Missouri’s Biggest Cities Spend $100 Million Annually Just to Give Away Money!

Posted on by Patrick Tuohey

An excellent story in the St. Louis Business Journal points out that according to a recent study by the Milken Institute, Kansas City and St. Louis are at best middling when it comes to economic growth. Reporters Brian Robbins and Jacob Kirn augmented that study by highlighting just how much Missouri’s two biggest cities spend on economic development to get such unimpressive results:

Nine key organizations, including the St. Louis Economic Development Partnership, St. Louis Regional Chamber and St. Louis Development Corp., claim a role in economic development. They collect and spend some $78 million annually, mostly from businesses and taxpayers.

…Kansas City counts roughly 10 key entities focused on development, and spends $21 million, according to the review. Its organizations include the Unified Government of Wyandotte County/Kansas City, Kansas and Kansas City Area Development Council. Kansas City’s rankings for job growth (91st), wage growth (83rd), and high-tech gross domestic product growth (96th) were better than those of St. Louis.

Note that the combined $99 million spent in Kansas City and St. Louis is just on the staff and overhead of the organizations that offer economic incentives—it does not include the additional hundreds of millions of dollars for the incentives themselves! While Kansas City’s growth barely places us in the top half of the 200 cities studied, St. Louis fares much worse. The Lou ranks 152nd in job growth, 142nd in wage growth, and 99th in high tech GDP growth.

Despite faring slightly better than St. Louis, it appears Kansas City proper isn’t getting much for its efforts. If you look at the news release webpage of the Kansas City Area Development Council—the same folks that put together the still-secret regional bid for Amazon’s second headquarters—you’ll find ten press releases for 2018. Several of them talk about positive developments in the Kansas City “region,” but only one, TrialCard, is actually about new jobs within the borders of Kansas City, Missouri. The announcement projected 225 new jobs.

Well, maybe. A Kansas City Business Journal story at the time suggested those numbers are temporary:

The Kansas City center will get up to the 200-225 employee mark beginning around November, including temporary workers, and drop to between 100 to 150 after about February, (TrialCard VP Scott) Dulitz said. Over time, he said, activity—and the employee count—could increase.

As if to underscore the St. Louis Business Journal’s point about the money spent, the release included:

KCADC was proud to work with a number of regional partners in attracting TrialCard to the region including the State of Missouri, Missouri Partnership, City of Kansas City, Missouri, Economic Development Corporation of Kansas City, Missouri, Clay County Economic Development Council, KCP&L, Spire Energy, Cushman & Wakefield and CBRE.

The problems with Kansas City and St. Louis won’t be solved by lavish economic development incentives. Instead, city leaders need to focus on the basics: infrastructure, public safety, education and the like. There is no shortcut to success—no matter how much you spend.

 

Proposal to Make PACER Free to the Public Deserves Support

Posted on by Patrick Ishmael

Court documents are, generally speaking, public information, and in Missouri the public has free access to a vast array of state litigation information through its Case.net system. Unfortunately, the same can’t be said for federal judicial records currently nested behind the PACER (“Public Access to Court Electronic Records”) paywall. However, if one U.S. representative has his way, that may change. Ars Technica reports:

The PACER system has been on the Web since the late 1990s. To avoid using taxpayer funds to develop the system, Congress authorized the courts to charge users for it instead. Given the plunging cost of bandwidth and storage, you might have expected these fees to decline over time. Instead, the judiciary has actually raised fees—from 7 cents per page in 1998 to 10 cents per page today. Even search results incur fees. The result has been a massive windfall for the judiciary—$150 million in 2016 alone.

Critics like the legal scholar Stephen Schultze point out that this is not what Congress had in mind. In 2002, Congress required that the courts collect fees “only to the extent necessary” to fund the system. It obviously doesn’t cost $150 million per year to run a website with a bunch of PDFs on it. Despite that, federal courts have used PACER revenues as a slush fund to finance other court activities. For example, one judge bragged at a 2010 conference about using PACER funds to install flatscreen monitors and state-of-the-art sound systems in court rooms.

Legislation has now been introduced that would require courts to make PACER documents available for download free. And this is a good thing.

I am sympathetic to the concern that the public writ large should not be on the hook for every undertaking by government, which is why I often support user fees for a wide array of government services, including for roads. But when it comes to good governance, there is a shared interest in transparency that government should bake into its standard operating procedure.

In slight contrast to our Show-Me Checkbook Project, the interest in transparency in our courts isn’t necessarily about oversight; while cities themselves are often black boxes to the public in terms of their spending, most court records are easy to obtain. The question in both cases, however, is whether the public should essentially have to pay twice for these records: through our tax dollars first, and then again when we want to see what our tax dollars have paid for.

For purposes of good governance, I don’t think paying twice—for checkbook records, or for court records—is appropriate, and I hope PACER becomes an open resource for the public very soon.

