Where Is That City Report on Economic Development?

Posted on by Patrick Tuohey

Are economic development incentives worthwhile? Abundant research from all over the country says they are not. Kansas City leaders disagree, and the City commissioned its own study of the practice—but that report is already over a year late and counting.

On November 1, 2016, the Council of Development Finance Agencies (CDFA) signed a contract with Kansas City to study the city’s economic development practices. Show-Me was critical of the City for hiring CDFA,  because they are a trade association whose mission is “to promote the common interest of Development Finance Agencies with respect to public policies and programs.” In other words, this group is being hired to analyze the success of the programs they promote. That hardly sounds like an impartial researcher. (But then our TIF Commission staff is funded by fees collected from TIF recipients, so conflicts of interest seem to be the standard operating procedure.)

Nevertheless, a study such as this is warranted, because Kansas City spends or diverts a lot of tax money to private developers. Studies of TIF and other incentives have found they are largely a waste of taxpayer money. This includes a report recently completed in St. Louis for the very corporation that doles out these dollars. That study concluded that TIF does not spur investment or create jobs; that it is not used in the economically struggling areas that need it; and that the level of reporting on these subsidies is poor. Other studies by universities and research institutions have likewise found TIF policies greatly wanting. Kansas City is due such an examination.

The contract signed with CDFA set a maximum payment of $350,000 for the study and set a deadline of May 1, 2017 for the final report. In an October 2017 email, Kerrie Tyndall, the director of economic development for Kansas City, wrote that the report should be received by the end of 2017—seven months late. In a November 2017 Kansas City Star story, Steve Vockrodt wrote that the report should be released in January 2018—eight months late. Ms. Tyndall indicated to me in March that the report should be delivered in mid-April—11 months late. As of this writing, May 25, there still is no report.

It is noteworthy that Public Financial Management, Inc., the company retained to provide analysis of economic development subsidies in St. Louis completed its study in 15 months and for half the cost of what Kansas City authorized. The Show-Me Institute issued its own analysis of TIF use in Kansas City and St. Louis after less than a year of study and at no cost to taxpayers.

A pricey, publicly funded and repeatedly delayed report on subsidies—performed by a group that supports such spending—isn’t likely to build confidence among residents. Kansas Citians deserve better policy and better policymaking.

Like a Sore Thumb: Missouri’s Testing Standards Buck National Trend

Posted on by James V. Shuls

Marching to the beat of your own drummer is all good and well as long as you know where you’re going. A recent study published in Education Next suggests that Missouri—alone out of all 50 states—is headed in the wrong direction with regard to state proficiency standards for students. The study compares how well students in each state do on their states’ proficiency tests to how well they do on the National Assessment of Educational Progress (NAEP). For example, if 25 percent of students in a state scored proficient on the state’s test, but 50 percent scored proficient on the NAEP, that would indicate that state’s proficiency standards are more rigorous than the national standards. Since states have different state assessments and the NAEP is administered in every state, the NAEP serves as a Rosetta stone and allows us to compare the standards of different states.  According to the analysis, every state in the nation increased the rigor of their proficiency standards from 2009 to 2017. . . except Missouri. This could have significant implications for Missouri students, especially students in Missouri’s most disadvantaged school districts.

When a school district in Missouri loses accreditation, students are allowed to transfer to a higher-performing school district. In recent years, thousands of students from the Normandy and Riverview Gardens School Districts used this provision in state statute to transfer to some of the highest-performing school districts in the state. But students lost the right to transfer when the state board of education voted to give the school districts provisional accreditation, based in part on improvements in student achievement-test scores. Based on the Education Next study, we have to wonder whether those learning gains were just an illusion caused by the state making the test easier.

It is important to understand this analysis is not comparing the rigor of the learning standards in each state. Standards say what students should learn in each grade. The relevant measure here is what students must score to be considered proficient by the state assessment. While the tests are developed based on the standards, setting the cut-score is a subjective process.  The lower the cut-score, the higher the percentage of students who will score proficient.

In 2009, Missouri had among the most rigorous assessments in the nation. The two images below come from a report from the U.S. Department of Education, “Mapping State Proficiency Standards Onto the NAEP Scales.” Look far to the right and you will notice that Missouri led the nation in rigor on the 8th grade reading assessment and had the third most rigorous state assessment in 8th grade mathematics.

