Should Sales and Use Taxes Fund Interstate Improvements?

Posted on by Graham Renz

Missouri’s “Main Street,” Interstate 70, is in need of more than the usual, periodic repairs. The roadway is, in some places, 60 years old, and its foundation has deteriorated. Put simply, the massive piece of infrastructure needs to be rebuilt and many citizens also want it expanded. But, even with a strengthening economy, the Missouri Department of Transportation (MoDOT) doesn’t have the means to fund reconstruction and expansion of the roadway. So, how will the job get done?

A few proposals to fund I-70’s reconstruction have emerged in Jefferson City this legislative session. One bill, SJR 3, would raise fuel taxes by just a few cents (1.5 cents/gallon on gasoline, and 3.5 cents/gallon on diesel fuel) , and is estimated to generate $57M a year for MoDOT and $24.5M for local governments to spend on roads. Another bill, HB 155, would allow the Missouri Highways and Transportation Commission (MHTC, which oversees MoDOT), to receive proposals from the private sector on the rebuilding and eventual tolling of Interstate 70. Both proposals focus on increasing user fees, which directly tie the funding of roads to the consumption of roads.

Another bill, SB 457, takes a different approach. SB 457 would, for 10 years, divert 8% of state sales and use tax proceeds away from the general fund to a newly established “Interstate 70 Improvement Fund.” Most of those funds, averaging $250M a year, would go towards reconstructing and expanding I-70 to four lanes each direction. SB 457 would generate enough revenue to rebuild and expand I-70, but the question arises: Are sales and use taxes appropriate sources of revenue for transportation investments? The answer isn’t so clear.

For one thing, it isn’t necessarily fair to force people who don’t use I-70 to pay for it. Should a working-class family in Cape Girardeau have to pay for an interstate they’ll never drive on? Should someone who doesn’t drive at all pay for the interstate system? Moreover, basing highway funding on sales and use tax revenue could lead to unintended economic consequences. As former Show-Me Institute Policy Analyst Joseph Miller put it, “If people pay for roads and bridges based on how much they shop and not how much they drive, it will make driving look comparatively cheap, pushing people to drive more at any gasoline price, thereby increasing congestion, pollution, and urban sprawl.” In short, by socializing the cost of roadways through general taxation, people will drive more than they usually would, creating negative externalities that a user fee-based system could internalize.

It’s also worth asking whether diverting general revenue, which funds public safety, education and other important services, is the best policy option at a time when the state is making budget cuts. If general revenues are used to fund interstate improvements, could that mean services traditionally funded with general revenues will be scarcer? It’s hard to know, but policymakers would be wise to consider possible consequences before shifting funds away from other areas.

In 2014, Missourians soundly rejected a transportation sales tax hike. Perhaps that, if anything, is a signal that Missourians don’t want their shopping patterns dictating their roadway funding.

Raise the Age-and Save!

Posted on by Patrick Tuohey

We wrote recently of the opportunity to improve public safety in Missouri by “Raising the Age”—that is, keeping most 17-year olds out of the adult criminal justice system.

Part of the potential benefit is related to federal guidelines that require jailed and imprisoned youth under age 18 to be kept completely separate from the adult population. The guidelines, designed to prevent sexual and physical abuse of children, are expensive to comply with, and Raising the Age would reduce the number of youth who require this protection.

There are additional reasons to think that Raise the Age reforms would save money. Ninety-three percent of 17-year-olds arrested in Missouri are charged with nonviolent or misdemeanor offenses. In the current system they are charged, jailed, and imprisoned as adults. That is costly to taxpayers, and the Missouri Department of Corrections estimates that it would save $14 million each year if, as legislation now being considered in the Senate and the House proposes, most 17-year olds were prosecuted in juvenile court instead of the adult system.

The good news is that thanks to previous and largely successful reforms in Missouri’s juvenile criminal justice system, there are fewer children going through the system. In 2006, the Division of Youth Services (DYS) saw 1,214 commitments. In 2016, there were only 645—a reduction of nearly 50 percent.

But representatives of the Missouri Juvenile Justice Association (MJJA)—a trade association of “juvenile officers,” a class of court employee that works with youth in the juvenile justice system—testified against HB 274, a measure that would require that 17-year-olds be prosecuted under the juvenile justice system unless they have been certified as adults. The MJJA representatives claim the measure will increase workload, and they want passage to be contingent on more than $15 million in new spending for more juvenile officers. It’s natural to assume that an influx of new clients might justify hiring more officers, but consider two trends in Missouri’s juvenile justice population over the past decade or so:

  • Total referrals to juvenile court are down 28% since 2004. (Source: Missouri Juvenile & Family Division 2015 Annual Report, page 10)
  • Missouri already pays for over 20% more juvenile officers than it did in 2006, when nearly twice as many youth were arrested and passed through Missouri’s juvenile courts.

