Essay: Education, Income, and Social Behavior Across Missouri

Posted on by Rik W. Hafer

You wouldn’t expect a lot of pushback if you claimed that there is a positive relationship between income and level of education. But simple truisms only get us so far, especially in formulating policy. Education budgets aren’t unlimited, and the best use of our resources isn’t always obvious. Should we concentrate on maximizing the number of people who earn a college degree, or is it more important to focus on getting as many students as possible through high school?

A new essay by Gail Heyne Hafer and Rik Hafer explores questions like these by examining data across Missouri counties to track not only economic outcomes but also social behavior in order to see whether different levels of education produce different outcomes at the county level and to inform debate about how educational funding should be allocated across the state.

Click on the link below to read the entire essay.

 

Kansas City’s Airport: A Monument to Political Ego

Posted on by Patrick Tuohey

Kansas City has an effective and efficient airport. There is no reason why Kansas City cannot continue to meet the needs of modern travelers while honoring our past architectural innovation, maintaining the convenience we have come to cherish, and keeping costs down. Many of the complaints that people have are largely cosmetic: (lighting, USB chargers, bathrooms) and could be addressed by repairs and upgrades rather than a complete rebuild. Yet a focus on these less-expensive options is absent from the current debate. Why?

Could the airport just be a legacy project? Two years ago, then–Aviation Department Director Mark VanLoh made it seem that way when he told the Northland Regional Chamber of Commerce, “You don’t have [all the information] yet. We don’t even have it yet. I know what I want because I want a new airport.” He just wanted it.

VanLoh is gone, but the strange enthusiasm for a single terminal continues. The new plan is just as over-the-top as the old one. The justifications for the spending come and go—claims of EPA mandates, TSA concerns, and airlines’ refusal to expand services—but the project itself remains the same: a $1.2-billion single terminal that is actually a downsizing of what we have now.

What is new in this round of the discussion is the financing and no-bid contracting. But regardless of who finances and builds the airport, the risk to Kansas City comes from the possibility of increased fees to airlines and passengers. Right now, Kansas City’s airport is very cheap for airlines, and travelers benefit with lots of flights from here. Increase the costs to airlines, and we risk losing that competitive advantage. Other airports have suffered after building new terminals for just that reason (Consider Cincinnati, Sacramento, or San Jose.).

The good news is that the city is no longer claiming that the airlines agreed to finance the project. This was never the case, despite incorrect claims from the Kansas City Star and the Kansas City Business Journal. In truth, the airlines merely agreed to pay higher rent for a new terminal while reserving their right to renegotiate once the terminal is built. They did not issue or back any debt; they accepted no risk.

Proponents of a new terminal are fond of telling us that the new terminal idea is not a Taj Mahal. In fact, they’ve been using that curious term over and over again for years (see the Google search here). The Taj Mahal, of course, is a 400-year-old elaborate mausoleum in India built to house an emperor’s wife. Such determination to settle for nothing less than a new terminal, however, combined with the candor of Mark VanLoh and the out-of-hand dismissal of cheaper alternatives, suggests that this is exactly what the new terminal is: a modern monument to political ego—not what is best for Kansas City.

Breaking: Blue Cross KC to Leave Obamacare Exchanges

Posted on by Patrick Ishmael

Major news from Andy Marso at the Kansas City Star. Reportedly the move comes after the company experienced a $57 million loss on the exchange in 2016: 

As we have noted before, rural areas of Missouri were already severely underserved by the Obamacare exchanges, and the departure of Blue Cross Kansas City will leave dozens of counties with no Obamacare providers next year if nothing else changes. To give our readers a sense for what part of the state the insurer covered, BCBSKC’s 2017 service map in the exchanges is below:

This may only be the first major insurer departure from Missouri that could happen this year. More on this story as it evolves.

Show-Me Now! Joplin Rebuilt Without Government Subsidies

Posted on by Patrick Tuohey

Six years after a tornado destroyed much of Joplin, MO, the city is back. The population is larger now. Property values are higher now.  And what role did government play in all this? They helped with the cleanup and they reduced the regulatory burden on construction, but when they tried to subsidize the rebuilding effort through tax increment financing (TIF), the developer that received the TIF money failed. And yet the people of Joplin pulled themselves up by their bootstraps and demonstrated for the country that subsidies are not needed to rebuild.

For more information, read our recent case study, Tax-Increment Financing in Post-Tornado Joplin.

 

Break Missouri’s Utility Monopolies

Posted on by Patrick Ishmael

Yesterday Governor Eric Greitens announced that he is calling the Missouri legislature back into a special session that would address economic development issues in the state’s Bootheel. Specifically, the legislature will likely take up a bill, or a variation of it, that died in the regular session’s final days that would allow state regulators to negotiate lower electricity rates for at least two plants in southeast Missouri—a privilege not readily available to other Missouri companies and individuals. Supporters argue that because the plants would be heavy electricity users, a variance in state utility policy is warranted to make the sites more competitive, especially in light of the jobs that would come to those facilities. As the session closed, one representative in particular presented an electric, heartfelt soliloquy on behalf of his constituents who would benefit from the change. I have little doubt that this special session is being called at least in part because of that representative’s fervent advocacy. 