Language Arts Standards Graph

Mathematics Assessment Graph

What followed 2009 was chaos. Missouri adopted the Common Core standards and ditched our rigorous state assessment. The state then went through turmoil as citizens pushed back against the Common Core, the legislature called for new standards to be written, and the state shuffled through four different state assessment systems. In the end, we wound up with an assessment that was easier than the one we had before.

Forget for a moment the overall message that lowering standards sends and the potential it has to impact all students. In the cases of Normandy and Riverview Gardens, lowering standards may have had a direct and detrimental impact on students. The year Normandy lost its accreditation, just 22 percent of the district’s students scored proficient or advanced in communication arts and 23 percent did so in math, according to the St. Louis Post-Dispatch. In 2017, the district regained provisional accreditation even though the performance of students in the district was not substantially better. That year, 34 percent of students scored proficient or advanced in communication arts and only 19 percent did so in math. Keep in mind these scores were with the easier tests.

Missouri’s state board of education voted to give provisional accreditation to the Riverview Gardens School District in 2016 and the Normandy Schools Collaborative in 2017. It seems those decisions may have been based on the faulty assumption that the student achievement in the districts was improving, when it seems the state was just giving easier tests. At the very least, we owe it to the students of these districts to investigate this further.

On Superintendents and Their Districts

Posted on by Christine Talent

Does it really matter who’s running a school district? Put another way, is paying top dollar for a superintendent a smart investment for a school? Recently, Show-Me Institute researchers sent out Sunshine requests to the 20 largest school districts in Missouri seeking their superintendent contracts dating back to the 2010–2011 school year. The purpose was to take a closer look at superintendent pay and compare it with school performance.

Sixteen districts responded with contracts showing superintendent salaries ranging from $125,000 to $294,000 per year. We also looked at an evaluation of those same school districts from the Stanford Center for Education Policy Analysis (CEPA), which measured the performance of 3rd-grade students in 2009 and then, five years later in 2014, measured the performance of the students in 8th-grade. The object of the CEPA study was to determine if students experienced a full five years of academic growth in five calendar years.

The table below shows superintendent salaries from 2011 to 2014 and student performance growth from 2009 to 2014 for each school district that responded to our sunshine request.

District Mean growth (in academic “years”), 2009–2014 Average superintendent salary, 2011–2014
Columbia 93 4.61 $182,095
Ferguson-Florissant R-II 4.28 $212,851
Fort Zumwalt R-II 5.59 $176,330
Francis Howell R-III 4.80 $191,797
Hazelwood 4.72 $228,247
Kansas City 33 4.33 $234,970
Independence-30 4.70 $210,820
Lee’s Summit R-VII 4.68 $238,553
Liberty 53 4.36 $164,000
Mehlville R-IX 4.64 $190.233
North Kansas City 74 4.56 $230,913
Parkway C-2 5.44 $229,406
Rockwood R-VI 4.37 $235,920
Springfield R-XII 4.55 $171,901
St. Joseph 4.39 $152,953
Wentzville R-IV 5.16 $198,326
Average 4.70 $203,082

The average academic growth between 3rd grade and 8th grade in these 16 districts is 4.7 years. Only three districts had five or more years of growth over the five-year period studied—Fort Zumwalt, Parkway, and Wentzville.

Because the time covered in the Stanford study (2009–2014) doesn’t align exactly with the superintendent salary information (which only goes back to 2011), we can’t make a perfect comparison of the salaries against performance. But based on the four years for which we have both sets of data, it’s difficult to see a direct connection between the two. Of the three districts with more than five years of growth in the table above, only Parkway paid its superintendent above the average rate from 2011 to 2014.

In fact, evidence of any connection between superintendents and student performance is hard to come by. One Brookings Institute study looked at the effect of superintendent turnover on student performance in North Carolina and Florida schools. It failed to find a significant connection. Nor did the study find a relationship between student performance and superintendent longevity.

Such studies make it appropriate to question why superintendent salaries are so high. There are certainly plenty of reasons why people think they should be high. Superintendents are like the CEOs of the school district. They oversee the management and budget of all the schools in the district. Perhaps most importantly, they hire principals and other administrators in the district, who in turn hire the teachers.

