Missouri Economic Development Incentives Aren’t Worth It

Posted on by Patrick Tuohey

From January 1, 2023, through December 31, 2023, Missouri issued just under $233 million in economic incentives, according to the Missouri Department of Economic Development (DED). For the period from July 1, 2023, through June 30, 2024, the department showed that self-reported data indicated the “actual number of jobs created as a result of the tax credits” was 4,696. These figures, published two pages apart in the 2024 Tax Credit Accountability Report, are telling.

It is first worth noting that job creation figures from economic development agencies are often misleading, with creative accounting used to inflate the numbers. And the numbers almost never account for the possibility that these “created” jobs would have happened with or without subsidies. Numerous academic studies have shown that economic development programs rarely work as advocates claim.

But just for the sake of argument, let’s take the numbers at face value. If we divide the jobs created by the incentives provided, the cost amounts to roughly $49,500 in taxpayer money for each job. Is that expense worth it?

Consider this: according to the Bureau of Labor Statistics (Table 6), Missouri’s economy added 589,337 jobs in calendar year 2023.* In other words, the ordinary functioning of the state’s economy produced roughly 125 times more jobs than the Department of Economic Development’s incentive programs. The DED’s contribution is a tiny fraction of the state’s overall job creation—and it comes at a substantial cost.

The price tag goes beyond the incentives themselves. The total department budget for salaries is $14.6 million for approximately 202 full time employees, meaning taxpayers not only footed the bill for the incentives but also paid for the administrative costs of distributing them. It’s an expensive way to do something the broader economy already does more effectively.

Perhaps it’s time to rethink the role of the Missouri DED. Those funds could be redirected to areas that deliver tangible benefits to all Missourians, like roads, schools, or public safety. Instead of propping up a costly system that yields meager results, Missouri could invest in the essentials that make the state a better place to live and work.

 

*NOTE: The BLS statistics I cite offer both gross job gains and gross job losses. I cite only the gross gains. A fair-minded person might suggest a more accurate approach is to calculate net job gains by subtracting gross job losses from gross job gains. I would agree with that in most cases. However, economic development professionals do not make a habit of acknowledging job losses. For example, it is often the practice to count as “new” a job that may have only changed location. Until economic development advocates provide a more rigorous accounting of jobs “created,” using BLS numbers on gross job gains is the best comparison.

Sedalia Doesn’t Need a 353 Redevelopment Plan

Posted on by David Stokes

There is a lot happening in Sedalia right now. Many local residents are starting to ask questions about the goings-on in local government, and that is a great thing. One of the items that people are concerned about is the city’s plan to expand and reauthorize its chapter 353 redevelopment plan, otherwise known as an urban redevelopment plan. Chapter 353 plans exist to create a large number of tax abatements. One member of the Sedalia City Council says he supports the 353 plan:

First Ward Councilman Tom Oldham commented that he feels that Chapter 353 is a great tool, as evidenced by his visits to Elm Springs, a community that also took advantage of the Chapter 353 program. Elm Springs went from blight to beauty as a result, Oldham said.

(Note: I assume he meant Excelsior Springs, which has a 353 plan, and not Elm Springs—I can find no municipality in Missouri with that name.)

Did a 353 urban redevelopment plan really turn Excelsior Springs (or Elm Springs?) from blight to beauty? Of course not. Granting some properties in a designated area a tax abatement if they undergo the required legal process isn’t going to grow the economy. If you want to cut taxes, great—cut taxes for everyone, not just a designated few. The idea that politicians are qualified to pick the right companies or properties is absurd.

Economist Dick Netzer once mocked the exaggerated claims of success by economic development officials and politicians by writing, “Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?” Those claims of subsidy success often border on the absurd. I once heard a Clay County economic development official claim that “all of the growth” in the town of Liberty—a fast growing, exurban community north of Kansas City the likes of which have been growing across the nation for decades—was due to a tax increment financing (TIF) package. All of it, he stated with certainty, as if suburbanization didn’t exist until Missouri’s TIF law was passed in the late 1980s.

