How Can Missouri Get More Out of Its CTE Programs?

Posted on by Abigail Burrola

It’s an alarming statistic. Even though more than 90 percent of Missouri high school students graduate, the Department of Elementary and Secondary Education (DESE) reports that just 42.5 percent (page 4) are prepared for college or a career after graduation. For students headed to college, this lack of preparation can lead to a rude awakening. But students who are interested in a career that does not require a traditional college degree also face problems when their high school education doesn’t teach them the skills they need to make themselves attractive to employers

Hundreds of career and technical education (CTE) programs across Missouri offer practical training in fields such as agriculture, business, health care, culinary arts, construction, computer science, and others. In many cases, students who complete the required coursework are issued certificates to that effect. But a school-issued certificate alone isn’t always enough to ensure students can access the workforce; they need credentials that carry weight with employers in the world beyond school.

Private-sector employers have everything to gain by ensuring that new graduates are ready to start work right away. That’s why many professional associations issue their own industry-recognized credentials (IRCs), such as Certified Nursing Assistant (CNA) or Automotive Service Excellence (ASE) certification. CTE students don’t have to take IRC exams to graduate, but passing an exam can save students time and money at the outset of their careers. For example, a CNA certificate that could be earned as part of a student’s high school coursework might otherwise require about 5 months of coursework and several hundred dollars in tuition at a community college.

To promote IRC attainment among high school students, several states have begun offering teachers bonus pay for every student of theirs who passes an IRC exam. For example, for every student who leaves high school ASE certified, the auto shop teacher might receive $25 to $50.

Linking teacher bonuses to IRCs has boosted student IRC attainment in states that have adopted the policy. For example, Florida awards a $50 bonus to a teacher for each student who earns an IRC after taking a course that could earn them college credit in the relevant subject, and $25 for each student who earns an IRC after taking only high-school–level classes. IRC attainment has grown from 803 graduates in 2008 to over 86,000 in 2017.

Similarly, since offering CTE teachers bonus pay when students earn IRCs, North Carolina has seen a 53 percent growth in five years. In the 2016–2017 school year, over 160,000 IRCs were earned. By comparison, there were 8,566 IRCs earned in Missouri the same year (according to information provided by DESE), meaning that Missouri has plenty of room for improvement. Unbelievably, just six high school students passed the Masonry IRC exam and just five passed the Construction IRC exam in Missouri last year.

More students getting IRCs could create a stronger workforce for our state. Other states are finding creative ways to make this happen—shouldn’t Missouri?

Let Bryce’s Law Live Up to Its Potential

Posted on by Susan Pendergrass

Parenting is hard. We want to do more than just keep our children safe and happy. We try to give them every possible opportunity to succeed in life, and that effort often begins with finding them the best possible school, or at least making the best of their assigned public school.

Parents of children with special needs face especially daunting challenges. Upon finding out that they will be raising a child with a disability, they must immediately learn as much as they can about their child’s condition. As the child approaches school age, the parents have to think about so much more than just a classroom and a teacher. It’s not surprising, therefore, that parents of students with disabilities have a particular need for more options regarding their child’s education.

Fortunately, four years ago the Missouri legislature recognized this need and passed Bryce’s Law, named for Rep. Dwight Scharnhorst’s grandson, who was born with severe autism. Bryce’s Law allows parents of children with autism, Down Syndrome, and several other disabilities to seek scholarships through certain scholarship-granting organizations to attend private schools.

Unfortunately, the legislative process resulted in a final bill that was materially different than the one Scharnhorst proposed. The final version of the law was structured in such a way that not a single child has received a scholarship. In fact, not even one of the contemplated scholarship-granting organizations has even materialized. Imagine the hundreds or thousands of children who have missed out on scholarships because elected officials in Jefferson City failed to draft an effective means for providing those scholarships.

The law will be up for renewal in 2019. Isn’t it time for the state of Missouri to put real funding behind Bryce’s Law and ensure it is a functioning program that can help Missouri students with special needs?

