As Kansas City voters head to the polls in April, one issue they will be voting on is whether or not the city should issue more general obligation bonds. Unfortunately, city leaders have not identified how the money raised with the new bonds will be spent. Click above to watch the video, or see these other posts regarding the GO bonds:
The GO Bonds Will Cost You Much More Than You’re Being Told
Opportunities for health care reform these days seem nearly boundless. Over the last few years Missouri has led the country with direct primary care, volunteer care, and right-to-try reforms, yet there is still much that the state can do to make health care better here in the Show-Me State. We’ve talked about a few possible reforms already, including Medicaid block grants & waivers, physician licensing reciprocity and certificate of need reforms, but another opportunity for lawmakers to reform the state’s health care system is an idea called “Right to Shop.”
Like the Medicaid reform we proposed three years ago, Right to Shop realigns incentives for health care consumers by rewarding them for seeking out cost-effective care. In a Right-to-Shop state, patients would be able to receive a portion of the savings an insurer would realize if the patient went to a lower-cost provider rather than a higher-cost provider. Rather than reinforce the paradigm where the ever-increasing prices we pay for a service go straight toward driving up our respective premiums, Right to Shop shifts the paradigm by empowering consumers in the private market to save themselves—and their risk pools—money that can be used toward other life needs they might have. That means more money can go toward health care spending, but also toward rent, car payments, or whatever else a patient might need, health-related or not.
Here’s how Josh Archambault of the Foundation for Government Accountability, the chief proponents of the idea, explained the concept in Forbes last year:
Right To Shop empowers patients with the knowledge they need to make smart choices about how and where they consume health care. They’re given tools to find the best value providers and, when they choose those options, they get a share of the savings – in cash.
It’s so easy, even a caveman can use it.
“Caveman” is probably a good image here, given that health care shopping was stuck in the Stone Age for much of the last few decades. For most Americans, the price actually charged for our health care when we received it was less of a gripe than the price paid in deductibles, premiums, and copays throughout the year—even though they’re all inextricably connected.
Right to Shop takes us another step in a better policy direction, toward transparency in pricing, competition for our care, and gentle reform of the third-party payer system we’ve come to expect. If Missouri policymakers haven’t considered the idea yet, now would be a good time.
Last year the state health insurance exchanges lost a host of providers as the companies providing the plans continued to hemhorrage money. Importantly, both Aetna and United left because the exchange market was so unprofitable, leaving patients with even fewer coverage options in 2017. Now we have more bad news, according to guidance issued by another company on Tuesday: Humana is leaving the exchanges, too, starting in 2018.
Regarding the company’s individual commercial medical coverage (Individual Commercial), substantially all of which is offered on-exchange through the federal Marketplaces, Humana has worked over the past several years to address market and programmatic challenges in order to keep coverage options available wherever it could offer a viable product. This has included pursuing business changes, such as modifying networks, restructuring product offerings, reducing the company’s geographic footprint and increasing premiums.
All of these actions were taken with the expectation that the company’s Individual Commercial business would stabilize to the point where the company could continue to participate in the program. However, based on its initial analysis of data associated with the company’s healthcare exchange membership following the 2017 open enrollment period, Humana is seeing further signs of an unbalanced risk pool. Therefore, the company has decided that it cannot continue to offer this coverage for 2018. [emphasis mine]
What does Humana’s decision mean for Missouri? Well for starters, in 2018, Jasper, Greene, and Newton counties will likely have only one insurance provider on the exchange, assuming Anthem doesn’t leave (as they’ve hinted they might do) and make that number zero. Options in Jackson and Clay counties in the Kansas City area will also be reduced, from three insurers to only two. To be clear, Humana wasn’t the largest provider of exchange plans by a long shot, but its departure suggests its suboptimal risk pool will migrate to the remaining plans in the state’s exchange, threatening those business models, as well. If, as Humana suggests, the company’s risk pool was too sick to be sustainable as a business model in 2017, it’s reasonable to believe that the remaining exchange providers will see their pools become sicker in 2018, and thus their business models less profitable. In other words, it’s an insurance death spiral.
Below is the insurer count map that I published earlier this year. The difference in 2018? The southwest corner of the state has only one inurer, and in the Kansas City area, all the 3 insurer counties become 2 insurer counties.
Assuming the accuracy of Humana’s release, the plans listed below will not exist on the Missouri insurance exchange next year.
The failure of the exchanges only serves to reaffirm that the misnamed Affordable Care Act needs to be repealed and replaced with a plan that empowers people and leverages the market to make care more affordable and accessible. We have a few ideas about how to make that happen. It’s time to finally make progress for patients.