Economists Alan Peters and Peter Fisher studied tax incentives closely and concluded that they work about ten percent of the time (as measured by job creation), and the other 90 percent are simply a waste of money. They added that, like the Clay County official mentioned above, economic development officials often credit all new employment and growth to tax subsidies.

The City of Saint Louis has been using tax incentives like 353 urban redevelopment plans, Enterprise Zones (EZs), TIF, and other subsidies as redevelopment tools for over half a century. How has it worked out? Colin Gordon, in his 2008 book Mapping Decline, documents the decline of the City of Saint Louis. The book’s research is exhaustive. The dominant theme of the book is the use of urban renewal tools and tax subsidies—and their absolute, total failure. From his conclusion:

The overarching irony, in Saint Louis and elsewhere, is that efforts to save the city from such practices and patterns almost always made things worse. In setting after setting, both the diagnosis (blight) and its prescription (urban renewal) were shaped by—and compromised by—the same assumptions and expectations and prejudices that had created the condition in the first place.

The dirty little secret that nobody seems to want to recognize is that 353 Plans, EZs, TIF projects, , tax abatements, and other subsidies do not work. They don’t succeed in growing the local economy, be it urban, suburban, or rural. The panoply of subsidies that come into play when a large area is declared blighted can have a number of adverse side effects. They shrink the local tax base, introduce more cronyism and favoritism into the economy, encourage more government planning of the economy, and increase the chances of eminent domain abuse. As a famous Swedish economist once said:

It is not by planting trees or subsidizing tree planting in a desert created by politicians that the government can promote . . . industry, but by refraining from measures that create a desert environment.

The Chapter 353 urban redevelopment plan didn’t help grow Excelsior Springs. It didn’t help grow St. Louis, nor any of the other cities that have such a plan. It won’t help grow Sedalia, either, but it will be great for the politically connected parties who get the tax subsidies they are after.

Is Professional, Non-Partisan Management the Solution for St. Louis Government?

Posted on by David Stokes

Both the City of St. Louis and St. Louis County are debating whether or not to adopt a city manager system of government (or county manager, obviously, in the county). Lucky for you, dear readers, the Institute just released my paper on local government structure that discusses the pros and cons of such systems in depth.

In a city or county manager system, the manager is employed by elected officials to run the day-to-day operations in a (hopefully) non-partisan and less politicized manner. Many municipalities use city managers or city administrators (a very similar system where the professional manager has slightly less power) in Missouri, including Kansas City and Springfield. Clay County is the only county that uses a county-manager system; it just instituted the system in 2021. The system works well, in my opinion, for small to mid-sized cities. I am less sold on this system for larger cities and, especially, counties.

Overall, the academic evidence suggests that adopting professional management would reduce corruption, improve financial reporting, lead to more broadly focused legislation (and fewer narrowly targeted measures), reduce political conflict, and increase innovative policy thinking (in ways both good and bad). These changes would be generally beneficial for the City of St. Louis and St. Louis County, though the idea that politicians would now have more time for “innovative” thinking terrifies me. Usually, that “innovation” means harmful policies involving subsidies and mandates.

On the other hand, there is not enough evidence to state that professional management would significantly affect taxes and spending, government employee pay levels, or the quality of local services, despite what proponents of city manager systems claim.

The last claim regarding the quality of local services is key. Would the adoption of a city or county manager improve the quality of basic governmental services? (For example, would the snow get cleared off the roads faster under a city manager?) The presumption of better service quality with professional management is common, and it may be correct in some cases. But the evidence is not as clear as its supporters would suggest. Professional management might well perform better than management by elected officials. But as one academic stated, “For decades, analysts have presumed this performance gap exists, but they have yet to empirically demonstrate that any differences actually exist.”

Interestingly, the one proven downside of professional management is lower voter turnout for local elections. It seems that when you depoliticize local government (which is not a bad thing), people understandably depoliticize their own involvement with local government.

I remain unconvinced that professional management is the cure for the governmental problems in the City of St. Louis or St. Louis County. Adding another layer of bureaucracy is rarely the right solution.

Forming a Missouri Nuclear Advisory Council

Posted on by Avery Frank

The recent snowstorm reinforces the necessity of a reliable, consistent energy grid to power homes and businesses. As America and Missouri grapple with rising electricity demand and widespread closure of coal plants, nuclear energy has emerged as a key piece to power future electricity needs.