There were concerns in the past with “public” funding going to “private” (often religious) schools, but the recent Supreme Court decision in Trinity Lutheran v. Comer, from right in our back yard in Columbia, would seem to permit such funding so long as it was generally available to religious and nonreligious schools alike and that religious schools were neither favored nor disfavored in the application process.

If directly funding Bryce’s Law is a bridge too far, allowing the contributions to scholarship-granting organizations to be tax credits instead of tax deductions (as Rep. Scharnhorst had originally intended) is also a possibility. In that case, it would be the contributions of private citizens rather than money from the public treasury that would fund the scholarships. The state of Missouri already offers a raft of pro-social tax credits for everything from child advocacy and crisis pregnancy centers to food pantries to youth development and crime prevention programs. Scholarships for students with special needs are an equally worthy cause.

Note that families don’t have to attend private schools. If they are being well served by their assigned public school, they can stay there. If, however, that public school is not meeting their child’s needs, they would have a chance to give another school a try.

There is a bitter irony to having a law on the books that could do so much for children with special needs, but cannot deliver the promised benefits because it fails to provide a viable funding mechanism. The time is ripe for the Missouri Legislature to fix its past mistakes and put Bryce’s Law to work for the families it was intended to help.

The Risk of City-issued Bonds

Posted on by Patrick Tuohey

Kansas City leaders tell us that the bonds issued by the Kansas City Industrial Development Authority to fund the construction of a billion dollar new terminal at Kansas City International Airport pose no risk to taxpayers. Repeatedly we are assured that if the project fails to generate enough revenue, the loss will be borne by private bondholders, not taxpayers.

Tell that to Platte County.

The Zona Rosa shopping district there cannot meet its bond obligation, and so the County has been considering covering the debt. In a March piece in The Kansas City Star, Platte County Commissioner Dagmar Wood said the effort amounts to “basically bailing out bondholders.”

According to The Bond Buyer magazine, the county board considered not making those payments, and as a result,

[S&P Global Ratings] slashed the rating on the Platte County Industrial Development Authority bonds for Zona Rosa deep into junk Sept. 7, to B-minus from A. The bonds were originally rated AA-minus based on the strength of the county’s guaranty subject to annual appropriation.

Let’s consider that “guaranty subject to annual appropriation.” It does not mean the County is bound to make up the difference; just that it will consider doing so each year as funds are available. The 2007 financial deal itself makes very clear that the county is not on the hook for the bonds (emphasis in the original),

THE BONDS DO NOT CONSTITUTE A GENERAL OBLIGATION OF THE AUTHORITY, THE DISTRICT OF THE COUNTY AND DO NOT CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY, THE DISTRICTS, THE COUNTY, THE STATE OF MISSOURI (THE “STATE”) OF ANY POLITICAL SUBDIVISION THEREOF WITH THE MEANING OF ANY CONSTITUTIONAL, STATUTORY OR CHARTER PROVISIONS OR LIMITATION.

Despite this, and because the County is considering not making such an appropriation, there may be considerable repercussions not just for the Zona Rosa project, but for Platte County and for the state! The Bond Buyer continues,

“S&P reports that the county is in strong financial and economic condition, but MMA assumes catastrophic downgrades for all Platte County securities should the IDA bonds default,” MMA wrote in its weekly commentary. “Further, MO appropriation bonds generally could see weaker price trends, particularly if market wide yields begin to rise.”

One can easily imagine a situation wherein a weak air travel market generates lower-than-expected revenue at KCI—below that needed to meet debt payments to bondholders. Just as with Zona Rosa, one can see that a rating agency might threaten to lower ratings for Kansas City despite the specific terms of the bond. Would Kansas City leadership then argue that taxpayers need to bail out the airport to avoid a reduction in our city bond rating?

The lesson for Platte County is that no publicly financed development is without risk to taxpayers. As Kansas City’s new terminal project lurches forward from error to error, it is lesson we ought to remember.

