Arise and Shine, Missouri lawmakers: You Have Nothing to Lose but a Long History of Bad Performance.

Posted on by Andrew B. Wilson

What’s wrong with you, Missouri lawmakers? Why so weak and feckless?

This is your conscience calling. I speak to all of you who call yourselves conservatives – the champions of limited government and economic freedom. Another year has come and gone and what do you have to show for it? “Too damned little,” I say, given super-majorities in both houses of the Legislature and control of the executive branch as well.

Look at what has just happened in the U.S. Congress. With far narrower majorities than you have in the Missouri Legislature, your counterparts on the national stage passed the most important pro-growth tax policy in many years – cutting the corporate income tax to 21 from 35 percent while also allowing businesses to write off the full costs of new equipment to improve operations and enhance productivity. In addition, under the new legislation, middle-income taxpayers will pay about $900 less in their 2018 tax bill than they would under the current law, according to the Tax Policy Center.

Though I may sound critical, I really do want you to succeed – for nothing is gained if you continue to ignore the chastisements of your often-troubled but ever-hopeful conscience. Here are my New Year’s Resolutions for you going into the 2018 session of the Missouri Legislature –

One, don’t be afraid to think big and act boldly. For almost three decades, Missouri has been one of the slowest-growing states in the nation. That alone should tell you that a major course correction is in order – and long overdue.

Two, say “No” to corporate welfare. Slaughter the fatted calves of tax credits for economic development (eliminating as much as $400 million in annual state expenditures).

Three, use those savings to lower taxes for all Missourians – both individuals and businesses.

Four, deregulate, deregulate, deregulate. Nationally, the undoing of many of the regulatory excesses from the Obama administration helped to power 3-percent-plus GDP growth in the second and third quarters. Further deregulation at the state and local government levels in Missouri can have a similarly beneficial effect. The governor’s No MO Red Tape initiative looks like a big step in the right direction.

Five, and this is a plea that is meant not just for lawmakers, but for who believe in the power of free markets: Do not shirk debate and, still more, do not shrink from the important task of ridding young people of the pernicious idea (widely accepted at colleges and universities in Missouri and across the country) that free-market capitalism is an evil system that promotes social injustice.

Nothing could be further from the truth. Free-market capitalism under limited (as opposed to wide-ranging) government is the only economic system that spreads opportunity far and wide and that reliably delivers both growth and prosperity to the many and not just the few.

To you lawmakers, I say, in closing: Good luck on ringing in the New Year with the strength and conviction that come from knowing that you are capable of achieving great things.

 

This op-ed also appeared in th Joplin Globe.

What Kansas City Millennials Want

Posted on by Patrick Tuohey

KCUR published a piece on a recent study of what millennials in Kansas City actually want by way of housing amenities. Much of the conventional wisdom on these demands, the piece noted, is generated from coastal cities with much higher population density and may not apply here.  According to the piece,

[Highline Partners representative Brett] Posten says conventional wisdom says millennials want to live in lofts downtown, but most of the [Kansas City] millennials that Highline talked to said they eventually planned to move to the suburbs, just like their parents did. While they enjoyed touring pristine fitness centers with steaming saunas and heated pools, Posten says, millennials put a higher value on open floor plans, in-unit washers and dryers and secure, covered parking.

That’s because Kansas City millennials aren’t actually ditching their cars. Though many said they’d like public transportation to be more reliable, less than 5 percent are car-free.

This is welcome research and should be instructive to city leaders who lard development subsidies on high rise projects and downtown streetcars thinking they are building for the future. They aren’t.  In fact, the rush to develop in Kansas City may be based on research conducted elsewhere. The Kansas City Star quoted Posten as saying,

We think developers are making decisions based on reading about millennials in the national press. The demographic in Kansas City is distinctly different.

Therein lies the problem of economic development in Kansas City: trying too hard to be like other cities and often joining the race too late. Convention hotels, luxury high rises, airport terminals and streetcars are little more than municipal me-tooism, rather than reflecting on Kansas City’s own unique competitive advantages.

