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.
Missouri’s Private Sector Expanding
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 |
Taxes for Thee, But Not For Me
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.
Kansas City, Economic Development, and Homicide
Kansas City desperately wants to grow, and we’re spending or diverting tens of millions of dollars of taxpayer money each year on economic development, mostly downtown, in order to attract tourists and residents. When pitching the streetcar expansion, the $800 million general obligation bond, or a convention hotel, the Mayor tells us we have to build the city for the next 75 years.
But the Kansas City of right now is floundering. Our population growth is flat and our economic growth is weak. We’re in the midst of a years-long spike in the homicide rate, which is one of the nation’s highest. As The Sentinel pointed out in a recent article, “in Kansas City you were seven times more likely to be murdered than you were in New York City.” Though Chicago grabs headlines for having had an almost-unfathomable 762 homicides in 2016, The Sentinel points out, “Chicago is only 4 percent more lethal. There is no solace in that.”
How did we get where we are? The question seems unanswerable. One answer may be police resources. The Sentinel tells us that New York has “more than twenty times as many police officers to handle those killings. In sum, the NYPD had seven times more officers per homicide than the KCPD.” Meanwhile, the Kansas City police department annual reports show that there are fewer officers in uniform today then there were in 2009. While the new city budget includes an increase for public safety, it is not clear if this would allow for new officers to be hired, or if the police and fire departments are spending efficiently.
To no one’s surprise, The New York Times reports that high crime hinders economic and population growth. New research indicates that:
when violent crime falls sharply, wealthier and educated people are more likely to move into lower-income and predominantly minority urban neighborhoods….
“When cities feel safer, that opens people’s eyes,” Ms. Ellen said of the willingness of new groups to consider these neighborhoods.
All the subsidized coffee shops and condominiums will be for nothing if the city is unable to deal with runaway crime. And tax increases to spur development will likely fail if the basic safety needs of a community are neglected. What Kansas City needs is not more wide-eyed development schemes, but more effort delivering basic services efficiently and effectively, if we are to have any hope at growth.
Medicaid Waiver Request A Great Idea
Although much of the legislative air has been consumed by Right to Work in the last few weeks, two other bills—both dealing in health care policy—are slowly making their way through the legislative process, and chances are good that our readers will hear quite a bit about them in the months ahead.
The first proposal, brought forth in the Senate, would request a “global waiver” from the federal government for Missouri’s Medicaid funds. A global waiver would deliver federal funding to the state’s Medicaid program without all the strings attached. Such a dramatic change in policy would allow for enormous flexibility for state legislators to craft a Medicaid program that can best help our state’s most vulnerable citizens without the similarly enormous burden of federal regulations that currently bedevil the program.
This is how Fox 2 describes the idea:
A Senate committee heard testimony Wednesday on a bill that would direct the state Department of Social Services to seek a “global waiver” from federal Medicaid requirements to remake the state’s program.
Sponsoring Sen. David Sater says the intent is to ask the federal government to provide Missouri’s Medicaid money as a block grant, giving the state greater flexibility over how to spend it. Federal Medicaid dollars currently are provided on a matching basis for each state dollar that’s spent on health care services.
Translation: Missouri would decide how best to serve Missouri Medicaid patients. Crazy, right?
Now if the waiver sounds to our longtime readers a lot like the block grant idea we’ve written about in the past, that’s because functionally, it is. Our full proposal would take the grant money and split it into HSAs for low-income beneficiaries, empowering them to make decisions about their health while simultaneously providing incentive for participants to save money and shop for care. These ideas are largely captured in the second bill I referenced in the introduction. That HSA idea is, of course, just one of many potential reforms to the Medicaid program that could happen under a waiver or block grant, so Missouri’s plan could be different from plans agreed to in Florida, Illinois, or any other state. That’s a feature of the block grant, and given that a block grant proposal is currently being floated by the President, we may soon have the opportunity to see the laboratories of democracy at work in an effort to provide and better-tailor care in the Medicaid program.
But to get there? The doors to those labs need to be thrown open, and that’s where the waiver and block grants come in. I hope these ideas continue to work their way through the legislative process, as they are likely to be front and center during this legislative session—especially, as seems reasonably likely, if the federal government green-lights block granting of Medicaid from its end.