Positive trends in regulation, attitudes toward nuclear power, and technology have fueled a resurgence in American nuclear power. The good news for Missouri: our state has a strong history with nuclear power and engineering. With real national momentum, Missouri has an opportunity to leverage our existing strengths to benefit from this resurgence.

A Simple First Step: Forming a Nuclear Advisory Council

A straightforward step would be forming a Missouri Nuclear Advisory Council to inform comprehensive strategies for guiding nuclear development. Tennessee’s recent experience offers a replicable model.

In 2023, Governor Bill Lee of Tennessee established a nuclear advisory council through executive order to inform legislative actions for addressing regulatory, education, and workforce barriers, as well as strategies for financing, waste storage practices, and opportunities Tennessee should pursue with federal partners and agencies. For example, the council recommended amending a regulatory statute to classify nuclear energy production facilities as Certified Green Energy Production Facilities, leveling the playing field with renewables.

Tennessee’s council serves as a model of collaboration and expertise, with membership that includes:

  • Directors of interested state departments: Environment and Conservation, Economic Development, and Emergency Management
  • Officials from the state legislature, congressional delegation, and local government
  • Experts from higher education, utilities, workforce development, the energy production sector, and the nuclear industry
  • Representation from the regional national laboratory
  • Additional members as determined necessary by the governor (Tennessee opted to include more experts and scientists).

Missouri could create a similar council through executive order, establishing a platform for collaboration among the state’s brightest minds.

Potential Focus Areas for the Council

While Tennessee’s council had a partial focus on economic development, Missouri’s council could prioritize identifying best practices and potential legislative solutions without interfering in market outcomes.

To provide one example, the council could identify and evaluate suitable locations for new advanced nuclear facilities. The U.S. Department of Energy reports that repurposing coal plants for advanced nuclear reactors can reduce construction costs by up to 35%. Oak Ridge National Laboratory has already identified retired and retiring coal plants in Missouri as promising sites for new reactors. The council could assess these opportunities and recommend actionable steps.

The Potential for Missouri

Missouri has the talent, the track record, and the need to build new, advanced nuclear facilities. A nuclear advisory council could bring these elements together to inform best practices for new nuclear development in our state, catalyzing investment, attracting high-paying jobs, and securing a reliable energy supply for decades.

Public Dollars for Public School Students: Discrimination of Choice

Posted on by James V. Shuls

Critics of school choice programs like to claim that these programs create new expenses for the government. They argue that the primary beneficiaries are those already enrolled in private schools and thus these programs will lead to millions and millions of dollars in new expenses. The problem with this argument is that these critics are assuming these are new costs instead of unfunded liabilities that already exist.

Each state has already promised every student a free public education. This includes every student currently enrolled in private schools or currently homeschooled. If tomorrow those students decide to go to public schools, public schools would be required to accept them and to educate them. This means states and local communities would be required to fund the education of those students. In other words, the state currently has an obligation to provide funding for every single eligible student in the state.

The only way a parent loses access to the funding for education is by expressing choice. We discriminate on the basis of choice. Parents of school children have the opportunity to receive public funding, but only if they sacrifice their ability to choose the school they want their children to attend.

I cannot think of another public entitlement program that removes the benefit when an individual expresses choice. Poor students can use Pell grants at the school of their choice. Veterans can use the G.I. Bill at the school of their choice, public or private. Welfare recipients who receive food subsidies can choose the place where they will use those funds.

Critics of school choice might point to healthcare programs as an example of government funding with limited choice. Some doctors or hospitals do not not accept certain government funding sources, such as Medicare or Medicaid. That is true, but notice the difference. In that case, it is the provider who doesn’t accept the funds—it is not the individual who loses it based on their choice. Many private schools would like to accept funds but are not eligible to. That is a key distinction.

When we tell families they are no longer eligible to receive funding because they choose to send their children to a school that aligns with their values or provides the type of education that they want, then we are discriminating against them based solely on their choice.