Raising the Age could be of great benefit to the children caught up in Missouri’s criminal justice system, and the opportunity to move them to the juvenile court system could also save taxpayers a lot of money. It would be unfortunate if this reform fell victim to state employees who demand more funding despite already having one-fifth more workers to handle just over half the cases they did 10 years ago. Where is the justice in that?

What Does It Mean for the State to “Underfund” Education?

Posted on by James V. Shuls

A new budget proposal from Rep. Scott Fitzpatrick (R-Shell Knob) would fully fund Missouri’s foundation formula for K-12 education for the first time in years. As I have noted in the past, there were some obvious reasons for why the formula has been underfunded. The formula had features that let it grow rapidly. When this happened, the state simply could not keep up with the obligations. Last year, legislators reinstituted a five percent cap on growth in the formula. That change makes fully funding the formula an actual possibility—one that could become reality as soon as next year.

The fact that Missouri has not fully funded the formula has been a rallying cry for more education spending. Indeed, educators across the state have claimed that we are “underfunding public education.” This new budget proposal has me wondering what will happen to those calls for increased spending when the state finally does fully fund the formula. Will they die down, or will they persist? To answer this question, it is important to define “underfunding” public education. Below, I explain three ways to think about education spending.

Constitutional Obligations

State constitutions vary in what they require in terms of education spending. Some state constitutions say very little. Others call education a “paramount duty” of the state. In Missouri, the constitution explicitly requires the state to spend 25 percent of state revenue on public education, which the state regularly does. The Missouri Supreme Court has upheld the funding system as recently as 2009.

Formula Obligations

The legislature is responsible for creating a formula to fund public schools. Missouri uses a foundation formula, which calculates exactly how much the state should spend on each student in the state. The Show-Me Institute recently released an updated version of my paper, “A Primer on Missouri’s Foundation Formula for K-12 Public Education,” which explains exactly how schools are funded by the state.

In creating the formula, the state creates what may be seen as another form of obligation—a stated obligation of adequacy. This obligation may be separate from a constitutional requirement, but it nevertheless creates an expectation among public school officials. They expect lawmakers to fully fund the formula they created. As we have seen failure to do so creates a useful talking point for advocates of higher education spending—we are underfunding the formula.

Now, it seems that argument may disappear.

Moral Obligations

What happens when Missouri fulfills its constitutional and formula obligations to fully fund public education? This will take some of the wind out of the sails of advocates for higher education spending, but it certainly will not end calls to increase funding. The truth is that individuals have their own views on education. These views may or may not be informed by research, but ultimately they flow from our own personal values, beliefs, and morals. I call this the moral obligation to fund schools. The level of this obligation is not universal; rather, it varies from individual to individual.

I applaud the legislature’s effort to fully satisfy both constitutional and formula obligations in funding Missouri’s schools. Nevertheless, we should anticipate continued calls for increased spending. Those calls, however, will be easier for lawmakers to address when they can point to a fully funded formula. 

Criminal Justice Reform: Mandatory Minimums

Posted on by Patrick Tuohey

Legislation has been introduced in Missouri that would relax the state’s rigid sentencing laws in favor of more flexible guidelines. Known as the Justice Safety Valve Act, the bill would offer a reprieve from inflexible one-size-fits-all sentencing and could save taxpayers a lot of money.

Under current law, sentencing courts are required to issue minimum prison terms based on several criteria including severity of the crime, previous convictions, and whether the infraction involved violence and/or firearms. The new legislation gives courts greater discretion.  In cases not involving serious physical force or abuse of a child, courts may:

depart from the applicable mandatory minimum sentence if the court finds substantial and compelling reasons on the record that, in giving due regard to the nature of the offense, the history and character of the defendant, and his or her chances of successful rehabilitation, imposition of the mandatory minimum sentence would result in substantial injustice to the defendant or the mandatory minimum sentence is not necessary for the protection of the public.

The opportunities presented by the Justice Safety Valve Act—cost savings for taxpayers, real rehabilitation for offenders, and reduction of recidivism—seem well worth the legislature’s consideration.

How Should Saint Louis Fund Its Zoo?

Posted on by Graham Renz

The Saint Louis Zoo is one of the finest institutions of its kind, and is a source of civic and scientific pride for Saint Louisans. It’s also in a $50 million hole. For nearly half a century, the zoo and other local institutions have been funded in part by property taxes levied within the Metropolitan Zoological Park and Museum District (Saint Louis City and County). In 2015, that property tax brought in $21.5 million in revenue to the zoo. But zoo officials claim those and other revenues aren’t enough to keep up with maintenance and planned expansion costs. So there is now a proposal making its way through the General Assembly that would allow for a sales tax increase in Saint Louis City along with Saint Louis, Saint Charles, Jefferson, and Franklin counties to bolster the zoo’s budget.

There are a number of questions surrounding this proposal, and how to fund the Zoo in general. This blog is not the place to exhaustively consider all of them. But there are two essential points that should be at the core of any discussion of the Zoo’s funding future.