How Bad was the CDFA Study of Incentives in Kansas City?

Posted on by Patrick Tuohey

It was with great anticipation that I received the long-overdue study of economic incentives in Kansas City conducted by the Council of Economic Finance Agencies (CDFA). Even before the actual publication, I had been critical of the amount spent, the trade association (!) hired to do the analysis, and the repeated extensions given to them—making the report over a year late.

Sadly, my worst fears were realized when I received a draft copy of the report via an open records request. And the release of the final report hasn’t made things any better.  In short, the report tallies up the amount of subsidies awarded in Kansas City, tallies the investments made, and divides the latter by the former. Their conclusion was that “each incentive dollar invested generated $3.83 in additional tax revenue.”

During the years this study took to complete, was any effort made to answer the central question before policymakers—how much development happened because of incentives? If so, I can’t see any evidence of that effort. The question has been tackled by other researchers—most if not all of whom seem to arrive at the same answer: very little—or certainly not enough. The Upjohn Institute for Employment Research concluded in a July 2018 study that “for at least 75 percent of incented firms, the firm would have made a similar decision location/expansion/retention decision without the incentive.” That is a devastating conclusion, suggesting that three out of four dollars spent on incentives is unnecessary.

As a result, policymakers were vexed when the CDFA’s report was presented to the City Council on August 16. The report gives them no information that could help them distinguish good incentive investments from bad.  Councilmembers’ repeated questions about how this report can inform future decisions were met with answers that seemed designed to obfuscate.

Consider the following exchange between one councilmember and the director of the office of economic development (starts at 48:15):

Councilman Lucas: So there is some public conversation at times to the idea that we should not incentivize on the Country Club Plaza, we should not incentivize downtown. I guess the answer that I am hearing is that we can’t quite answer that question. Is it your view, Ms. Tyndall, that this study can actually help answer the question as to whether we have provided sufficient incentivizing activity such that we do not need to continue to extend incentives in certain areas?

Kerrie Tyndall: The way that I would respond to that question is to say that I think that this study shows that in general economic development incentive tools do work. They do provide an overall positive return on investment to the city when we apply them, but they are ultimately—at the end of the day—a tool. And someone has to take advantage of those tools in order for us to see an impact and from a public sector perspective we can certainly invest our dollars and be in control of how we invest our dollars when we’re trying to leverage investment of the public sector we’re somewhat dependent upon them to take advantage of those tools in order to accelerate some of the social gains that we want to achieve . . . [I gave up transcribing here].

In other words, no. City officials seem to be saying that taxpayers ought to subsidize every project in order to realize that three-to-one investment return. After about 90 minutes, the mayor seemed frustrated that council members weren’t buying the report’s conclusions. He asked one of the consultants—PGAV Planner’s Adam Stroud—about whether the incentives created the return that the report touts (starts at 1:25:55),

Mayor James: If $288 million [in incremental real property taxes*] is as a result of some incentive being used, if there is no incentive being used, would the number be zero?

Adam Stroud: I can’t answer that.

James: Would it be less than the $288 [million]?

Stroud: I also can’t answer that.

Again, unlike so many other studies of economic development incentives, this one simply omitted any analysis of whether incentives were necessary to drive development. This report just makes that assumption, but as Stroud honestly points out, he doesn’t know because this study didn’t consider it.

Despite the costliness and tardiness of the study, this giant hole in its design makes the report essentially worthless, both for assessing of existing incentive subsidies and for guiding future policymaking.

*The $288 million that the mayor refers to is actually the amount that will be returned to the developer instead of going to fund city services, so it’s unclear why the mayor asks the question this way. Nevertheless, it’s clear from the context that the mayor is looking for a link between subsidies and higher tax revenues, but this study can’t establish such a link.

Higher Taxes = Less Innovation

Posted on by Patrick Tuohey

When researchers at the Show-Me Institute argue that high tax burdens encourage people to leave Kansas City and St. Louis, city leaders often react with derision. Yet when they want to encourage development in their respective cities, they employ policies intended to attract investment by—surprise—reducing taxes through abatement, tax increment financing and the like. They may not want to admit it, but they are conceding our chief argument: Tax rates affect development.