This is not a system designed to meet the needs of every child, but a system designed for control. It is a system designed to force people into accepting the education that the government provides.

It would undoubtedly cost a lot of money to provide the public subsidy to those individuals who are presently in private schools. But the only reason it will cost new money is because we have been discriminating against families who use alternatives to public schools for decades. We have denied them access to the public funding that they should receive. It is time to end the discrimination against choice in our public education system. It is time to end the discrimination against parental power and educational opportunity.

Establishing a Missouri Office of Government Efficiency (MOGE)

Posted on by Elias Tsapelas

The size of Missouri’s government has nearly doubled over the past five years, and given the recent commitment from President Donald Trump to establish a Department of Government Efficiency at the federal level, the time is right for Missouri to establish its own Missouri Office of Government Efficiency (MOGE) to rein in excess spending and unneeded regulations.

If Missouri’s elected officials are serious about addressing our state government’s unsustainable growth, they should look at past efforts undertaken across the country to see what might work. Perhaps the most successful state-based cost-cutting initiative in history was then–California Governor Ronald Reagan’s 1967 executive order creating the “Governor’s Survey on Efficiency and Cost Control”. (The text of that order is available here.)

Reagan’s blueprint outlined some some key principles that any Missouri initiative should consider:

Governor Created

  • The Governor is the elected official best situated to coordinate an effort that examines all parts of Missouri government and to start implementing solutions. He can ensure that all executive branch officials cooperate in providing information and executing reforms.

Goal-Oriented

  • To help ensure success, the initiative needs to start with a clear mission, a top-level objective, stretch goals, and a commitment from everyone involved (inside and outside government) to reach those goals.
  • Much of the data needed to inform decisions will not be immediately available. Rooting out inefficiency will require targeted requests or establishing new metrics to get the information necessary to achieve the initiative’s goals.

Led by Non-Government Experts

  • Reagan understood that getting a handle on government growth required innovation, creativity, and outside-the-box thinking that could only come from those outside of government. A Missouri initiative should seek insights from business executives, nonprofit experts, former government officials, and financial consultants with prior public-sector knowledge or experience successfully turning around companies.

Privately Funded

  • Efforts to find cost savings in government shouldn’t be dependent on government funding for functioning. Reagan’s efficiency initiatives at both the state and federal level were entirely funded by private sources.

Pre-Specified Timelines

  • Time is of the essence for Missouri when it comes to cutting costs. Ensuring the work is completed in a thorough and expedient fashion will require deadlines, perhaps with the option to extend them based upon meeting preapproved metrics.

Commitment to Implementing Solutions

  • One of the biggest hindrances to Reagan’s cost-cutting efforts was a lack of legislative commitment to implementing the survey’s recommendations. In fact, only about one third of the recommended cost savings could be realized without any legislation being passed. Going into the efficiency exercise with a commitment from legislative leaders will be key for the initiative’s lasting success.

All told, Reagan’s citizen-led commission of more than 200 private-sector leaders was able to recommend, in short order, more than 2,000 reforms to improve California’s government operations and significantly cut costs. These recommendations included long-term savings estimates for California taxpayers of more than $500 million, which if adjusted for inflation would amount to about $4.2 billion today.

A similar result for Missouri today would be a much needed step in the right direction. It’s long past time for a serious effort in Jefferson City to rein in the state government’s excess, and taking a page out of Reagan’s book by turning to the private sector for meaningful solutions might be the most promising path forward for achieving long-term success.

Following the Reagan and DOGE frameworks, here are some specific examples of what a Missouri initiative could look like:

Creation

  • Establish by executive order a Missouri Office of Government Efficiency (MOGE)

Objective

  • Mission: The Missouri Office of Government Efficiency (MOGE) would conduct a comprehensive review of Missouri’s government. This review would include all services, programs, spending, regulations, and administrative practices. The goal would be to determine how Missouri’s government can be improved, as Governor Reagan specified in his original executive order, to be “the most efficient, expeditious, and economical” in the country.
  • Pre-Specified Timelines: This review, along with actionable recommendations, should be completed by no later than December 31, 2025.
  • Insights from Business (performance metrics): Given that Missouri’s budget is approximately twice its pre-COVID size, federal COVID relief for states is ending, and state tax revenues are down, a reasonable goal would be to return Missouri to its fiscal year 2019 cost trajectory unless a cost–benefit analysis by MOGE clearly justifies an alternative savings target. In dollar terms, this would amount to an approximate inflation-adjusted reduction of $2 billion in general funds.

