Higher Than Expected MoDOT Revenues Mean No Loss in Federal Matching Funds

Posted on by Joseph Miller

As we’ve written about many times before, MoDOT is facing serious financial difficulty. Soon, the department may not have the money it needs to maintain, much less improve, the state highway system. Until recently, it was assumed that MoDOT would be unable to match federal dollars in the next fiscal year, meaning the state would lose more than $160 million federal dollars, compounding its problems.

              But it appears now that MoDOT has had a reprieve. Revenue dedicated to the state highway system rose 4.5% in FY 2015, much higher than expected. That gives MoDOT an additional $47 million in state funding and saves $160 million in federal matching dollars that otherwise would have been lost.

This increase is mainly the result of the improvement in the economy and lower fuel prices. People are buying cars at a faster rate, increasing MoDOT’s motor vehicle sales tax and license revenue. Lower fuel prices, along with a resurgent economy, mean people drive more, increasing gas tax receipts. This is yet more evidence that long-term demand for personal vehicle use, and with it demand for state highways, is not in anything approaching decline.

Unfortunately, MoDOT’s revenues will need to continue to climb at this pace for the next few years to ensure that Missouri will match all federal dollars. This is unrealistic, as motor vehicle sales could easily stagnate and fuel tax revenue will likely fall as cars become more fuel efficient. Even worse, assuming MoDOT’s revenue does grow fast enough to match federal funds, the department will still not have the money to implement expensive, but necessary, improvement projects (like the reconstruction of I-70).

But just as the last few years were not a good time to panic, the recent news does not mean now is a good time for complacency. MoDOT’s user funding base is broken, and will only become more broken if left unreformed. With the reprieve MoDOT just received, policy makers have more breathing room to implement sensible reforms on the principle of user pay, user benefit. They should take the opportunity.

It’s Good to Be Home

Posted on by Michael Q. McShane

Hi friends. My name is Mike McShane, and this week I’m starting as Director of Education Policy for the Show-Me Institute.  I couldn’t be more excited.

I grew up in Kansas City and love that town like only a prodigal son can. If you have lived in Kansas City all of your life, you just have to trust me that Arthur Bryant’s tastes so much better in the restaurant if you’ve been having the sauce mailed to you for a couple of years.  Hearing the crack of the bat at the K sounds more melodious when you’ve been watching a herky-jerky video stream on your laptop for the past few seasons. And coming over the crest of I-70 and seeing Downtown framed perfectly under that overpass after a long drive from the East Coast, well, there’s just nothing quite like it. It is so great to be back.

But being from Kansas City (and having gone to college in St. Louis) also makes me acutely aware of our great state’s shortcomings when it comes to providing educational opportunity for all of our children.  Rural, urban, city, town, suburb, exurb, we can and must and will do better.

I want to do my small part in our collective improvement.  That means researching, writing, and speaking about the most pressing issues facing our education system.  What might this look like? Well from me you can expect to see a few things:

  1. A devotion to better understanding, and helping others to understand, how school choice works, where it stumbles, where it succeeds, and how to make school choice programs better.
  2. Easily digestible analysis of education research, data, policy, and politics in Missouri and around the country.
  3. A relentless fight to expand the number of quality schooling options that families, particularly low-income families, have across the state.
  4. Stories of great schools and great teachers who are fighting against the odds every day to give children the quality education they deserve.
  5. Lots and lots of policy ideas on how to make Missouri’s education system better. My writing, I hope, will be a place for optimism.  We can learn from other states, other countries, and other sectors and bring the best of their ideas to the Show Me State.

Together we can learn and grow and debate and disagree and make Missouri a better place, for all of its citizens. I hope you’ll join me in this noble quest.

Charity Clinic Coming to St. Louis Area Next Month

Posted on by Patrick Ishmael

Over the past few years we have talked a lot about the Volunteer Health Services Act (VHSA), which allows out-of-state medical professionals to more freely provide charitable care in Missouri. As a general matter, one of the priorities of state-based health care reforms must be to remove barriers to accessing care, and the state’s decision in 2013 to allow access to free care provided by qualified out-of-state doctors, dentists and other professionals was a very welcome one. Other states would do well to follow the leadership of Missouri and other states in this policy area; in fact, next month Missourians in the St. Louis area will get to see the benefits of VHSA-type reforms, albeit in neighboring Illinois. 

Remote Area Medical, one of the charity clinic pioneers in the United States, will be having a free health care expedition from August 14th through the 16th in East St. Louis, IL. As always, the clinic will be open to the public, and while I haven’t heard any indication that the group will be making any historic drone deliveries at this particular event, what is certain is that there will be a lot of people seeking help — and a lot of people giving up their weekend providing it. That events like RAM’s remain necessary in a state like Illinois, which has gone whole hog for Obamacare, is its own commentary. 

But setting that aside for the moment, I think the most important takeaway from the event for all of us is ultimately this: that people should be able to help one another without the undue interference of government. Both Missouri and Illinois deserve kudos for making these sorts of clinics more available to their citizens.

Show-Me Institute Presents: Breaking Down Revenue

Posted on by Michael Rathbone

City residents care about how much they pay for government services. For those in Saint Louis and Kansas City who are wondering how much they pay, they now have an easy resource to check. The Show-Me Institute presents a new case study: “Breaking Down Revenue: How Kansas City and Saint Louis Compare to Six Other Cities.”

This case study examines government revenue, per person, of Saint Louis and Kansas City along with six other comparison cities (Denver, Indianapolis, Louisville, Oklahoma City, Omaha, and Tulsa). It examines tax burdens on residents (in total and as a percentage of personal income), the amount of fees collected, and other tidbits of information that the general public might find interesting. Please give it a look.