Instead of trying to predict future market demands and subsidizing them—in the same way every other city has done before us—Kansas City leaders should focus on delivering basic services effectively and efficiently.

An Emerging Policy Frontier: Workforce Development

Posted on by Patrick Ishmael

One of the hottest topics of 2018 will be the reform of the state’s prevailing wage laws, and because of that, it’s likely that the construction industry as a whole will get a bit more attention from lawmakers this year. The prevailing wage (basically, a “minimum wage” for public construction projects) does not distinguish between union and non-union labor, so the prevailing wage’s requirement that governments pay above-market rates for construction work is, understandably, attractive to most folks in the construction industry—and unattractive to the taxpayers that have to overpay for the work. Put simply, repeal of the prevailing wage would be a policy advancement for the state.

But repeal of the state’s prevailing wage law won’t put Missouri’s tradespeople on the fast track to pauperdom. Indeed, in true supply-and-demand fashion, a shortage of skilled laborers in the construction industry is already driving up salaries there.

“I think that all craft professionals are in the mid-to-upper five-figures, and once you add in per diem and bonuses and incentives, it is not uncommon that we have workers making six-figures,” [Steve Green, vice president of the National Center for Construction Education & Research] said, adding that often accounts “for a lot of overtime.”

With a slew of good paying available jobs, why is the labor shortage so pronounced?

“Construction is not a sexy profession: we don’t attract the younger workers like other professions do,” NCCER president Don Whyte said, adding that his organization is trying to change public perceptions to show that through construction, families can earn a robust middle-class living.

There are a lot of layers to this policy onion. Americans have long placed a premium on a college education, viewing it as a proxy for eventual prosperity while, in important respects, stigmatizing professions where a formal education isn’t required. Certainly college-educated individuals, on average, make more than those who don’t have a college degree, but the rising cost of that education and changing contours of the modern economy have taken a toll on the economic slam-dunk that college once was. Complicating matters further is that as government has subsidized college educations, it has produced more college graduates who otherwise wouldn’t have chosen college — and who instead might have become skilled tradespeople, creating a workforce gap in an industry which, literally, builds our country.

That’s a long way of saying that Missouri probably needs to reassess the way it looks at its workforce policies. The state spends hundreds of millions of dollars every year providing Missourians the opportunity for a college education, but is focusing on college-educated professions a silver bullet for a balanced economic future? Probably not. And that’s why recent efforts to promote apprenticeship programs in the state are not only welcome, but necessary to the economic future of Missouri.

To be sure, the best way to advance that goal will require robust debate, but it’s long past time that the state looked at its workforce portfolio and recognized that a college education leading to gainful employment is good for the state—but so too is a debtless apprenticeship in an industry that will pay handsomely for those services. I hope this important workforce issue gets the attention it deserves this session.

Is This How Trust Is Regained?

Posted on by Philip Oehlerking

After voters rejected implementing a local use tax in November, the Columbia City Council made it their mission to win back the trust of voters by being wise stewards of taxpayer money. Councilman Matt Pitzer talked about how to go about the task:

We do that by making smart financial and fiscal decisions . . . and being open and transparent in our spending and where the citizens’ tax dollars are going.

This commitment to good government is admirable. So why would the Columbia City Council vote 5-3 in favor of approving the Broadway TIF after the Columbia TIF Commission overwhelmingly voted 8-3 against the proposal?

For several months, a developer who owns The Broadway Columbia Hotel, has been trying to convince the TIF Commission to declare 1104 E. Walnut St. a redevelopment area so that he can qualify to receive $2 million in taxpayer subsidies to expand. To support this effort, the developer claimed in his development plan (pp. 4–5) that the building meets the “Conservation Area” criteria for TIF eligibility because it is 56 years old and “displays obsolescence due to age, ongoing vacancy, and deferred maintenance of external items like the roof and gutters.”

Furthermore, the developer claimed in testimony provided to the TIF council on October 30 that while not blighted yet, the redevelopment area may qualify due to excessive vacancies, litter, and alcohol containers on the grounds. Should taxpayers be asked to pick up the tab for cleaning the area up, or should it be the responsibility of the property owner?