Innovation in Child Care Coming from Private-Sector Employers

Posted on by Emily Stahly

Here’s a problem most working parents have faced: You’ve found a good sitter or daycare center for your children, but on a day when you absolutely need to be at work, your sitter is ill—or maybe it’s your child who is ill, and the daycare center won’t let you bring her in. It’s hard enough to find one trustworthy childcare provider. Having a backup plan for emergencies is even tougher.

It’s a common problem that can cause real difficulty for anyone whose job demands aren’t always flexible, but do we need the government to fix it? Here are how some employers have chosen to deal with the issue: Companies including General Mills and Starbucks now offer a backup childcare benefit, and Best Buy recently began rolling out a new program that helps parents by giving them 10 days of subsidized childcare a year that they can access quickly through Care.com. The only cost to parents is a $10 a day co-pay.

Such programs can help both companies and their employees: The company doesn’t lose productivity from workers having to stay home, and employees don’t have to use up valuable vacation or sick days to attend to their kids when other plans fall through.

It’s a win–win scenario—a private-sector solution based on a voluntary, mutually beneficial arrangement. And it doesn’t require government intervention in the form of subsidies, which would require a decision about whether to pay for them in higher taxes or to reduce spending elsewhere. Best Buy specifically cited the lower federal corporate taxes as helping make this new backup childcare benefit possible. Wouldn’t it be better for Missouri policymakers to take a similar approach by simply making it easier for companies meet the needs of their workers?

 

2018: A Bad Year for Government-failure Deniers

Posted on by Andrew B. Wilson

Are you a government-failure denier – someone who believes that the government that governs best is one that overflows with good intentions, regardless of the cost? Are you someone who thinks a lot about “market failures” and never stops to think about government failures?

Well, my friend, if you are, I have to admit: You had a couple of modest “wins” in 2018. Here in Missouri, free-market thinking took it on the chin in two ballot initiatives. On Aug. 7, by an overwhelming majority, Missourians voted to kill a right-to-work law passed by the Missouri Legislature in 2017. Then on Nov. 6, Missouri voters passed another ballot initiative boosting the state’s minimum wage from today’s $7.85 to $12 by 2023.

Compared with other news, however, those victories by deep-pocketed trade union groups and their co-dependent, big-government allies were small beer. The year’s big story was the striking success at the national level of free-market policies in driving faster growth and widely shared prosperity for all groups of people. For two years, the federal government has been lifting the burden of regulations and taxes on businesses and consumers alike. The dynamism of American capitalism has done the rest.

Recent GDP growth has been close to 4 percent – or about double the rate sustained over the eight years of the prior administration. Suddenly, there are more job openings than people seeking work. That, in turn, has led to higher pay for people at all income levels.

On Oct 2, Amazon CEO Jeff Bezos announced that he was raising his company’s internal minimum wage for warehouse and other unskilled workers to $15 an hour. This led to mutual back-slapping between Bernie Sanders and Bezos. The self-declared socialist complimented the world’s richest man on “doing the right thing,” and Bezos responded with self-congratulations, saying he hoped that other companies would follow his lead.

But guess what? He wasn’t leading. The U.S. Labor Department recently reported that wages for nonsupervisory warehouse employees had risen 4.6 percent from a year earlier, to $17.87 an hour. That’s almost $3 an hour more than the wage set by Amazon’s act of supposed enlightenment. Faced with the demands of an expanding economy and a tight labor market, companies did what they had to do – they raised wages to poach workers or keep the ones they have. So it wasn’t Mr. Bezos who deserved the compliment, but the unimpeded operation of the free market.

If you look around the country and the world, you see people everywhere who are fed up with the cluelessness of wealthy and long-established political elites who continue to pursue highly questionable policy objectives regardless of the cost in higher taxes, reduced paychecks, and lost economic growth. We are witnessing what the Wall Street Journal calls a “Global Carbon Tax Revolt,” with ordinary people rising up in protest against fuel-tax hikes and costly climate-change initiatives aimed at boosting unreliable renewable power. That has happened with the violent “Yellow Vest” protests in Paris and many rural areas that have rocked the presidency of France’s Emmanuel Macron. Other hot spots in the same revolt by taxpayers opposed to sacrificing growth on the altar of environmental piety include Germany and Canada, along with the states of Arizona, California, and Washington.

In sum, 2018 was a bad year for government-failure deniers. It was a much better year for those who believe in the unrivaled power of free markets to create and spread wealth and to promote greater individual freedom, responsibility, and creativity. But 2018 wasn’t all roses either, with rising fears of a global trade war sparked by retaliatory tariffs.

Tariffs are another tax – a tax on commerce. Of course, the more you tax something, the less you get of it. Missouri is a soybean basket to the world. Our state can ill afford a major disruption in world commerce. Neither can the nation. Looking ahead to 2019, let us hope that the substantial economic gains made in 2018 are not jeopardized or lost through the folly of managed (or mismanaged) trade policy.

Are Missouri Teacher Salaries Going Down?

