Gold Medal for Sentiment, But a Wipeout on Policy

Posted on by Patrick Ishmael

The State of Missouri has a long history of excellence in athletic competition on both the domestic and international stages. And thanks to St. Louis in 1904, Missouri is also one of the few states in the country that can lay claim to having been a host for an actual Olympics. The state’s bona fides in terms of promoting and welcoming athletic competition and achievement are, in other words, unassailable.

On the other hand, the state’s track record on good tax policy is not nearly as strong, which is why a proposal to exempt Olympic winnings from state taxation is both unsurprising and disappointing. 

I should reiterate once again that Missouri needs to move away from growth-destroying income taxes, but special tax carveouts like the ones currently being debated for Olympic athletes make it ever more difficult to provide much-needed relief to all Missourians. Creating a tax incentive for excellence in one profession disadvantages high achieving Missourians in other fields who are not afforded similar deference by the state.

On what basis is it wrong to tax Olympians for their achievements and yet right to tax others for theirs? If it is wrong to tax Olympians’ income, what does that say about a tax system that relies heavily on income taxes?

I reject the idea that any tax incentive that reduces an individual’s tax burden is a net benefit to taxpayers or is even preferable as a matter of policy, in much the same way that I don’t see “pro-business” legislation as necessarily “pro-market.” Exempting Olympians’ winnings from taxes is certainly pro-Olympian, but it isn’t “pro-taxpayer,” nor is it good policy.

All the while, I understand the sentiment. We all want to be supportive of our high achievers, especially those achieving in a public way on the international stage. But legislators should focus on reforming taxes for everyone—athletes included, but not specially preferred.

Short-Term Medical Insurance Proposal Offers Opportunity to Get People Coverage

Posted on by Patrick Ishmael

There are a lot of reasons health care costs in the United States continue to grow. One is that we don’t really have a market for many of our health care products, and in important ways we are disincentivized to price shop. But another important factor is that much of what Americans consider health “insurance” nowadays is really mostly a maintenance agreement, not insurance. And often the most expensive features in those maintenance agreements are forced onto plans by state and federal officials

Imagine if cars had to be sold this way. Say that I just need a cheap car to get to work every day, but the law prevented dealerships from selling me a car without gold rims, tinted windows, and free oil changes for life—in other words, all the bells and whistles. My budget may be $5000 for the car, but the dealership may only be able to sell cars that start at $30,000 because of all the mandates. The result isn’t that I end up getting the more expensive car with the mandated features—but that I might have to go without a car entirely.

That’s the problem in American health care in a nutshell. Some people may find themselves overpaying for a product they don’t want, and others may end up going without a product that they really need because it’s so expensive.

There’s a wrinkle in that health care paradigm, though. While longer-term insurance plans typically fall under the auspices of federal regulation and often have state coverage mandates tacked on, “short-term medical insurance” (or STM) can often sidestep the mandate layers and offer a product that is insurance first and a maintenance plan second, if at all.

That may sound a bit jarring if you’re used to health insurance as maintenance, but imagine how much homeowner’s insurance would cost if government required insurers to include a grass-mowing benefit, or if a car owner’s insurance had to include an oil change benefit. STM generally avoids those additional costs by focusing  on the financial backstop that insurance is actually supposed to be.

Having greater latitude in finding a plan that fits your medical needs (and your budget) is an important step in fixing the health care cost problems we see in America today, and that’s what one proposal from the House appears to offer. The legislation would expand the duration that an STM plan can last from six months to a year in Missouri, and it would also make clear that the STM plan a consumer might purchase is different from the insurance plans they might be used to. Specifically, the plans would have to state plainly in their documents that,

This policy may not cover preexisting conditions, including conditions you may currently have and are unaware of but are not diagnosed until the policy’s term. This policy may not cover certain essential health benefits, including prescription drugs, preventative care, and emergency services. Before you realize benefits under this policy, you may be responsible for a deductible and/or coinsurance. Be sure to discuss these items with your insurance broker before purchasing a short-term medical policy.

In other words, a consumer may not have every medical condition covered—the maintenance plan would be limited—but if they were hit by a bus, they’d have a financial backstop because they’d at least have the STM’s insurance protecting them.