Now we learn that high tax rates affect more than development. According to a new study from the National Bureau of Economic Research, tax rates affect innovation. The researchers used data stretching back to the early 20th century and looked mostly at state-level taxation. The large amount of data used by the researchers led to some impressive findings (page 33):

A one percentage point higher tax rate at the individual level decreases the likelihood of having a patent in the next 3 years by 0.63 percentage points. Similarly, the likelihood of having high quality patents with more than 10 citations decreases by 0.6 percentage points for every percentage point increase in the personal tax rate.

The report even anticipated some of the usual complaints about innovation in Kansas City that are tied to our development-incentive “border war” with Kansas:

We find that taxes matter for innovation: higher personal and corporate income taxes negatively affect the quantity, quality, and location of inventive activity at the macro and micro levels. At the macro level, cross-state spillovers or business-stealing from one state to another are important, but do not account for all of the effect.

Municipal leaders have invested a lot of taxpayer money and frothy eloquence in innovation and technology. Yet when it comes to actual public policy, such as with ridesharing, they have reverted to regulatory bad habits in both St. Louis and Kansas City.  They certainly aren’t supporting innovation in their tax policies.

If political leaders in Missouri want to spur innovation, they need to enact policies that stay out of innovators’ way—and burden investors less.

Kansas City Incentive Study Misses Opportunity

Posted on by Patrick Tuohey

Kansas City recently released a study of its economic development incentive programs. Unfortunately, rather than a rigorous examination of the link between incentive investment and returns, the city presents a basic logical fallacy: that because development happened after an incentive, it happened because of an incentive. And for this bit of sophistry taxpayers parted with $350,000.

The Kansas City Business Journal reported that the consultant who prepared the study couldn’t show “how much development might have occurred in the absence of all incentives.” This is no small oversight. Kansas City is spending or diverting hundreds of millions of dollars into various development schemes at significant cost to school districts, counties and other basic services. We ought to have some sense of whether this is working. No private sector CEO worth her salt would permit such a significant investment of resources without any idea of the return it was likely to generate.

Worse, the report’s inability to connect investment with return was not a bug; it was intentional. Plenty of organizations, academic and otherwise, have conducted research into this very relationship. In 2016, the St. Louis Development Corporation—the River City’s version of the Kansas City’s Economic Development Corporation—conducted exactly this sort of study and determined that the use of incentives could not be said to drive private investment or create jobs. Incidentally, the company that produced St. Louis’s study, The PFM Group, also submitted a lower bid on the Kansas City project than the vendor the city eventually chose.

A 2018 working paper published by the Upjohn Institute of Employment Research concluded in part, “For at least 75 percent of incented firms, the firm would have made a similar location/expansion/ retention decision without the incentive.” That is a devastating conclusion—and one that is largely supported by research elsewhere. Is Kansas City wasting three out of every four incentive dollars?

Unfortunately, city leaders don’t seem to want to know; the study they commissioned did not even attempt a but-for analysis. City Manager Troy Schulte heralded the study and encouraged developers to make more use of the program. Are we really to believe that every economic development incentive program in Kansas City is a wild success? Really?

The biggest disappointment of the study, as alluded to in the Business Journal’s editorial on the matter, is that the report cannot help policymakers sort good projects from bad. It cannot ensure that future decisions regarding incentives are data-driven. It simply took every bit of economic growth the city has seen and attributed it to the incentives that came before. That is not analysis that encourages better policy. It is political cheerleading, and it is unworthy of the people and policymakers of Kansas City.

