKC boasts that this is a 600% increase in daily cyclists on Armour. That is true but underwhelming. We’re talking about 44 cyclists in a metropolitan area with more than two million people.

How do we know 44 people a day are now using the Armour bike lanes? The post didn’t say. I followed up with an employee from Kansas City Public Works, who confirmed that BikeWalkKC was using data from its one-time departmental bike counts. No one knows if 44 riders is a one-time phenomenon or a daily occurrence.  

Bike advocates claim that building infrastructure will create demand. Patrick Tuohey talked about this assertion in an earlier blog post, citing the demand analysis BikeWalkKC published to support this project. The analysis was performed without any current cyclist counts. A demand analysis that doesn’t bother trying to measure current demand to help gauge future demand seems more like guesswork than rigorous assessment.

Building bike lanes and hoping that demand will follow is not sound public policy. Data actually shows a downward trend of bike commuters in the United States. Only about 0.1 percent of Kansas City’s metro population commuted by cycling in 2014, and recent data from Public Works suggests that number has dropped even lower.

“If you build it, he will come” was an effective line for a movie, but that idea doesn’t translate to municipal policy. Kansas City has more pressing needs, and better ways to spend taxpayer dollars.

USDA Moves to Kansas City, Gets Incentives

Alex Muresianu of Reason wrote recently about the USDA moving 550 positions from the Washington, D.C. area to the Kansas City area. This was a good move for the USDA because of the cost savings to the federal government:

The USDA’s cost-benefit analysis found that shifting these two agencies to Kansas City would reduce costs by 11.3 percent, saving taxpayers roughly $300 million (in nominal terms) over the next 15 years. These savings stem primarily from the fact that Kansas City has dramatically cheaper real estate than D.C., as well as marginally lower cost of living. The USDA’s report noted that the median sale price of a home (a major factor in determining cost of living for employees) in Kansas City is $205,400, compared to $420,000 in D.C.

This isn’t a surprise to me; I moved to Kansas City from Washington, D.C. in 2005. Nor should it surprise anyone who read our paper on the competitive advantages of the Kansas City region, as the paper mentions low cost of living as a major advantage for Kansas City.

While we don’t know exactly were in the region the USDA will locate, it was disheartening to read in The Kansas City Star that $26 million in “unspecified” incentives were part of the deal. The authors reported:

Greg LeRoy, executive director of the watchdog group Good Jobs First, accused the USDA of engaging in an Amazon-style selection process that made states compete for the jobs with incentives.

“It’s outrageous that the USDA would run an auction. This is the extreme version of privatized behavior by the federal government. Uncle Sam has no business running auctions, dangling jobs on state and local taxpayers,” he said.

LeRoy said the final competition the USDA is setting up between Kansas and Missouri is reminiscent of how corporations set municipalities against each other after a region has been selected.

“This is classic site location consultant chicanery…This is an ugly, extreme version of Uncle Sam imitating Jeff Bezos. Yuck. If I were a Missouri or Kansas taxpayer, I would never stand for this. And as a federal taxpayer I’m cross-eyed.”

It’s a shame that the USDA encourages such behavior. It’s a shame that the Kansas City region plays ball, and it’s a shame that we’ll now fight among ourselves for the specific USDA location.

I discussed this topic with Pete Mundo this morning on KCMO Talk Radio. Click here to listen to the segment.

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