And as the name suggests, STM is generally used for shorter periods of time than more fully-featured health maintenance plans. Some people may need it to fill a temporary gap in employer-sponsored coverage, and others may prefer it as an alternative to vastly more expensive Obamacare plans, even though STM plans are “skinnier” in terms of benefits and were generally non-compliant for purposes of the mandate penalty. 

Expanding the scope of STM coverage would help to resolve both of the problems I articulated at the beginning of this blog post—the limited incentive to shop around for coverage, and the multi-layered onion of mandates—that drive up the cost of the average health “insurance” plan.

This STM expansion idea is an excellent one that helps to meet the needs of people who really want coverage but don’t want or can’t afford what the government is trying to impose on them. I hope the idea receives increasing attention as the session continues.

Charter Schools 101: Are Charter Schools Public or Private?

Posted on by Susan Pendergrass

As I wrote last week, even after 30 years charter schools remain a mystery to many people. Often, even the people who understand the basics about how charters operate are confused about whether they are public or private schools.

For the record: Charter schools are public schools. In fact, they’re commonly referred to as “public charter schools” by supporters and detractors alike. But misunderstanding about the issue has been surprisingly stubborn. In fact, a former Secretary of Education and current head of the U. S. Senate Education Committee said just two years ago, “There are some private charter schools, are there not?”

Charter schools have much more in common with traditional public schools than many people realize. Charters receive the same state and federal funding that any public school receives. In most cases, they also receive the local funding per student for the students who attend. Unlike traditional public schools, charter schools must pay all of their costs, including the cost of buying or building the school, from their annual revenue.

The students in charter schools are public school students whose parents have chosen to send them to a charter school rather than send them to the public school to which they are assigned based on their address. They participate in all state testing and have all of the same rights and responsibilities of all public school students. It is illegal for charter schools to discriminate against any student who chooses them, to charge tuition, or to teach religion. If there are more parents who choose the school than there are seats, students must be selected through a public lottery. Parents are free to have their child return to their assigned public school at any time if they aren’t satisfied with the charter school.

The teachers at a charter school are public school teachers, although not usually required to be members of a local teacher’s union or collective bargaining agreement. The administration and board of each charter school has substantial discretion when it comes to hiring, paying, and firing their staff. In Missouri, charter school teachers are required to participate in the public pension plans for teachers.

Unfortunately, myths about charter schools abound, leading to serious misunderstandings. And because they’re not typical public schools and don’t answer to the local school board, opponents sometimes refer to them as private schools. But saying it doesn’t make it so.

Enhanced Sunshine Law Enforcement A Good Idea

Posted on by Patrick Ishmael

Show-Me Institute readers probably know about some of the difficulties we’ve had in getting municipal spending information for our Municipal Checkbook Project. From cities’ bad record-keeping to being told it would cost us tens of thousands of dollars for them to provide the information, we have heard a lot of excuses for why Missouri municipalities can’t tell us how they’re spending the public’s money. And while some of these answers were arguably in compliance with the letter of Missouri’s Sunshine laws, many of the excuses are, in my estimation, far afield from the laws’ intent of fostering meaningfully open and transparent government.

But those excuses may have to get more creative if one proposal becomes law. Among other things, the reform would create a “transparency division” in the attorney general’s office to focus on transparency matters. It would also put some teeth into the statutes to ensure that agents of the state are in compliance with Missouri’s Sunshine laws. While the legislation itself was only recently filed, the idea has been percolating for at least a few weeks.

Creation of a transparency division, Hawley said, will ensure that questions about conflict of interest won’t interfere with enforcement of the Sunshine Law. And enumerating penalties for violation of record retention law will help ensure enforcement.

Hawley said many improvements could be made to the Sunshine Law to get it in line with modern technology. But discussion of a large-scale review of the law shouldn’t stand in the way of his proposals aimed at improving enforcement of the existing law, he said.

Comprehensive reform is always welcome. For example, we’d like to see cities regularly report their spending rather than forcing taxpayers to instead chase cities and their excuses ad infinitum. But incremental reforms that move toward those larger ends are also welcome, and it seems like this proposal is well within that track.

Charter Schools 101: What Is a Charter School?

Posted on by Susan Pendergrass

It’s hard to believe that after nearly 30 years charter schools are still a mystery in some parts of the United States. But I still get the question: What is a charter school?