New Airport Terminal Coming to Kansas City, Maybe?

Posted on by Joseph Miller

For the last couple years, Kansas City’s Aviation Department and some city leaders have been pushing for a new terminal at Kansas City International Airport. The plan they developed, and which we heavily criticized, proposed to spend $1.2 billion on a single terminal to replace MCI’s current three-terminal design. After public opposition, and especially the realization that MCI’s largest tenant Southwest Airlines was not yet on board, the Aviation Department and current airlines entered closed negotiations last year.

This week, the city received a status report on the negotiations. Nothing is final, but refurbishment plans have been shelved as “too expensive,” and the city and the airlines are now looking for a cost-effective new terminal plan. While most news outlets appear to take that as meaning a new terminal is definitely going to happen, that assumption is premature. If Southwest and the other airlines do not like the terminal plan that comes out of negotiation, refurbishment plans can be unshelved.

However, at this point it looks as though the city and airlines are looking at new terminal options, but it generates more questions than it answers. Will it be the same as the terminal plan from last year? Will it be a more modest proposal? Is Southwest planning to make the kind of investments it has made in Houston, Fort Lauderdale, or Dallas? Will Kansas City voters, many of whom enjoy the convenience of the current layout, support such a new terminal plan?

 

MCI

One new terminal proposal under consideration

 

MCI2

Old New Terminal Plan (2013)

We don’t know, and likely won’t know, until earlier next year. However, the flying public in Kansas City and the airport itself will be best served by a terminal system that is cost-effective and user-friendly.

Show-Me Institute Presents: Betting on the Big Returns

Posted on by Michael Rathbone

“Nothing ventured, nothing gained.”

This common proverb argues that one cannot expect to achieve anything without taking some risk. The amount of risk one is comfortable with differs from person to person. However, if the thing at risk is the retirement savings of thousands of public school teachers, it would be wise that managers of these teachers’ money take as few risks as possible.

Unfortunately, these managers are going in the opposite direction and placing riskier and riskier bets in order to finance teacher pension obligations. As my colleague James Shuls and I point out in our new essay, “Betting on the Big Returns: How Missouri Teacher Pension Plans Have Shifted to Riskier Assets,” each of Missouri’s public teacher pension plans have moved away from investing in safer assets such as fixed-income securities and toward riskier investments such as equities and various alternative assets.

As we state in the paper, more risk isn’t inherently a bad thing since investors are compensated for that risk with higher returns. Still, what will happen to taxpayers if some of these risky assets fail to deliver as expected? James and I cover this and more in our paper, so please give it a look.

Post-Obamcare Medicaid Enrollment Far Outpacing State Projections

Posted on by Patrick Ishmael

When Congress passed and the president signed the Affordable Care Act, supporters of the law were adamant that Obamcare would control health costs in government health care programs. It hasn’t worked out that way, of course, and particularly in Medicaid, the costs of the program are exploding in ways that states had not predicted and did not plan for.

 
In Kentucky, for example, enrollments during the 2014 fiscal year were more than double the number projected, with almost 311,000 newly eligible residents signing up. That’s greater than what was initially predicted through 2021. As a result, the state revised its Medicaid cost estimate from $33 million to $74 million for the 2017 fiscal year. By 2021, those costs could climb to a projected $363 million.
 
“That is a monstrous hole that we have got to figure out how to plug, and we don’t know how to do it,” said Kentucky state Sen. Chris McDaniel, a Republican who leads the Senate budget committee and opposed expansion. “The two biggest things that keep me up at night are state pensions and the cost of expanded Medicaid.”

 

It’s a similar story in many expansion states. In California, actual enrollees tripled projected Medicaid enrollment. In Ohio, costs have more than doubled. 

 

Even in a non-expansion state like Missouri, current enrollment in the Medicaid program has grown so much that today nearly one in seven Missourians is in a government health care program. Between May 2014 and May 2015, over 100,000 currently eligible enrollees were added to the state’s Medicaid program, thanks in part to the woodwork effect we’ve often talked about.

 

Missouri’s Medicaid program needs to be significantly reformed not only for patients and taxpayers, but also for other programs in the state budget. In Kentucky, the state senator quoted in the story said that pensions and the cost of expanded Medicaid kept him up at night, but even unexpanded and unreformed Medicaid presents a serious threat to the solvency of other big-ticket programs in Missouri—including education. We have presented a variety of reforms that can help get Medicaid’s problems under control so that the state won’t have to pit the interests of children against Medicaid patients. 

 

But unfortunately, it seems the pro-Obamacare crowd wants to make fixing Medicaid contingent on simultaneously detonating a fiscal bomb in the state budget with an expansion . . . and that’s a non-starter for supporters of good government. Policymakers should recognize the mistakes other states have made in expanding their broken Medicaid programs and decline to emulate their poor decisions. It’s time for Medicaid reform in Missouri, period.

Kansas City’s Debt

Posted on by Patrick Tuohey

KCUR does a nice job of rounding up a few projects such as the Sprint Center and Kemper Arena that Kansas City taxpayers are still funding. It is an incomplete list by far, but a good start. Their short list of four items totals $712 million as of last year.

Overall, Kansas City redirects $100 to $110 million each year to developers for the various TIF projects in town. That doesn’t include some of the recent ones like Burns & McDonnell, the Kansas City Star, and Cerner. In fact, according to the Washington Post, Cerner is the biggest recipient of taxpayer subsidies in the state of Missouri. Their last subsidy from Kansas City may be the biggest in the city’s history.

When will city leaders decide that we’ve subsidized enough and start trying to reap the rewards of all the previous spending? Given recent news regarding Two Light and the Star, the answer appears to be no time soon.

 

 

 

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