The developer also noted that without TIF assistance, potential investors and lenders said they would not be willing to join the project because the financial risk would be too great. And yet, in a letter sent to the commission, the Boone County Auditor pointed out that “just a few blocks west of the parcel in question . . . a multi-story office building is currently under construction [and] is proceeding without TIF financing on a smaller lot than the subject lot, and at a significant investment … of several million dollars.” If similar projects can proceed without subsidy, then can’t this one as well?

Finally, the Boone County Assessor has warned that over its 23-year life, the TIF arrangement would divert $4.3 million away from schools, libraries, and municipal services—but the hotel expansion is projected to produce only $695,000 in tax revenue. Proponents say this diversion of money will lead to job growth. However, this argument is at odds with multiple studies that have concluded that TIF has no demonstrable effect on job creation. Is this the sort of smart fiscal decision-making that is supposed to regain the trust of the voters?

Last year, the Missouri Legislature passed a law stating that if a city passes a TIF over the objection of a TIF commission, then the money raised from it can only be used towards the demolition and clearing of the site. Unfortunately, the law only applies to Saint Louis County, Saint Charles County, and Jefferson County. Maybe it’s time to include Boone County—or the rest of Missouri—under the law. 

Want Better Hotels? Then Support a Free and Open Market

Posted on by Patrick Tuohey

One accomplished hotelier believes that “Airbnb is a mortal threat to the U.S. hotel industry. The only way you can compete with a strong idea is by having another strong idea.” While the hotel industry seems to believe the first part, they are using their political influence rather than good ideas to stamp out Airbnb and other short-term rental (STR) companies. That battle is coming to Missouri.

The author of the quote above is Ian Schrager, creator of boutique hotels and nightclubs, including Studio 54. In a recent Wall Street Journal piece, Schrager talks about the threat and how he is designing hotels to maximize efficiency and deliver a superior service to modern customers. Unfortunately, rather than innovate, some hotels are seeking to use the power of government to thwart competition. And governments are too often willing to do their bidding.

According to The New York Times, the American Hotel and Lodging Association trade group has launched a “multipronged, national campaign approach at the local, state and federal level.” One document shows that the group seeks to work with “a broad coalition of affordable housing advocates, community groups, neighborhood associations, labor, and other progressive entities.” The entire document is worth reading.

We’ve already seen some of this play out in Missouri, although the AHLA document does not cite efforts in the Show-Me State. Some neighborhood association activists have raised unsubstantiated fears about increases in crime. Kansas City’s own Planning and Development Department is exaggerating complaints against short-term rentals such as Airbnb. If Kansas City wants to present itself as a tech-friendly millennial magnet, it ought not keep fighting tech innovations such as Uber and Airbnb. Yet fight them it does.

In the 2017 legislative session, HB608 was an effort to pre-empt the current hodge-podge of municipal regulation that is being driven by the hotel industry’s concerns. The bill kept political subdivisions from imposing fees or prohibiting short term rentals outright, while permitting those subdivisions to impose “reasonable regulation” to “protect the public’s health and safety.” It may have been this last part that doomed the effort, as supporters of STRs feared that “reasonable regulation” was too broad a concession. As of this writing, January 4, there does not appear to be a similar bill proposed for 2018.

More recently, Airbnb announced a deal with Missouri in which it would start collecting and remitting state and local taxes on behalf of their owners. In their statement they estimated this would amount to $1.1 million in tax revenue.

New internet platforms such as Airbnb and VRBO (Vacation Rentals by Owner) offer great opportunities for consumers and for business innovators like Schrager who are up to the task. The churn of the free market—although sometimes ugly in the short term—is the reason why our country enjoys so many technological advantages and conveniences. Allowing big business to use its influence over government to thwart innovation by protecting existing markets isn’t just bad for Airbnb, it’s bad for hotels, government revenue, and consumers.

What Is the Cost of ‘Raising the Age’?