Organizational Structure

  • Led by Nongovernment Experts: The governor could appoint two highly respected leaders from outside of government who have a proven track record of delivering transformational change to large organizations to lead MOGE. In addition, to help ensure the initiative’s success, MOGE leadership should be allowed to select any additional staff or members they deem necessary to conduct the review.
  • Privately Funded: The Governor or his allies could fundraise, as Reagan did, to fund MOGE. Ensuring that all funds used to conduct the work of MOGE come from private rather than public sources removes any undue leverage that government could have over MOGE and its policy recommendations.

Commitment to Implementation

  • Agency Cooperation: The Governor could order all government agencies to give full and timely cooperation to any MOGE requests for access to data or other information that MOGE deems necessary to conduct its work, except for any instances expressly prohibited by law.
  • Citizen Participation: MOGE leadership should commit to publishing intermediate findings and recommendations, formally submitting progress reports to Missouri’s General Assembly, and creating a website or holding public hearings to solicit input from members of the public who in many cases have pertinent first-hand knowledge of government inefficiencies and needed services that MOGE’s internal audit of agencies may not fully uncover.
  • Legislation: Fostering input and cooperation from Missouri’s General Assembly will be essential to achieving MOGE’s specified goals. To that end, the Governor should seek a commitment from legislative leaders both to cooperate with the MOGE efforts and to advance the legislative initiatives recommended to reduce the cost and increase the productivity of state government.
  • Transparency: MOGE leadership should make all final recommendations public with supporting analysis and make its leadership available for public hearings and information sessions to explain its findings and methodology.
  • Accountability: After MOGE issues its recommendations, the executive branch should be required to respond to every agency recommendation by either implementing it in full or detailing why it is not doing so.

The 2025 Missouri Legislative Session Begins

Posted on by Elias Tsapelas

Susan Pendergrass, Elias Tsapelas, and David Stokes join Zach Lawhorn to discuss the start of the 2025 Missouri legislative session. They cover budgetary reform, the need for a Missouri Taxpayer Bill of Rights, the creation of a recession preparedness fund, open enrollment policies, statewide school choice, improvements to Missouri’s school report cards, tax reform, telemedicine, healthcare regulations, and more.

Listen on Spotify

Listen on Apple Podcasts 

Listen on SoundCloud

Produced by Show-Me Opportunity

When NGOs Make the Rules: Safeguarding State Sovereignty

Posted on by Patrick Tuohey

State policymakers in Missouri and elsewhere often face the daunting task of crafting complex regulations. Enter nongovernmental organizations (NGOs), ready with model rules and expert recommendations. But as two recent reports caution—Beware the Trojan Horse of Rulemaking Nongovernment Organizations from The Buckeye Institute in Ohio and NGOs and Their Effect on Regulatory Policy from the Texas Public Policy Foundation—accepting these ready-made regulations can undermine state sovereignty and bypass public accountability.

Both reports warn against uncritical reliance on NGOs. The Buckeye Institute’s report highlights how groups like the National Association of Insurance Commissioners (NAIC) and the International Code Council (ICC) provide prepackaged regulations that states often adopt with minimal changes. This might simplify rulemaking but risks surrendering control over policies meant to serve unique state interests.

Similarly, the Texas Public Policy Foundation stresses that NGOs wield significant influence due to their specialized knowledge. However, when this expertise is accepted without scrutiny, state leaders may find themselves locked into policies shaped by national or even global agendas, often misaligned with local priorities.

Transparency emerges as a key recommendation from both reports. The Buckeye Institute calls for opening up the entire regulatory process, urging state governments to publicly disclose all interactions with NGOs, including drafts, meetings, and financial agreements. This would allow taxpayers to see who’s behind the policies affecting their lives.