The general obligation (GO) bond being considered in April would raise property taxes to pay off a series of 20-year bonds, twenty of them in total, targeted toward maintenance and infrastructure. These are legitimate city expenses that have been deferred for decades.
Despite the need, there is concern that political leaders will fall back on old practices of moving money around. Fearing this, a neighbor of mine in south Kansas City wrote some members of the City Council with a very salient concern:
What becomes of the existing general fund budget allocated to Public Works for street preservation and sidewalk repair? Does it continue to be used for street preservation or is it siphoned off to another area?
According to Kansas City’s Comprehensive Annual Financial Report (CAFR) for fiscal year 2015, the budget for the Public Works Department was almost $183 million. (The budget was $187 million in FY 2014 and $212 million in FY2012.) The Council is free to allocate the general fund as they see fit. It is, after all, what we elect them to do. The response my neighbor received was not promising:
The City’s Public Works Department confirms that the funding policy for Public Works street maintenance is set by ordinance. GO Bonds will dramatically expand revenue available for street reconstruction, maintenance, and repair. By law, GO Bond proceeds can only be used for GO Bond projects and cannot be diverted.
This answer plays right into my neighbor’s worry. Yes, the GO Bond proceeds may be restricted to public works projects. The concern is that the addition of new money from the GO bond will simply allow the Council to redirect discretionary spending from the general fun elsewhere. For example, imagine telling your child that any proceeds from her summer job will be dedicated to her college fund—then reducing your own contribution to the fund by the amount that she contributes to it. She may agree to make an additional contribution, but it won’t have the impact she is expecting. Similarly, voters may approve Question 1 giving $600 million in bonds for street and sidewalk repairs, only to find that the totality of money spent on street and sidewalk repairs does not increase by $600 million.
The fear is compounded by the Mayor’s refusal to commit to specific projects and timelines. He tells us that he doesn’t know what the city will be faced with in 20 years, yet he is fine with asking voters to commit to raising their taxes for 40 years. And as stated above, the reason Kansas City faces this problem in the first place is that previous councils did not fund needed maintenance.
The ballot questions at hand ask voters to ignore decades of experience with politicians’ bait and switch.
Kansas Citians would be wise to demand more explicit and binding commitments from City Hall, and smaller, shorter-term bonds. That way they have more opportunities to hold politicians accountable.
After the unrest at Mizzou in 2015, and with enrollment plummeting, Mizzou has struggled to regain its footing. Is there a way for Mizzou to bounce back? Our new paper highlights reforms from universities around the country that may offer fresh ideas. Click above to watch a video introduction to a new essay by Mike McShane and Michael Highsmith, or read the entire essay by clicking here.
What do owners of the luxurious Intercontinental Hotel in Kansas City and the St. Louis Cardinals have in common? They’re both leveraging special sales tax districts to subsidize their private ventures. The number of sales tax jurisdictions in Missouri has ballooned by 33% over the past 20 years. As the chart below shows, this growth correlates with rising sales tax rates. In short: the more districts, the higher the taxes.
Almost all of these new taxing districts are community improvement districts (CIDs) or transportation development districts (TDDs). These CIDs and TDDs are quasi-governmental districts formed through questionable processes that allow for even just a single voter to authorize millions in spending. What’s worse is that taxpayers often have no clue these districts exist, or that they’re paying into them. The charts below depict CID and TDD growth over the past 20 and 14 years, respectively.
Both CIDs and TDDs have bad track records in Missouri. Despite collecting and spending billions in taxpayer dollars, they often lack transparency, accountability, and other basic principles of good government. Of the 34 TDD audits the State Auditor’s office has completed over the past 10 years, a third concluded the TDDs under consideration were in bad financial shape. And nearly all audits indicated other issues, ranging from conflicts of interest, uncompetitive bidding practices, to a failure to comply with basic accounting standards. Some CIDs have even filed for bankruptcy.
Isn’t it time policymakers in the Show-Me state rein in the growth of these taxing districts? Increasing taxes on ordinary consumers like you and I, often to pay for privately-owned projects we’ll see no return on (e.g., the proposed Chesterfield Ice Complex, City Foundry project, or over-budget Loop Trolley), is not sound economic or fiscal policy. When it comes to taxes and taxing districts, often, less is more.
Charter school expansion is just one of several school choice initiatives lawmakers in Jefferson City have proposed this legislative session. The first charter schools opened in Kansas City and Saint Louis in 1999, but many Missourians still have questions and concerns about charter schools and the quality of education they offer. A new Show-Me Institute essay addresses many of these questions by examining studies on charter school performance in Missouri. In addition, the essay describes barriers that are preventing charter schools from serving more children throughout the state. Click on the link below to read more.