Posted on by Emily Stahly

On December 1, legislation was prefiled that would raise the age of criminal responsibility to 18 years old rather than 17 in Missouri. Currently, our state is only one of five where 17-year-olds are automatically prosecuted as adults no matter the crime. This new legislation would place them in the juvenile justice system unless—due to their history or the nature of the crime—they are certified as an adult by a judge.

Giving judges this discretion should reduce concerns that offenders will be let off the hook too easily. Repeat offenders, or those whose crimes are especially serious, could still be dealt with appropriately. Meanwhile, the juvenile justice system could handle the others, which could benefit both the teens and the state.

One concern about this policy is the cost. Based on the fiscal note for similar legislation introduced during the last legislative session, placing more teens in the juvenile system would cost an additional $6.715 million per year. Dr. David Mitchell, an economics professor from Missouri State University, used an alternative cost calculation in a paper he presented at a recent Raise the Age panel discussion.

He argues that even though the per-person/per-year cost is higher in the juvenile system than in the adult prisons, 17-year-olds sent to adult prison spend more time behind bars, on average, than they would if they were in juvenile detention centers. Thus, the cost savings would be higher for the Department of Corrections than originally estimated and the net burden on the state would be closer to $2.432 million per year. He also points out that this amount is only .008% of the state’s budget.

So the cost of this policy to the state would be less than previously assumed. The benefits, however, could be large according to Dr. Mitchell’s estimates. Based on several factors, there could be long-term economic gains from placing most 17-year-olds in the juvenile system.

First, teens convicted of crimes have better earning potential if they go through the juvenile system. Studies have found that teens who have been in adult prison have a 20 percent lower chance of being employed after they are released and work 25 to 30 percent fewer hours if they do manage to find a job. On the other hand, teens who were convicted of a crime but did not go to an adult prison had almost as good a chance at finding a job as teens who did not commit a crime at all.

Second, there is a large disparity in recidivism rates between the juvenile system and the adult system. In Missouri, the recidivism rate for youthful offenders coming out of the adult prison system is about 67 percent, whereas the rate for those coming out of the juvenile system is 15 percent.

With these two factors in mind, placing most 17-year-olds into the juvenile system could be fiscally beneficial to the state. They would be more likely to have a job and be paying taxes (money gained for the state) after serving their sentences, and less likely to end up back in jail (less money being spent by the state).

It’s impossible to know exactly how much raising the age could save the state, but Dr. Mitchell’s analysis indicates that it would be a worthwhile investment. With such a small upfront cost and  potentially large long term gains for the state—not to mention positive impact on these teens’ lives—shouldn’t Missouri join the vast majority of states with this sensible reform?

A New Year’s Resolution for Education Reform

Posted on by Emily Stahly

A new year and a new legislative session are upon us, and with them, most likely the same old debates over school funding. A new study from EdChoice, however, could help reshape conversations in Missouri by showing that in general, people greatly underestimate how much we spend on education.

So just how much do we spend per student each year? This survey found that only 11 percent of people selected the correct range of $8,000 to $12,000. In fact, the national average is a little over $11,000, while Missouri spent on average $10,899 per student for the 2016–2017 school year.

Nevertheless, 31 percent of respondents thought America spends less than $4,000 on each student every year, while 29 percent did not know or did not want to answer.

Then the survey asked if people thought we spend too much or too little on education. For this question, however, half of the respondents were given the actual spending figure and half were not. Here are the results: 

Respondents were asked if current levels of spending on education are too high, too low, or about right.
  Too high About right Too low Don’t know/did not answer
Split A: Without information 11% 28% 54% 7%
Split B: With information 19% 32% 38% 11%

Source: EdChoice, “2017: Schooling in America.”

When presented with the real numbers, the proportion of those who think spending is “too low” fell significantly. So when people say that our schools are underfunded, it seems that many base their opinion on estimates of actual spending that are too low.

Too often, our debates over education policy get hung up over funding even though many of us lack a clear picture of how much we are spending now, let alone how much should be spent. If we want to accomplish meaningful education reform in 2018, resolving to have informed discussions about spending would be a good place to start.

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