Andrew Coulson, RIP

Posted on by Michael Q. McShane

Every once in a while I stumble across a sentence and think man, I wish I’d written that.

One of my favorite examples of this, and a passage that I have quoted more times than I can remember, was written by Andrew Coulson, the former director of the Cato Institute’s Center for Educational Freedom, who passed away over the weekend. It came from a book he contributed to in 2002. Here’s what he wrote:

We are all losers when our differing views become declarations of war: when, instead of allowing many distinct communities of ideas to coexist harmoniously, our schools force us to battle one another in a needless and destructive fight for ideological supremacy.

Andrew’s writing was the first to introduce me to the idea that school choice might not just be good for kids academically, but could help us create more harmonious communities. If we don’t have to fight each other over what gets taught in history or science class, and we respect our fellow citizens’ rights to instruct their children in the way that best fits their needs and their values, we can get along better with each other. What a great idea.

We truly do stand on the shoulders of giants.  God bless his memory.

Is There “Right to Work” for Missouri’s Government Union Members?

Posted on by John Wright

I get asked all the time whether Missouri has “right to work” for its government employees. The answer is an unequivocal “no.” Missouri is not a right-to-work state. Not for the private sector. Not for government workers, either. This means that government workers, such as firefighters, teachers, and social workers, can be forced to pay for a union’s services. Even if they object.

Several union contracts allow the union to demand fees from employees as a condition of employment. There’s also case law that allows unions to force employees to pay agency fees. (See Schaffer v. Board of Education of the City of St. Louis.) Perhaps there’s an argument this case should be overturned, but for now it’s law.

So then why the confusion?

The issue came up in a recent hearing on a bill that would increase the transparency of government unions. In the hearing, Clark Brown, an executive with SEIU, seemed to imply there were no forced dues clauses in state contracts. The Kansas City Star also repeated the misconception in a recent article.

It is true that some unions do not have a forced payment clause in their contract. Workers covered by these contracts can choose whether or not to pay for union membership. The fact that many state employees are not currently forced to join a union may be the reason why many people believe Missouri government workers have “right to work.”

I can understand why many, including the Kansas City Star, would be confused by this. But SEIU should know better. It’s a little complicated, but in essence, at least two of their state contracts (here and here) include a type of forced-pay clause. Make no mistake: Although there is variation among different contracts, some Missouri public-sector workers can be forced to pay for union representation.

Missouri Legislature Looks to Further Regulate Payday Loans

Posted on by Joseph Miller

Payday loans are high-interest, short-term loans that are most commonly used in low-income communities. Because high interest rates (often above 500% annually) can easily cause a person’s debt load to get out of hand, restricting the payday loan industry has become increasingly common in legislatures across the country. There are currently two bills that propose to further regulate the payday loan industry in Missouri, HB 1942 and HB 1881. These bills may be well intended, but legislatures should be careful lest they harm those they are trying to help.

Take for example the provisions of HB 1942, which would limit the annual interest on a payday loan to 36%. That may sound like a high limit to many, but remember that payday loans are not secured, meaning they are not backed by a car or a house or something else the lender can repossess if the person who takes the loan doesn’t pay up. They’re like personal loans from banks, which don’t come cheap. According to the Federal Reserve, the average personal loan interest rate is around 10%. For those without good credit, the rate approaches 30%.

Capping interest rates might sound like a good idea—sticking it to lenders and helping out regular people. But the people who take out payday loans are often those who would not qualify for a loan at 36% interest. Thus, a bill like HB 1942 would protect these people from high interest rates by cutting off their access to credit entirely. If someone’s car breaks down or they have a medical emergency and they need cash fast, telling them they should have saved more or joined a credit union six months ago will be cold comfort.

See former policy analyst David Stokes talk about payday lending in this Show-Me Institute video.

Policy Choices and “Our Divided City”

Posted on by Patrick Tuohey

In a recent documentary, "Our Divided City," KCPT's Michael Price goes to great length to detail the many problems facing Kansas City's urban core. Those problems include crime, blight, and a lack of basic city services. Regarding the economic incentives to developers that go mostly to the wealthy parts of town, something Show-Me discussed in an essay, Mayor Sly James says, [remarks begin at 47:41]

I spend a lot of time talking to developers and I spend a lot of time talking to developers trying to get them to build east of Troost [Avenue]. If they don't want to do it, you can incentivize them all day long. What they look at is, "How do I get a return on investment?"