MetroLink Underperforms, but It Is Not Underdeveloped
The Post-Dispatch’s Tony Messenger claims that MetroLink, Saint Louis’s light rail system, is “underperforming and underdeveloped.” He’s half right. Today, MetroLink carries roughly as many passengers as it did in 2005, prior to the last expansion. In fact, all modes of transit underperform in Saint Louis. A lower percentage of Saint Louisans ride the entire rail and bus system today than rode the pre-MetroLink, bus-only system. Even some transit activists admit the system has been underperforming for years.
But is MetroLink underdeveloped? One way to answer that question is to ask whether the existing supply of light rail meets demand. Based on ridership trends, the existing supply of light rail may actually exceed demand. Ridership plummeted during and shortly after the recession in 2008 and has failed to pick back up even while economic conditions have improved in Saint Louis.
Another way of determining if MetroLink is underdeveloped is to compare it to other light rail systems. The table below lists light rail systems from across the country, and looks specifically at the length of each system, as well as the population and geographic size of the urbanized area (UZA) where the system is located.
Note: Track miles are compared to UZA and not ‘Service Area’ (SA) because SA includes modes besides light rail (e.g., buses) and is a direct correlate of track miles. Thus, SA is simply a function of track miles, and not a measure of the metropolitan area a system serves. See National Transit Database Glossary for more.
Source: Track miles from agency websites, and UZA data from National Transit Database.
Given this perspective, we can see that in terms of track miles, Saint Louis has a rather robust light rail system compared to other cities. While there is variation across systems, Saint Louis has more miles of track than the average and the median system. In fact, of these 18 systems, Saint Louis is the 7th-largest (and if we excluded systems with heavy rail, the 5th-largest). MetroLink is even larger than some heavy rail systems, such as Metrorail in Miami-Dade County (24.4 miles), and is just about as large as Atlanta’s system (47.6 miles).
However, what matters is not just the length of a system but also the length of a system relative to the size of the area it serves. To measure this, we divide the size of an area by the miles of track its system has—the figures in the fourth column. (For a more complete picture, I’ve also included population as the last column.) In short, the lower the number in the fourth column, the more miles of track per square mile of land, and so, the more developed a system is. By this measure, Saint Louis has one of the more developed systems in the country and compares well to many cities, with a system that is far more developed than the average. Saint Louis even compares favorably to Los Angeles!
Based on this analysis, Saint Louis’s light rail system does not appear underdeveloped. It may even be overdeveloped (or, perhaps, it developed too quickly or along poorly chosen routes). Before pushing for another expensive MetroLink extension, shouldn’t officials ask if we already have more than we need (and can afford)?
Course Access in Missouri, Updated
A little more than a year ago, Brittany Wagner and I published a paper titled “Course Access in Missouri: Diversity, Personalization, and Opportunity” wherein we looked at programs that allow flexibility in the funding that states send to local school districts to allow students to better customize their school schedule.
As part of that paper, we looked at the current state of course access in Missouri, and used Department of Elementary and Secondary Education (DESE) enrollment data to try and determine which districts did not have any students enroll in advanced classes like Calculus, Physics, or AP courses. We looked at this question because there is evidence that many rural districts struggle to offer these classes.
To investigate, we reached out to DESE and asked for enrollment data in Chemistry, Physics, Calculus, and AP courses from the 2014–15 school year. We counted up the number of districts that had zero students enrolled and then subtracted it from the total number of districts. Here is the figure from the report.
We wanted to update these data for the 2015–16 school year, so we again contacted DESE for the enrollment numbers. This is what course access looks like in 2015–16:
The numbers for the 2015–16 school year are still striking. In percentage terms, 9 percent of districts that offer high school did not have a single student enrolled in Chemistry, 42 percent did not have a single student enrolled in Physics, 40 percent did not have a single student enrolled in Calculus, and 63 percent did not have a single student enrolled in an AP class.