But with little evidence that superintendents are making a significant difference in student performance, it’s reasonable to ask why districts are paying them so much. The people in the school hierarchy who have the most effect on student achievement are teachers—and at an average salary of around $53,000, they earn around one-fourth of what superintendents earn. That’s not even considering the school pension system, which definitely favors the higher paid. All of which takes us back to a question that James Shuls raised in an April blog post: Is this really where we want to spend our money?

Did Easier Tests Cost Normandy Students the Right to Transfer?

Posted on by James V. Shuls

On December 1, 2017, the Missouri State Board of Education went into a closed session and ousted Commissioner Margie Vandeven. Yet that wasn’t the only controversial decision that day. In a unanimous vote, the board decided to classify the Normandy Schools Collaborative as provisionally accredited. That move meant that thousands of students lost the right to transfer to higher performing schools. Now it seems that vote was made without all of the facts.

A recent study in Education Next by Daniel Hamlin and Paul Peterson of Harvard University shows that Missouri’s state assessments have gotten easier. In fact, Missouri was the only state in the nation to decrease the difficulty of state assessments from 2009 to 2017. As recently as 2009, Missouri’s state tests were given a grade of “A” by the publication and were ranked second in the nation, behind only Massachusetts. This meant we set a high bar for achieving proficiency. Since then, we’ve dramatically lowered our standards. Missouri’s assessments now receive a letter grade of “C” and rank us 48th in the nation.

 Keep in mind that test scores are a significant component of the score a school district receives on the state’s Annual Performance Report (APR). Normandy has made substantial improvement on the APR. The district scored just 7.1% in 2014. When the state board voted to reaccredit the district, the APR score was 62.5%. That score was just barely above the 60% threshold for provisional accreditation and was the district’s first year scoring in that range. At the time, 8.7 percent of the district’s 8th-graders scored proficient or advanced on the state’s easier assessment.

We shouldn’t dismiss the progress the Normandy Schools Collaborative has made. Under the steady leadership of Superintendent Charles Pearson and the oversight of the state, the district is clearly heading in the right direction. The question is whether the state’s easier assessments may have given the school district the extra 2.5 percentage points on the APR that put the district into the provisional accreditation range. More importantly, would the state board of education still have voted to reaccredit the school district if the members had known some portion of the district’s academic gains were illusory?

We won’t know the answer to that question for some time. Right now, the state board does not have a quorum as the five members who voted to fire the commissioner have been withdrawn. This means the board can take no action on this or any other issue. It also means that students in Normandy and other provisionally accredited school districts will be required to return to their home school districts next year. Students who transferred to Clayton, Kirkwood, and other high-performing school districts will be forced to go back to the schools they sought to escape. 

When the vacant state board seats are finally filled and the board reconvenes, they will have a lot of work to catch up on—including hiring a new education commissioner—so it will be easy for the members to overlook the situation in Normandy. That would be an injustice to the students there. At the very least, the board should thoroughly investigate the extent to which easier tests cost them the opportunity for a better education.

Legislature Passes Bill to Bring Transparency to Schools

Posted on by Philip Oehlerking

If school districts can levy taxes, then taxpayers should be able to see exactly how the money is being spent. And with the passage of House Bill 1606, it would seem the Missouri legislature agrees. If it’s signed by the governor, the new law will help bring transparency to school district spending, an aspect of government that is the focus of the Show-Me Checkbook Project. Public school districts will be required to develop a searchable database to track their expenditures and revenue, and that database will be made available to the public. The law also directs the Department of Elementary and Secondary Education to create a template that a school may use if it does not have a website to host a database.

It is especially encouraging to see the legislature pass HB1606 at a time when audits show how schools can mismanage the money they receive.

I hope this legislation will serve as a template for the establishment of other databases to monitor how cities, counties, and special taxing districts spend the public’s money. Such databases are a 21st-century tool for the age-old task of keeping government accountable to taxpayers.

 

Enough: Earned Income Tax Credit’s Failure Wasn’t Because “Corporate Interests” Were Prioritized

Posted on by Patrick Ishmael

In the last few days, several Missouri editorial boards have published pieces bemoaning the income tax cuts passed by the Missouri legislature, particularly the omission of an earned income tax credit (EITC.) As our readers know, Show-Me Institute writers have been strong proponents of a non-refundable EITC, and I supported its inclusion in the comprehensive tax reform packages that were filed this year. The program has the potential to help low-income Missourians, and is a far superior reform to bad ideas like minimum wage increases.