Developers can't be faulted for wanting to earn a buck, and investment on the east side of town can carry additional risks. That is exactly why governments adopted tax increment financing, or TIF, to alleviate some fo the risk that investors face. But that policy is made meaningless if everyone gets TIF, and if they get it in the nice parts of town. Of course a developer would not take on a large risk developing east of Troost when the city will subsidize a low-risk development west of Troost. The solution is to stop incentivizing the wealthy western part of the city, and save incentives for where they were actually intended.

Later in the film, Mayor James gets defensive when asked if it isn't time to take action. He says, [53:17]

Everybody says action. Nobody has an answer. If anybody had an answer to that question you don't think it would already be being used? You know, people seem to think that this is somehow a political issue. This is a citywide societal problem and the city and society has to address it; not just people in public office. That's crazy. If that were the case it would have been done by now. Certainly I would have done it by now if I had that power and authority but I don't even have the authority to keep guns out of the hands of 19 year olds.

Certainly the Mayor is correct that the problems faced in Kansas City are not unique to us. These problems plague urban areas all over the country, and they indeed stem from significant systemic issues of poverty, education, and racism. But that is not to say that the Mayor has no "power or authority," or that expecting political solutions from our political leaders is "crazy." It is not. 

The Mayor does have the "power and authority," for example, to tear down the 875 vacant and "dangerous" homes that litter the east side as featured in the documentary. He has the "power and authority" to beef up spending on code enforcement. Instead, he and the City Council have chosen policies that spend money on downtown streetcars and luxury apartments and hotels.

Frankly, if anyone lacks "power and authority," it is the people on the east side of town who can't afford to hire the high-priced development attorneys needed to get the ear of policymakers.

Why Does Missouri Underfund Public Schools?

Posted on by James V. Shuls

I often hear people complain that Missouri’s lawmakers don’t fully fund public education.  Let’s be really clear about the terms we use here, because there is a distinction to be made between “underfunding public schools” and “underfunding the foundation formula.” The former could be a serious problem, while the latter may not be. Let me explain.

Underfunding public schools implies that we are not giving schools enough money to adequately educate students. This could obviously cause serious problems. Some make this claim when they say Missouri doesn’t fully fund public education, but not all. What most people are referring to is the Foundation Formula—the mechanism that determines how much the state is supposed to give to schools. Right now, Missouri is underfunding the formula to the tune of hundreds of millions of dollars.

It is possible to underfund the formula and yet not underfund public schools. How so? The formula is an imperfect construction of lawmakers and lobbyists. While it is useful, there is no reason to believe it has identified the precise amount of money that schools need. That, however, is a discussion for another day.

In the Springfield News-Leader, I have an op-ed that helps explain why Missouri continually underfunds the formula. You can read it here.

Missouri Legislature Considers Disbanding Saint Louis Taxi Commission

Posted on by Joseph Miller

Recently, a bill was filed in the Missouri State Legislature (HB 2284) that would repeal the enabling legislation for the Saint Louis Metropolitan Taxicab Commission (MTC). If such a bill were to pass, it would eliminate the MTC.

We’ve written about this commission many times before, but to sum things up:

·         At least four of the nine commission members are taxi industry representatives.

·         The body used its regulatory discretion to pass pointless rules and freeze market entry for new companies. The MTC felt it had the ability to discern taxicab demand in the region, as well as the right to control taxi supply and industry practices.

·         The MTC dragged its feet over the entry of Uber and other ridesharing services, with regularly evolving justifications. While most other large cities initiated reforms to welcome these types of companies, the MTC still fights to block Uber from Saint Louis.

·         The commission itself devolved into bickering and infighting, with some members disgracing themselves and the region as a whole in the public arena.

The story of the MTC is a story of regulatory failure. A body designed to protect consumer interests was captured by industry representatives. The body then made competition very difficult or impossible, and essentially regulated out market innovation. If it were not for the disruptive effects of Uber, Lyft, and companies like them, does anyone doubt that it would have been business as usual at the MTC?

The for-hire vehicle market, and Saint Louis, are changing. The MTC, often using state enabling statutes as a shield, has shown itself incapable of dealing with this reality. Maybe Saint Louis would be better off without this taxicab commission. 

How Bad Policy Survives

Posted on by Patrick Tuohey

In modern politics, combatants like to paint those around them as evil or ignorant. The practice is as old as the republic. And while a small minority of policymakers may have questionable motives, more often than not, they mean well.