First: Should shoppers across the four counties and the city—rich and poor alike—pay for a zoo they may never visit or directly benefit from? Sales taxes are easy to collect, and they can generate significant revenue, but that doesn’t mean they are an economically sound or fair way to fund the zoo. Is it fair to tax someone buying wine in Defiance or Augusta in order to support a zoo miles away in Saint Louis City, that they may never patronize? Moreover, should those in the Zoo-Museum district—working poor included—be taxed twice for the zoo?

One might object that many of the zoo’s visitors come from outside the Zoo-Museum District, often from Saint Charles, Jefferson, and Franklin counties, so they should help pay for this regional amenity. I wholeheartedly agree that those who visit the zoo should pay for it. But a sales tax across those counties would tax far more people who don’t visit the zoo than people who do. As a percentage of total annual visitors, residents from the three above-mentioned counties only comprise 13% of the zoo’s attendance. Now, one could argue that since some people in the Zoo-Museum District pay property taxes for the zoo and never visit, others in the region can make that sacrifice, too. While this reasoning might appeal to those already paying the zoo tax, exporting bad policy doesn’t make it any better.

Secondly: Can the Saint Louis region stomach any more sales tax increases? In many parts of the city and county, sales tax rates are close to 11%, and there is an almost never-ending list of public projects asking for sales tax hikes. In Saint Louis City, a MetroLink expansion proposal includes a 0.5% sales tax hike; in Saint Louis County, Proposition P includes a 0.5% hike for public safety. At what point will the sales tax capacity of the Saint Louis region be exhausted, leaving no room for other projects and initiatives?

It’s important that the zoo has the funds necessary to keep its property and infrastructure in good repair, and no doubt feeding elephants isn’t cheap. But that doesn’t mean just any funding mechanism is appropriate to keep the zoo running. Leaders and policymakers in the region should carefully consider the funding options before them, and not be too hasty to dismiss options like user fees as an appropriate path toward a sustainable funding future.

L’Affaire Middlebury

Posted on by Michael Q. McShane

Economist Herbert Stein is famous for the quotation “If something cannot go on forever, it will stop.”

For many years, Stein was a Senior Fellow at the American Enterprise Institute, where I am an adjunct fellow and Charles Murray is the W.H. Brady Scholar in the social sciences. Last week, Dr. Murray attempted to give a speech at Middlebury College in Middlebury, Vermont, and well, you’ve probably heard how that went.

It was the most violent instance in the recent trend of out-of-control protesters on college campuses silencing speakers with whom they disagree. Just days after Dr. Murray’s talk, the philosopher Peter Singer, who I think can fairly be put at the opposite end of the political spectrum from Dr. Murray, had a lecture shouted down by students with megaphones.

This cannot continue. Maybe I’m being overly optimistic, but I think the events at Middlebury represent a turning point in the free speech battle on college campuses. My perusal of the media coverage of the event shows near universal condemnation of the students’ actions. From the New York Times to National Review, educated people of all political stripes have opposed it. Dr. Murray himself has praised the administration at Middlebury, which is rightfully embarrassed and has committed to fixing the problem.

Time will tell, and the concrete steps Middlebury takes will be important, obviously. But I think the tide is turning. If you follow writers like Kat Timpf at NRO or Robby Soave at Reason, it seems like not a week will go by without some speaker that deviates even a tiny bit from the orthodoxy on some issue getting shouted down. Liberals are being protested, conservatives are being protested, and seemingly apolitical folks are being protested. It’s like that scene from Oprah’s “favorite things” episode when she gave everyone a car: “AND YOU GET A PROTEST! AND YOU GET A PROTEST!”

Ironically, the upside is that it isn’t just conservatives who are being shouted down anymore. This has the effect of widening the group of people who oppose the protests. It’s easier to be a bystander when you disagree with the person who is being protested. It’s harder when you feel your own tribe is under attack.

Things that cannot continue, won’t. This has to end, and the sooner the better.

Policy Study: Missouri’s Funding Formula for K-12 Public Education

Posted on by James V. Shuls

The foundation formula put into place during the 2006-2007 school year is the basis for public school funding in Missouri. The formula is an attempt to balance factors including the number of students in a district, the cost of living in various districts, available local revenue, and the number of students with special needs. The fairness of the formula is the subject of debate, but its complexity is unquestioned. James Shuls, Distinguished Fellow of Education Policy at the Show-Me Institute, has updated the primer he originally published in 2012 to clarify how state and local dollars work together in the funding formula. Click here to read the entire primer.

Stuck in the Middle with Mizzou

Posted on by Michael Q. McShane

The University of Missouri has received more than its share of media attention over the past few years, but most of that coverage has focused on the 2015 protests in Columbia and their aftermath. In his new essay, Show-Me Institute Director of Education Policy Michael McShane takes a more measured look at Missouri’s university system and asks how well it is fulfilling its dual missions: education and research. Click here to read the entire essay.

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