The Texas Public Policy Foundation also emphasizes transparency but frames it as a cautionary principle: state leaders must “exercise extra caution and deliberation” when adopting NGO-driven proposals. Their point is simple—just because NGOs offer expertise doesn’t mean their rules are the best fit for every state.

The Buckeye Institute goes further by offering specific policy solutions:

  • Legislative Oversight: Every NGO-driven regulation should face legislative review before adoption.
  • Public Input: Create forums for broader public participation in the rulemaking process to counterbalance NGO influence.
  • Tailored Standards: States should adapt model rules to fit local contexts rather than adopting them wholesale.

The Texas Public Policy Foundation takes a broader approach, focusing more on raising awareness about the issue. The message: recognize the influence NGOs wield and remain vigilant.

Missouri’s policymakers should take these warnings seriously. Kansas City’s adoption of the 2021 International Energy Conservation Code (IECC) serves as a cautionary tale​. The city’s unmodified adoption of the more costly standards stalled new home construction.

Missouri must balance benefiting from NGO expertise with preserving state sovereignty. Public transparency, legislative oversight, and tailored regulations are essential safeguards.

As the Buckeye report warns, if policymakers fail to inspect every policy offer carefully, they risk inviting a Trojan Horse into state rulemaking—complete with hidden costs and unintended consequences. In an era of growing regulatory complexity, vigilance is necessary.

The Last Thing Missouri Needs Is More Urban Planning

Posted on by David Stokes

A recent op-ed in the St. Louis Post-Dispatch called for substantially increasing the power of urban planners in St. Louis and other Missouri cities. Considering the state of government in the City of St. Louis right now, I did a double take to see if it was a joke. It wasn’t. Somebody is actually calling for increasing the role of local government in managing every aspect of our lives. I think that is terrifying, and I am not exaggerating when I say “every aspect.” From the commentary:

Every English city uses this basic framework, ensuring all elements of city life are working together to benefit everyone’s well-being. [emphasis added]

If New York City and Houston do not have a comprehensive plan, then our Missouri municipalities don’t need one either. As Jane Jacobs said about urban planning, “The pseudoscience of planning seems almost neurotic in its determination to imitate empiric failure and ignore empiric success . . .”

There is general agreement that some type of infrastructure planning is required by municipalities. As cities grow or change, there need to be plans in place for the installation of sewers, gas and water pipes, electrical lines, sidewalks, and roads. But urban planners rarely maintain focus on those needs. Planners frequently and disappointingly mandate the mundane. The growing sameness of so many American communities is a direct result of municipal plans requiring a consistent look in a community. When you realize that most zoning codes were copied (the literal cut-and-paste prior to computers and copy machines) from other cities, that most cities use the same (or very similar) building codes, and that zoning codes limit the options available for many lots, nobody should be surprised by the loss of distinct urban aesthetics across the nation. As Cody Lefkowitz wrote about the depressing sameness of urban areas now:

Before the rise of zoning and consolidation of development, the country was full of special places with wonderful vernacular architecture. These were cities and towns built by many hands. Cities and towns that aged gracefully through generations of stewards iteratively building from the foundations of their predecessors. New Orleans, that much-loved city, is one of the most exceptionally beautiful places one can imagine, with an identity as unique as it is mystifying. When you’re there, you could never mistake yourself for being anywhere else.

Municipal planning commissions are empowered to establish comprehensive plans for their cities and to approve changes, amendments, and variances to the current plans or zoning codes. They are largely advisory. The city council can easily approve a change the planning commission rejects, like in Kansas City when the council unfortunately approved building height limitations for the Country Club Plaza. In Creve Coeur in 2013, the city council approved changes to allow a new grocery store that the planning commission had rejected. City councils can also reject changes the planning commission approves.

The point is not that elected officials should be subservient to the planning commission members; far from it. The point is to overcome the idea that planning is some kind of urban science with a large public benefit. The planning process is wholly subject to the same political aims, interest group pressures, and regulatory capture that all of government is. Furthermore, the process institutionalizes and legislates the bias toward uniformity and present-day assumptions. Counties and municipalities should limit their use of planning to necessary infrastructure issues and refuse to engage in it otherwise.

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