State of the State Highlights Show-Me Research

In Governor Parson’s State of the State address last week, he touched on many topics that Show-Me Institute analysts have been writing about for years. A brief list of topics from the speech, accompanied by links to relevant writings from Show-Me Institute researchers, follows:

  • Workforce development wasn’t just mentioned in the speech—it was singled out as one of the two most important policy priorities moving forward. Patrick Ishmael has been out in front of this issue, writing on the importance of workforce development, particularly in the area of vocational training. Readers of this blog may also have seen posts by Emily Stahly on the potential for charter schools to help give Missouri a more skilled workforce, and by Abigail Burrola on how a focus on industry-recognized credentials could better prepare our high-school graduates for good jobs after graduation.
  • Infrastructure was the other issue designated as a top priority, particularly the pressing need to fund necessary repairs and improvements to Missouri’s highway system. Back in 2016, Joe Miller wrote a comprehensive paper on options for funding the Missouri Department of Transportation. More recently, Graham Renz and Patrick Tuohey have advocated for user fees as the best way to fund our state’s transportation needs, whether through a gas tax or some form of tolling.
  • The Governor noted the drain on the state’s finances caused by Missouri’s high incarceration rate and his desire to avoid building more prisons. Ways to help keep prison populations down include reform of laws governing mandatory minimum sentencing and efforts to help ex-offenders enter the workforce, as Patrick Tuohey has written.
  • The need to control the growth in the cost of the state’s Medicaid program was also discussed. Elias Tsapelas has not only written on this topic, but has also looked at measures being taken in other states to address the problem

Even topics mentioned only in passing during the speech have been covered by Show-Me Institute analysts, including telemedicine, tax credit reform, and educational challenges facing children with autism and other disabilities.

It’s encouraging to hear that so many long-overdue reforms may be on the docket during the current legislative session. As we watch to see if 2019 will bring important changes to Missouri policy, we’ll continue to research and advocate free-market solutions that will help move our state forward.

New Year, New Sales Taxes

By now it shouldn’t surprise us. As we head into the new year, governments across Missouri are getting ready to collect more in sales taxes.

Over the past eight or so years, the number of distinct sales tax jurisdictions in Missouri has grown by more than 9 percent—a total of 199 new jurisdictions created. This growth is caused by several factors, but mostly by new and overlapping special taxing districts, such as ambulance districts, levee districts, and, most prominently, transportation development districts (TDDs) and community improvement districts (CIDs). These districts are formed to collect sales and other taxes to fund various improvements and services. Unfortunately, TDDs and CIDs usually just help pad developers’ bottom lines.

Graph: Statewide Sales Tax Jurisdiction and Rate Growth

Source: Missouri Department of Revenue, Sales/Use Tax Rate Tables, numerous years.

As the figure above shows, with the increase in sales tax jurisdictions comes an increase in the average sales tax rate. This means that as more and more jurisdictions come on the scene, taxpayers cough up more and more money.

However, just because the average sales tax rate has been on the rise, it doesn’t necessarily mean all Missourians are paying more in sales taxes. As noted above, the driving force behind the rate increases has been the creation and overlapping of special taxing districts, which usually encompass relatively limited geographic areas. And although the TDDs and CIDs that are driving the rate growth are all over the state, about two-thirds are in the St. Louis and Kansas City metro areas, where much of the state’s population lives. So, overall, even if some Missourians are not significantly affected by the recent rate increases, many are.

Unfortunately, as things stand there is little taxpayers can do to curb the state’s sales tax rate growth. That’s because many if not most TDD and CID taxes can be established without the approval of the general public. These districts can be formed by property owners—often developers—meaning the taxpaying public has no say in whether the rate hikes become law. Real reform would have to come in the form of significant changes to the laws governing TDDs and CIDs. So, as the new year gets going and the legislature meets in Jefferson City, lawmakers keen on lowering (regressive) taxes should take some time to think about redesigning the laws that allow these districts to be established.

 

 

Kansas City and St. Louis Increasingly in Debt

In June 2013, the Show-Me Institute published a paper comparing St. Louis and Kansas City’s expenses  with six peer cities. One of the expenditures compared was debt service per capita. For Missouri’s two biggest cities, debt was high then and has only gotten higher since. In an upcoming paper by Show-Me Institute analyst Elias Tsapelas, we revisit those numbers. The chart below shows just the spending on debt.

Debt Service Spending Per Capita

Kansas City’s and St. Louis’s debt service per person were the highest of the cities we studied a few years ago and remain the highest today, despite some dramatic increases in debt in Louisville and Denver. Tulsa and Indianapolis actually reduced their per capita debt payments!

For Kansas City, debt service spending rose from $296.24 per person in 2011 to $322.90 in 2017. St. Louis’s numbers rose from $328.15 to $369.33 in the same time period. Long-time readers of this blog shouldn’t be surprised; we pointed this out almost two years ago when Kansas City and St. Louis ranked 101st and 112th out of 166 cities in a study of financial health  by the California Policy Center. Nor should it surprise Kansas City’s leaders. As we wrote at the time,

The Mayor’s own Citizens Commission on Municipal Revenue 2012 report cites high debt as a problem and offers, “Because current debt levels are high compared to peer cities, the impact on the City’s credit rating from issuing additional and significant levels of debt must be of primary concern.”

As Kansas City approaches a mayoral election and St. Louis yet again ponders subsidizing a sports stadium for wealthy would-be owners, city leaders need to focus on long term financial sustainability and stop buying expensive municipal baubles on taxpayer credit.

 

 

 

 

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

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.

 

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