So where does bad policymaking come from? Sometimes it comes from getting so caught up in the debate that we don’t examine the facts we’re dealing with. Today’s example comes from the December 10 Kansas City Council’s business session. The topic was the airport. And as he seems to do every time he talks about the airport, the Mayor offered up statements he must know are not true. At least three times he made the same mistake:

[2:28:55] “The cost is in the airport, the region has nothing to do with it. All of the costs are in the airport and come from the airport. There’s not tax money that comes from Johnson County or Wyandotte County or Clay or Platte or Cass. Its all airport money. It’s in the airport; stays in the airport; and gets recycled.”

[2:30:29] “Airport revenue can only be used for airports. Money that is generated in the airport stays in the airport.”

[2:30:58] “You can’t take any money from the airport and use it for sewers or sinks or anything else.”

This is not the first time the Mayor has made this claim. He’s done it in interviews and in his state of the city speech.

We know this is not true because we have a city ordinance that authorized the city to move funds from the Aviation Department to the Finance Department. We know because while James was mayor the city renegotiated the debt to give them more time to pay it off. We know because the Mayor’s own submitted budget for 2015-16 includes it as a line item.

Perhaps most strikingly, we know because earlier at the very same December 10 business meeting, aviation consultant Sheri Ernico said:

[35:47] “There was an instance, which is very unusual for airports in this country, where the [Kansas City] general fund borrowed some money from the airport in 2008, but it had to be repaid with interest.”

What makes the Mayor’s stubborn memory lapse most worrying is that the loan was made to cover losses the city incurred in bad tax increment financing deals for things such as the Power & Light District.

What hope can we have for good public policy when mistakes are papered over with denied consequences?

Does Saint Louis Have an Illegal Tax?

Posted on by Joseph Miller

On February 1, a Saint Louis City business filed suit against the city, claiming that the municipal payroll tax was illegal under state law. The payroll tax—a 0.5% tax that businesses pay on their total payroll—should not be confused with the earnings tax—a 1% income tax that all residents and nonresidents who work in the city pay (and that companies pay on profits). The suit claims that cities only have the right to levy taxes that are stipulated in the constitution. Payroll taxes are not. City officials have claimed that Saint Louis’s status as a charter city allows these taxes.

One might ask, if the city’s payroll tax is illegal, why hasn’t it been challenged before? After all, the tax has been in place since the late 1980s, ever since the city reformed its business license fees. The explanation here may come in the answer to another question: Who pays the payroll tax? The city of Saint Louis’s private-sector payroll was more than $11 billion in 2014. If all businesses paid the payroll tax evenly, the city should have received more than $56 million. In fact, the city earned only about $37 million. Most of that gap comes from the fact that nonprofits (along with government) do not pay the payroll tax. While that sounds charitable, it’s important to remember that Saint Louis City’s top employers are large, wealthy nonprofits like St. Louis University and BJC Healthcare. Small nonprofits like the Show-Me Institute have an impact as well.

But it doesn’t end there. Companies are regularly given payroll tax exemptions as part of incentive packages to keep them in the city. Anthem and Polsinelli are two such companies and are listed in the previously mentioned lawsuit. Do companies with legal departments large and savvy enough to know that the payroll tax has constitutional issues receive exemptions? Or is it simply clout that allows large companies to avoid the tax? Whatever the case, of the top ten employers in Saint Louis City in 2013, only one might have been paying the full payroll tax:

Employer

Employees

Rank

Payroll Tax?

Reason for Payroll Tax Exemption?

Washington University

14,705

1

No

Non-Profit

BJC Healthcare

13,241

2

No

Non-Profit

St. Louis University

10,096

3

No

Non-Profit

City of Saint Louis

8,098

4

No

Government

Defense Finance & Acct Services

6,379

5

No

Government

Wells Fargo

5,653

6

50% (both earnings and payroll taxes)

Reimbursement Incentive

Saint Louis Board of Education

4,992

7

No

Government

State of Missouri

4,240

8

No

Government

AT&T Services

4,016

9

?

NA

US Postal Service

3,973

10

No

Government

With the payroll tax, we have a policy that not only raises legal questions, but is also implemented unevenly. Does the full rate only apply to for-profit, private businesses without the clout to get a tax break or the wherewithal to make a fuss? If so, the city might want to reevaluate its tax policy, whether it is legal or not.

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