Charter schools are public schools, but instead of being governed by a local school board, they are governed by a document—their charter—that lays out how the school will operate and the metrics by which its performance will be judged. The charter is granted to the group of individuals who seek to open and run the school, and it has an expiration date of three to five years, at which point it needs to be renewed or the school is closed. The charter is awarded by an authorizer, or sponsor, who is responsible for making sure that the school stays on track, both academically and financially, and who makes the renewal or closure recommendation.

A little history might be helpful in understanding how the charter school movement began. It started in the late 1980s as an idea to let teachers, parents, or community leaders open and run a public school outside of district oversight. Credit for the idea usually goes to Al Shanker—head of one of the two major teacher’s unions in the United States. In 1988, Shanker offered an idea for reinvigorating public education that was inspired by a visit to a school in Cologne, Germany the prior year. He argued that we should allow teachers to create innovative, autonomous public schools, and that these chartered schools would serve as laboratories from which effective ideas could be replicated.

Around the same time, political economists John Chubb and Terry Moe argued that the institutional structure of public education wasn’t working. they found that autonomy was the one indispensable requirement for an effective school. And, they concluded, the existing structure of public education limits and undermines school autonomy. In their book Politics, Markets, and America’s Schools, Chubb and Moe proposed building an entirely new structure for public education that would withdraw authority from existing institutions and place it directly in the hands of schools, parents, and students. School districts could continue to operate their existing schools, but they would have no authority over the “chartered” public schools.

In 1991, bipartisan support for Al Shanker’s idea led to the passage of the first charter school law in Minnesota. The law was groundbreaking, and in 1992 eight chartered public schools opened in Minnesota that were autonomous, student-centered, results-oriented, and designed and run by teachers. The following year California followed suit. At the start of the 2017–18 school year, there were over 7,000 charter schools in 42 states plus the District of Columbia, serving nearly 3.2 million students. Charter schools now represent seven percent of all public schools and enroll six percent of public school students. Today, one in five public school students attends school in a district with at least 10 percent of its students in charter schools.

A $200,000 Retirement Benefit and a $250,000 Salary? Deal!

Posted on by James V. Shuls

Ah retirement . . . that glorious time at 57 years of age when you can begin drawing roughly $200,000 annually for the rest of your life while simultaneously continuing to work and earn an additional $250,000.

What, that’s not the norm? Well, it is exactly what the “retiring” Pattonville superintendent will be doing soon.

The Kansas City Business Journal is reporting that the longtime superintendent will be retiring from Pattonville this year and taking up the superintendent position in the Shawnee Mission School District in Kansas. This move will allow him to retire from the pension system in Missouri and begin drawing his guaranteed benefit while also earning a salary in his new district, because the two school districts are in different pension systems.

According to the St. Louis Business Journal, the Pattonville superintendent earned $267,232 in 2016–17. In Missouri’s Public School Retirement System, members can earn 75% of their final average salary (defined as their three highest consecutive years). This would easily put his annual retirement benefit over $200,000, because the listed salary does not include other benefits, such as medical, which are also included in the final average salary.

There are three important things to take away from this.

First, we have to ask if it is wise to have a system that pushes effective leaders out at a relatively early age. This superintendent, who might likely work for another decade or more in Kansas, will begin drawing his retirement immediately and will draw it for the rest of his life. Indeed, there is a tremendous incentive for individuals to retire at this point in their career.

This leads us to our second point, pushing out effective educators  may not be an effective strategy if we want to improve the quality of education. This superintendent will take his services elsewhere, but many terrific teachers, principals, and superintendents are pushed out of education all together.

Finally, when people ask why the pension system is underfunded, this should be one of the prime examples you give them. The problem is that individuals like this superintendent often do not contribute enough to the system to cover their pension benefits. He is a big time pension winner, who will be receiving much more in benefits than he contributed to the system.

Don’t get me wrong: I applaud the superintendent’s decision. It’s a smart one, and we should all be so lucky. The problem is that we can’t all be so lucky. Lavish benefits like this must be paid for by someone. As I have shown before, they are paid by teachers who leave money in the system, by low-paid teachers in other districts, and ultimately by taxpayers.

Superintendents and others like Pattonville’s are not simply getting what they put into the system; they are getting much more. Let me ask you which system seems fair: this one, or a system in which retirees receive benefits that are in line with their contributions? If you ask me, the answer seems obvious. 

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