Posted on by James V. Shuls

Last year, teachers went on strike in West Virginia, Oklahoma, Kentucky, Arizona, and Colorado and a general sense of unrest in the education profession swept the nation. As was written in Education Next, “Those walkouts seem to have lent new urgency to teacher demands for salary raises and increased financial support for schools.” Each year, Education Next conducts a survey on a number of education issues. Following the strike, 49 percent of respondents said we should increase teacher pay. This was a 13-percentage-point jump over the previous year’s survey.

In a separate analysis in Vox, Alvin Chang suggests that this unrest may have something to do with the fact that teacher salaries are failing to keep pace with inflation. Using average teacher salaries in each state from 2004 to 2016, Chang finds that teachers have had their pay essentially cut by three percent over this period when we account for inflation. In Missouri, that cut was 2.3 percent.

There is, however, a glaring problem with this calculation. From 2003 to 2016, there have been demographic and staffing changes in the teacher workforce. Schools have decreased class sizes, hiring more, younger teachers. With an influx of less experienced teachers, the average pay will be lower. But this doesn’t mean the salary schedules (the pay systems used for teachers) are losing ground to inflation.

To assess whether teacher salary schedules in Missouri are keeping up with inflation, I reviewed the annual salary report of the Missouri State Teacher’s Association (MTSA). MSTA collects salary schedules from each school district. The report lists the average pay for four key categories: bachelor’s degree minimum and maximum, and master’s degree minimum and maximum. The data cover a five-year period.

Below, I show the average salary, as reported on the salary schedules, in each of these categories.  As you can see, pay has been increasing over this period of time. The question is whether these increases keep pace with inflation, which helps us assess whether teacher salaries are going up or down in real terms without the impact of demographic changes to the workforce.

Figure 1: Average Salaries in Missouri Based on Salary Schedules

Teacher salary graph 1

In the next graph, I adjust the salaries for inflation. As a result, all values are in constant 2017 dollars.

Figure 2: Average Salaries in Missouri Based on Salary Schedules (Inflation Adjusted)

Teacher salary graph 2

As you can see, almost all of the lines are fairly flat. From 2013 to 2017, salaries dropped by a small margin for the bachelor’s minimum salary, the master’s minimum, and the bachelor’s maximum, while the master’s maximum saw a small increase.

  • Bachelor’s Minimum Change: -0.001%
  • Master’s Minimum Change: -0.002%
  • Bachelor’s Maximum Change: -0.005%
  • Master’s Maximum Change: +0.007

There is nothing wrong with wanting to ensure that teachers are well paid, but we need to be careful about how we analyze the data. By simply comparing average teacher salaries over time, we forget that the population of teachers is changing.

When we look at the actual salary schedules, which determine how much teachers are paid, we see little change in inflation adjusted pay scale over the past five years. Salary schedules were keeping pace with inflation, but the population of teachers changed, giving some the misleading impression that teacher salaries were falling behind.

Millennials Are Buying in the Suburbs

Posted on by Patrick Tuohey

Kansas City has been on a spending spree to try to attract millennials downtown, having been caught up in the now-discredited “creative-class” strategy originally promulgated by urbanist Richard Florida. Note that this is the same Richard Florida who the Kansas City Area Development Council paidto assist with its Amazon proposal, only to say later that cities felt like they were “being taken” by Amazon and should “think twice“ about wanting the headquarters. But Kansas City jumped in blindly as it tried to woo millennials, spending “probably in excess of a billion” dollars in an attempt to create a hipster paradise downtown. Is it working?

In a word, no.

Despite wishful thinking (and some fuzzy math) from boosters like the Downtown Council, millennials nationwide are choosing to leave cities when they decide to buy a home. According to a study conducted for Ernst & Young, a plurality of millennials, 38 percent, live in the suburbs. According to CNBC,

Among millennial homeowners, the suburbs are the clear No. 1 choice: 41 percent of millennial owners opt for suburbs over cities, small towns or rural areas. That’s up from 36 percent in 2016, Cathy Koch, EY’s Americas Tax Policy Leader, tells CNBC Make It.

It’s not just that they’re settling down as they get older, either, Koch says. When looking at the very same age group today compared to two years ago, there’s an increase in the share of millennials living in the suburbs.

“It was a surprise to me to see this generation increasingly choosing suburban locations to buy homes,” Koch says, but the trend makes sense: “The ‘suburbs’ may very well be smaller cities close to larger urban areas — these still afford the richness of city living (including employment opportunities) at maybe lower home prices.”

The focus on Kansas City’s downtown has not yielded a return worthy of the investment. We’re not attracting millennials. Even the tourism numbers promulgated by the city’s tourism board are suspect. Certainly Kansas City is suffering the same fate of many cities through no fault of its own. But the degree to which that city leaders have focused on developing streetcars, convention hotels, and the airport—while seemingly ignoring a years’ long spike in homicides—demonstrates an unwillingness to face reality.

 

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