Agency Fees in Government Aren’t Allowed in Missouri, But That Didn’t Stop Some Local Governments

Posted on by Patrick Ishmael

When?Janus vs. AFSCME?was decided earlier this summer, its immediate effect was on the 22 states that allowed government unions to collect agency fees from workers. Thanks to?Janus, those government workers can no longer be compelled to support a union as a condition of employment. But fortunately, workers in Missouri had those rights already by statute, namely Missouri Revised Statute §105.510. That section makes clear a number of things, but relevant to the agency fee discussion?is this?(emphasis mine): 

 

No such employee shall be discharged or discriminated against because of his exercise of such right [to form and join a union],?nor shall any person or group of persons, directly or indirectly, by intimidation or coercion, compel or attempt to compel any such employee to join or refrain from joining a labor organization. 

 

Which brings me to a research project that we have recently embarked upon: to catalogue and review the collective bargaining agreements (CBAs) that have been instituted by the state, and by local governments across the state.?The Show-Me CBAs Project?is still in its early stages, but it has been remarkable to see how often agency fee requirements are included in these contracts. 

 

For instance, Crystal City in Jefferson County appears to have amended an existing agreement on March 26 of this year to add a provision requiring employees to pay and become union members, to pay the union the amount of union dues but not be a member, or be fired.?Page 13:

Crystal City

Meanwhile in a contract agreed to this past June, the City of Grandview also included in its contract with Grandview Firefighters, Local No. 42, a provision compelling non–union members to support the union’s activities through a “modified agency shop.” Page 2 of the agreement: 

Grandview

Curiously, both Crystal City and Grandview struck their respective agency fee sections shortly after we contacted them about their collective bargaining agreements. On the same day that we contacted Grandview (July 24) requesting its collective bargaining agreements, the Grandview Board of Aldermen removed the offending section by ordinance.  We also contacted Crystal City on July 24; and on August 13, its agency fee section was removed. 

 

While the removal of these sections was appropriate, the larger problem here is that it appears these local governments (and many others) may have been violating of Missouri workers’ rights even before the?Janus?decision was handed down. When a contract the city negotiates purports to give the union power over you, and especially when you aren’t given reasonable notice of your actual employment rights, hasn’t the city, through its CBA, “directly or indirectly” attempted to compel you to join a labor organization, in violation of the plain language of §105.510 of the Missouri Statutes? Moreover, if any of these cities exercised a termination provision of one of these agreements against an employee—if they fired someone (or formally threatened to fire him) because he didn’t pay the union as a condition to employment—then the statutory violation seems even more obvious.

 

In Missouri, these provisions shouldn’t have been in these contracts even prior to?Janus, as they were already contrary to existing state statute. Local governments should be very concerned about whether past and current employees—all workers, both union and non-union, who made decisions based on such language—will want back the dues and fees taken under a CBA regime that misled them about their rights under Missouri law.

 

More of the Same for the New KCI Project

Posted on by Patrick Tuohey

For years, Kansas City Mayor Sly James asserted that revenue generated at the airport cannot be redirected to the city. This is incorrect. Airport funds have been redirected to the city to cover other bad economic development investments. But his strong insistence makes the recent news all the more puzzling.

According to The Kansas City Star, part of the deal the city struck with Edgemoor, the winning bidder for construction of the new terminal, included diverting airport revenue to workforce training, gap-financing for developers, and support for a program to help the elderly with home renovation. The FAA rejected these expenditures. According to the Star:

The FAA also rejected the use of airport revenues for $1.5 million in assistance to the Northland, including housing, economic development and mental health needs.

Why is this a surprise? Even if city hall doesn’t have a command of the specifics about how airports operate, shouldn’t it be aware of these prohibitions? Shouldn’t Council members—especially the members who served on the Council’s short-lived airport committee—have known this?

This is the second in a recent set of embarrassing revelations about the airport project. Recall that a few weeks ago we learned that the Aviation Department director didn’t know enough about FAA regulations regarding environmental assessments. And before that there was the years’ long parade of advisory groups and consultants.

Building a new airport terminal is a big project, and unforeseen challenges and setbacks are no surprise. But what we’ve seen so far indicates a serious lack of competent leadership.

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