In the process of updating these numbers, I realized that I made a coding error in the data set upon which the figure in the original paper was based. Careful readers of the paper will see that we subtracted our enrollment numbers from 507, even though there are 518 school districts in Missouri. We did this to try and exclude from our analysis school districts that didn’t offer high school because there is no way they could offer these advanced classes. According to DESE’s 2017 “Fast Facts” page, DESE lists 448 districts that offer high school, not 507. After chatting with the good data folks at DESE, we confirmed that in the 2014–15 school year, Missouri also had 448 districts that offered high school. Accordingly, Figure 1 from our Course Access essay (which is also Figure 5 in this essay), should look like this:
My apologies for our original miscalculation, but our argument still stands (the figure with 2015–16 numbers uses the correct total number of districts—448). In too many school districts across the state, too few students are enrolling in higher-level coursework, and course access programs can help fill that gap.
Two notes regarding the graphs above: When counting Physics courses, in both years, we excluded a class called “Physics First,” as this is a course for 9th-graders, not what we would consider an “advanced” course for high school upperclassmen. In calculating the 2015–16 figures, we counted any AP courses both for the AP column and for the respective subject matter column.
Pension Reform in Missouri
“The bottom line is this: Our state has a serious pension problem, and we need to start talking about how it can be fixed before it’s too late.”
With that statement, Missouri State Treasurer Eric Schmitt described our state’s severe underfunding of public employee retirement plans. To put an issue that Show-Me Institute writers have been highlighting for years in simple terms, when initial contributions to a retirement plan are too low or don’t grow as fast as projected, spending promises can’t be kept. Either retirees are hung out to dry, or taxpayers must step up and pay what a plan cannot.
Addressing our current spending issues is essential to improving our state’s fiscal health, but if we fail to consider Missouri’s long-term pension obligations the results could be disastrous.
As any savvy investor knows, the power of compounding can make a huge difference when it comes to saving. If our investment assumptions today are even slightly different from what actually happens in the market, this difference can grow rapidly over time. A widening gap between assumed and actual returns is especially troubling, because most economists agree that estimates for pension investment returns are often too rosy.
In 2015, Andrew Biggs of the American Enterprise Institute estimated that Missouri’s public pension plans had a total of $57.3 billion in unfunded liabilities (which are calculated as current assets minus the net present value of what will need to be paid). If plan investments fail to grow enough to cover promised benefits, then a bill much larger than even $57.3 billion will hang over the budget discussions Missourians have years from now.
So how can we fix this problem? Reforms that help Missouri transition away from plans that promise payments for life and toward plans that incur their costs up front can protect our state from investment risks. Schmitt illustrates this perfectly when he says “Our goal as a state should be to fully fund our obligations as they are incurred instead of putting the burden on the backs of our children and grandchildren.” Policymakers should consider adopting this goal—the sooner, the better.
Where Are the Certificate of Need Bills?
Last month I had the opportunity to go back to my alma mater, Saint Louis University, and share with a crowd of medical students my thoughts on the future of health care in this country. We had a great conversation about where we’ve been when it comes to care provision, the failures of the system, and where we ought to go, but what I emphasized again and again was the importance of expanding health care supply. That can happen in a lot of ways, including through the reformation of licensing, scope of practice, and insurance laws. But I also emphasized the importance of a supply reform I view as low-hanging fruit for legislators—abolishing Certificate of Need (CON) laws for Missouri hospitals.
CON laws create barriers to opening all sorts of medical facilities without undue interference, supposedly to protect health care access. The research says these laws do the opposite, which is why support has grown for their repeal nationwide. But in contrast to previous sessions, it doesn’t seem that there’s legislation moving to the forefront yet that would unwind Missouri’s CON law. Frankly, that’s mystifying.
Over the last few years we have talked a great deal about the importance of CON reforms. We even included it as an item in our Blueprint. But apart from our work on the subject, the potential impact of CON reform on patient care is made clear by events taking place right now in the Kansas City area. Kansas doesn’t have a certificate of need law; Missouri does. Unsurprisingly, and as reported by the Kansas City Star, a network of microhospitals is sprouting up all over the Kansas side of the metro area. And as the Star notes, the same sort of innovations aren’t happening in Missouri.
But the law cannot change unless there is legislation to change it and champions to see it through. There is still time for bills that can expand the supply of health care facilities, of physicians, of care, and all the rest. That said, time is running out. If CON reform is going to get done, it needs legislative champions. It remains an open question who those will be in 2017.