That’s why it was so disappointing that just as the EITC was on the verge of passing the Senate as part of House Bill 2540, an amendment struck. The proposed amendment, offered by an EITC supporter, would have stripped out the provision that would have essentially funded the EITC and an additional 0.1% reduction to the individual income tax. In response, the bill sponsor proposed instead to omit those effectively co-dependent sections from the final legislation, and that’s what the Senate agreed to. The revenue source for the EITC was gone, and with it, the EITC as well.

That’s why the cookie-cutter characterizations of the EITC ordeal by some Missouri news outlets is so off-putting. First, to portray tax reform as an either-or proposition—that you’re either “for corporations” or “for working families“—is fundamentally wrong as a framework for understanding tax policy. But secondly, to offer that portrayal with respect to the tax reform push of 2018, which included an EITC up until the final hours of the session, is especially misleading. Had it not been for the curious legislative decision to play chicken with a revenue provision in the waning hours of the session, the EITC would be on its way to enactment today. Alas, it isn’t.

A non-refundable EITC remains good policy. While its prospects are good for future years, it is nonetheless unfortunate that it did not pass in 2018. But to suggest that its failure this year was a matter of some form of class warfare is simply wrong, and unhelpful to Missouri newsreaders.

It’s a Gas Gas Tax!

Posted on by Patrick Tuohey

With apologies to The Rolling Stones, I write today about the Missouri Legislature’s passage of HB 1460. The bill would place before Missouri voters a November ballot measure to raise the state motor fuel tax gradually until it became 27 cents per gallon in July 2022. The measure would also raise the tax on compressed and liquefied natural gas to 27 cents per gallon equivalent beginning in 2026.

No one is eager to pay more taxes, but as my former Show-Me Institute colleague Joe Miller wrote in 2015:

Much of the [Missouri Department of Transportation (MoDOT)] problem lies in the gradual deterioration of the user-fee funding base of MoDOT, specifically the state fuel tax. The fuel tax last increased in 1996, and Missouri now has the country’s fifth lowest regular gasoline tax and fourth lowest diesel fuel tax.

Miller later discussed the MoDOT funding problem in his February 2016 policy study. The reasons stem from a decline in revenue from user fees such as the fuel tax, an increase in highway construction costs, and the resulting risk of losing federal matching dollars. Miller explored several possible solutions, including tolling and increasing fuel taxes, and even the pros and cons of doing so (see page 28 of the study).

The money needed to maintiain our transportation infrastructure will have to come from somewhere. Voters were correct to reject the statewide sales tax proposed in 2014. User fees such as a fuel tax are vastly more fair.

I look forward to participating in the public debate over the role of the government in providing for infrastructure, the needs and benefits of maintaining a healthy highway system, and the most efficient way of doing both.

Lawmakers Give Missourians a Tax Break

Posted on by Patrick Ishmael

State Lawmakers have cut income taxes for Missourians with a bill that now heads to the desk of Governor Eric Greitens. The House and Senate have passed a compromise version of HB2540, which formerly dealt with a whole host of important tax issues but in the end grappled primarily with individual income tax rate reductions. Formerly over 400 pages, the new version of HB2540 is now fewer than ten pages—and it’s a powerful handful of paper.

Specifically, the bill reduces the individual income tax rate by four-tenths of a percent (from 5.9% to 5.5%), paying for that reduction by removing some of the federal tax deductibility that Missouri currently permits. That’s progress, but the bill would have been even stronger if language that created a non-refundable earned income tax credit could have been retained. Unfortunately that provision was stripped out late in the Senate debate of the bill after a trigger provision that would have paid for it (pending a Supreme Court case) was put on the chopping block.

Still, the bill as passed is an important one that continues the downward trajectory of the state’s individual income tax rate. In truth, it is but another step toward eliminating growth-destroying income taxes in this state, with many steps to go. But that long-term trend doesn’t detract from the importance of HB2540’s enactment, now and in the future. Congratulations to all the legislative leaders involved in this effort.

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