But as happens with proposals like this, there is a tradeoff: other electricity users would ultimately pay more so that these plants could pay less. And it’s that tradeoff that promises to be hotly debated next week when the bill comes up for reconsideration.  Here is the 64-dollar question: rather than carving out exceptions to rules as they go along, why don’t policymakers first consider whether the rules themselves need to be changed for everyone? Such a reanalysis seems exceedingly appropriate as the Legislature focuses its energy on Missouri’s public utilities.  

As a general matter, utility customers across the state do not have a choice in who provides their power, and that impacts us all. If you could only subscribe to one cell phone company, the incentive for that company to compete for your business with better service and lower prices would be drastically reduced. The same is true of utility companies.  Why does Missouri allow the default electricity arrangement to be basically choiceless for the average Missouri customer? 

The state is part of a dwindling subset of utility regulators that still substantively curb utility choice in the United States. I would be more open to the notion that an energy customer is uniquely situated to require a break on its energy costs if Missouri was already operating in a market environment for utilities—one in which market forces could drive down the prices everyone pays. Whatever the eventual disposition of the smelter legislation in this special session, legislators need to have that serious reform discussion sooner, not later. And chances are good that discussion will begin in earnest next week.   

School Choice Criticism: Heads We Win, Tails You Lose

Posted on by Michael Q. McShane

On multiple legs of my commute this week I’ve heard parts of an NPR series on school vouchers. In general, I think much of the commentary has been fair. School vouchers are not some miracle cure that improves schools overnight. Voucher programs are created imperfectly, implemented imperfectly, and thus have growing pains, so not everyone is happy with them. Those people deserve to have their stories told just like families who use vouchers and are thriving.

However, one line of criticism has irked me. The headline of this story encapsulates it well: “Indiana’s School Choice Program Often Underserves Special Needs Students.”

It is true that a smaller percentage of voucher-using students in Indiana are identified as having special needs. It is also true that the maximum voucher amount in the state is $4,800.

That $4,800 number was reached because opponents of vouchers argued that the program should not be able to access local property tax dollars or federal dollars for low-income students or students with special needs. The voucher is derived only from the funding that the state allocates to educate children. What’s more, it also leaves behind 10% of state funding so that traditional public schools have money for fixed costs like debt service and capital upgrades, because opponents also argued that even if students leave, traditional public schools still have to keep the lights on, the building heated, and the parking lot paved.

So opponents constrain the funding amount to a level that can barely pay to educate a student with zero special needs in an already efficient school and then complain when schools don’t take on harder (and more expensive to educate) children.

It’s heads we win, tails you lose. If you actually get the money you need to meet the needs of students with special needs, you are sucking the system dry. If you don’t, and thus don’t serve those kids, you’re discriminating. School choice programs can’t win.

We should be realistic about the tradeoffs in the design of school choice programs. Limiting the amount of money that follows each child will shape who gets served and who doesn’t. If you want voucher programs to serve more students with special needs, send more money with them. If you don’t want to send that money, how is it fair to cry “discrimination” when students aren’t served?

Another Stadium Subsidy Bites the Dust

Posted on by Graham Renz

Missouri taxpayers dodged a bullet last December when state funding for a soccer stadium in downtown Saint Louis was opposed and not pursued by then Governor-elect Greitens. But some policymakers in Jefferson City were determined to spend state taxpayers’ money—during a time of budget cuts—on a different sports arena in Saint Louis: the Scottrade Center, home of the Saint Louis Blues.

Senate Bill 469 (SB 469) would have allowed for up to $6 million a year in state funding for renovations to the hockey arena. All in all, proponents of the bill were asking state taxpayers for $70 million. Fortunately for taxpayers across Missouri, the bill didn’t make it to the governor’s desk.

SB 469 was poor policy. It would have forced all Missourians, from Maryville to Branson to Kirksville, to subsidize an arena benefiting wealthy team owners. While proponents touted a variety of economic benefits, from construction jobs to gushing tax revenues, they failed to acknowledge decades of economic consensus: stadiums and sports teams don’t grow the economy. As Dennis Coates and Brad Humphreys put it in their 2008 Econ Journal Watch paper:

No matter what cities or geographical areas are examined, no matter what estimators are used, no matter what model specifications are used, and no matter what variables are used, articles published in peer reviewed economics journals contain almost no evidence that professional sports franchises and facilities have a measurable economic impact on the economy.

Does SB 469’s demise mean the Scottrade Center will fall into disrepair? Almost certainly not, as local policymakers in Saint Louis have already committed 64 million in taxpayer dollars to the facility earlier this year—without a public vote. And since the facility is abated from all property taxes, it should have cash on hand to make some of the upgrades it wants.

But just because SB 469 wasn’t codified into law this legislative session doesn’t mean a similar bill cannot or will not be introduced next year. Before state policymakers conjure up another package of subsidies, they would do well to take a sober look at the research on sports stadiums.

(For more on the economics of stadium subsidies, see here, here, here, and here.)

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