According to the most recently released data from the Bureau of Economic Analysis’s (BEA), (https://www.bea.gov/newsreleases/regional/gdp_state/qgsp_newsrelease.htm) Missouri’s output of goods and services (real GDP) grew at a 3.8 percent rate in the third quarter of 2016. Between the third quarter of 2015 and the same period in 2016, the economy expanded at a 2.0 percent rate.
When the BEA announces its real GDP growth rates for states, it uses an “all-industry” value. This includes both private industries (all economic enterprises owned by individuals or groups) and also the government (which encompasses the purchases of goods and services at all levels/branches of government). Because the private and public sectors both contribute to total (all-industry) output, this total measure can provide misleading signals on how well the private sector of the economy is doing. After all, the private sector of the economy is the growth engine for future economic well-being.
The table below illustrates how total measures don’t always paint the full picture. The table shows the growth rates for three categories: All Industry; Private Industry, and Government. The data cover the most recent four quarters for which information is available. All growth rates are based on year-over-year comparisons to smooth short-term wiggles in the data. In other words, the growth rate for 2016Q3 is the growth rate from 2015Q3 to 2016Q3, etc.
The data show that government “output” grew in the third quarter but declined in the previous three. This resulted in an all-industry output growth that was lower than that of the private sector, which actually expanded in every quarter shown. While the all-industry growth rate averaged 1.6 percent over these four quarters, private industry output—excluding government—increased at a faster average rate of 1.9 percent.
You might be thinking, “But such small differences in growth rates are trivial.” They are small, but they are not trivial: Using the average all-industry growth rate, it would take 45 years for the state’s output to double. The private industry values, in contrast, indicate that income would double in 38 years, a 16 percent reduction. Surely most of us would prefer our income to grow faster.
After separating out the effects of government, it appears that the private sector’s output of goods and services expanded at a faster pace than is suggested by the commonly used all-industry measure. This example shows that including government’s activity can affect our perception of how well the economy is actually doing.
| Period* | All Industry | Private Industry | Government |
| 2016 Q3 | 2.0 | 2.2 | 0.6 |
| 2016 Q2 | 2.1 | 2.4 | -0.2 |
| 2016 Q1 | 2.1 | 2.4 | -0.4 |
| 2015 Q4 | 0.8 | 1.0 | -0.4 |
A recent Kansas City Star story on the proposed Kansas City general obligation bonds, (GO Bonds) contained the following:
This year’s campaign is dubbed Progress KC. So far, the biggest contributors include Burns & McDonnell, JE Dunn, Mark One Electric, and several development and law firms.
Supporters are counting on the Heavy Constructors to help fund the campaign. That group, whose members stand to benefit from the infrastructure jobs, won’t officially decide until later this month.
It was nice to see the Star make a point of mentioning that financial backers of the 40-year property tax increase such as Burns & McDonnell, JE Dunn, and the Heavy Constructors have a bottom-line interest in the matter. They will likely get a lot of the money that they are asking taxpayers part with. But at least two of the biggest donors have something else in common.
Both Burns & McDonnell and JE Dunn do not pay the full property tax on their respective headquarters buildings. Or rather, thanks to Kansas City’s generous tax subsidy programs such as tax increment financing (TIF), much of their property, sales, and earnings taxes are returned to them to offset the costs of their impressive corporate pleasure domes. Readers of The Pitch may recall that Burns & McDonnell contributed heavily to convince voters to keep the earnings tax, and then lobbied the city to have a portion of its own earnings tax returned to it to build that same headquarters.
Walter Johnson, a professor of African American Studies at Harvard University recently spoke at the Kansas City library and referred to this sort of practice as “a fundamentally feudal model of corporate citizenship.” Rather than pay taxes to support institutions that are vitally important to the community—such as schools, libraries and the like—these corporations seek to avoid taxes and instead give charitably to the causes they themselves deem worthy. Johnson concludes:
Corporations shouldn’t have to keep their communities afloat through charitable giving. That’s what taxes are for, and that’s why paying them is typically considered a civic obligation, not an act of generosity.
That Kansas City is suffering from years of infrastructure mismanagement is a cold, hard fact. And it won’t surprise anyone to learn that those most eager to enact the tax will profit from its adoption. Yet it is a civic shame that those same corporations calling for an increase in others’ property taxes have spent so much effort trying not to pay their own taxes. Burns & McDonnell and JE Dunn should accept their own civic obligation before passing it on to others.
