Jefftran Has Deeper Problems than Fare Revenue

Posted on by Joseph Miller

Recently, Jefferson City’s City Council voted against raising fares on its public transportation system, Jefftran. The proposal would have increased full fare from $1 to $1.50. Jefferson City’s transit director lamented the decision, stating that the fare increase would have brought in an extra $30,000 to Jefftran.

But in reality, if Jefftran is to become  financially stable, it should start by reexamining how it runs its buses. In 2013, Jefftran carried about 335,000 riders. However, Jefftran’s expenses were more than  $2 million in the same year. That means  for every person who stepped on board a city bus, Jefftran spent about $6 .  However, on average, each passenger paid only 60 cents per trip. Percentage wise, that’s a huge subsidy; a subsidy that is ultimately borne by local and national taxpayers. By raising fares 50 cents, revenue from riders would go from covering about 10% of operating costs to covering almost 12%. That’s more than a drop in the bucket, but not much more.

Rather than aiming for a little extra money from fares, Jefftran could look into how its buses operate. Despite Jefftran’s extremely low fares (half the cost of riding a bus in Saint Louis), it has struggled to attract customers. In fact, ridership on the system is down more than 25% since 2008.

ridership-n-spending-jefftran

Jefftran buses have low utilization for the service level they provide, and that utilization has decreased in recent years along with ridership. It’s clear that the service Jefftran offers is not serving the needs of residents, at least not in a way that is commensurate with the amount of resources the system requires.

If Jefftran is truly to become an efficient transportation system, it needs to be prepared to ask tough questions about its operations. Questions like: What type of services do residents demand, and would be willing to pay for? Are traditional bus routes a cost-effective way of providing mobility in Jefferson City? Is Jefftran running the type of routes that maximizes ridership while keeping costs low?

However Jefftran answers these questions, it seems clear that Jefftran has problems that will not be solved with a 50 cent fare increase.

State Departments of Education Should Stop Trying to Predict Who Will Be a Good Teacher

Posted on by James V. Shuls

Teacher quality is hugely important. The difference between a good teacher and a bad teacher can be as much as a year’s worth of learning. These academic gains translate to increased earning potential for students with great teachers.  In his paper, “The economic value of higher teacher quality,” economist Eric Hanushek writes, “A teacher one standard deviation above the mean effectiveness annually generates marginal gains of over $400,000 in present value of student future earnings with a class size of 20 and proportionately higher with larger class sizes.” So, when the Missouri Department of Elementary and Secondary Education (DESE) decided to focus on teacher quality in the “Top 10 by 20” initiative, it made sense. The problem is that DESE’s efforts to improve teacher quality are completely misguided.

DESE decided the best way to improve teacher quality was to raise the bar on licensure exams. Licensure exams and other certification requirements are only effective at improving the quality of the workforce if they are related to the outcome we desire; namely, increased teacher quality. The figure below offers an illustration. This figure comes from a paper by economist Dan Goldhaber, “Everyone’s doing it, but what does teacher testing tell us about teacher effectiveness.”

On one axis, you have a measure of teacher quality and on the other a teacher’s performance on licensure exams. The height represents the number of teachers, with most being somewhere in the middle. The red line indicates a minimum passing score on the licensure exam and the blue line indicates some minimum level of teacher quality. If teacher quality and performance are highly related, as they are on the left figure, then a licensure exam could do a good job of screening out individuals. “A” represents the individuals who would be good teachers, but are kept out because they fail the test, “B” are the bad teachers who fail the test, “C” are the bad teachers who pass the test, and “D” are the individuals who pass the test and are adequate teachers. As you can see, when the test isn’t related to teacher quality, as presented on the right, we have more ineffective teachers passing the test (“C”) and more good teachers failing the test “A”.

Goldhaber Teacher Quality

 

Teacher licensure tests are more like the figure on the right. They do a poor job of predicting who will be a quality teacher. What DESE did is move the red line further to the right; thus, keeping more people out.

The fact is, we are lousy at predicting who will be a good teacher. Thus, increasing the rigor of licensure exams will not do any good. Hanushek offers another solution – teacher de-selection. He writes, “replacing the bottom 5–8 percent of teachers with average teachers could move the U.S. near the top of international math and science rankings with a present value of $100 trillion.” Rather than try to predict who will be a good teacher, we should focus on removing those individuals who have proven to be bad teachers.

Raising the bar on licensure exams will not improve the quality of the teaching profession. If we want to do that, we need to make teaching more attractive to high performing individuals and we need to get rid of the bad apples in the teaching profession.

 

Jefftran Has Deeper Problems than Fare Revenue

Posted on by Joseph Miller

Recently, Jefferson City’s City Council voted against raising fares on its public transportation system, Jefftran. The proposal would have increased full fare from $1 to $1.50. Jefferson City’s transit director lamented the decision, stating that the fare increase would have brought in an extra $30,000 to Jefftran. But in reality, if Jefftran is to become for financially stable, it should start by reexamining how it runs its buses. In 2013, Jefftran carried about 335,000 riders. However, Jefftran’s expenses were over $2 million in the same year. That means that for every for every person who stepped on board a city bus, Jefftran spent about $6 dollars. However, on average, each passenger paid only 60 cents per trip. Percentage wise, that’s a huge subsidy; a subsidy that is ultimately borne by local and national taxpayers. By raising fares 50 cents, revenue from riders would go from covering about 10% of operating costs to covering almost 12%. That’s more than a drop in the bucket, but not much more. Rather than aiming for a little extra money from fares, Jefftran could look into how its buses operate. Despite Jefftran’s extremely low fares (half the cost of riding a bus in Saint Louis), it has struggled to attract customers. In fact, ridership on the system is down more than 25% since 2008. jefftran Jefftran buses have low utilization for the service level they provide, and that utilization has decreased in recent years along with ridership. It’s clear that the service Jefftran offers is not serving the needs of residents, at least not in a way that is commensurate with the amount of resources the system requires. If Jefftran is truly to become an efficient transportation system, it needs to be prepared to ask tough questions about its operations. Questions like: What type of services do residents demand, and would be willing to pay for? Are traditional bus routes a cost-effective way of providing mobility in Jefferson City? Is Jefftran running the type of routes that maximizes ridership while keeping costs low? However Jefftran answers these questions, it seems clear that Jefftran has problems that will not be solved with a 50 cent fare increase.

Federal BRIDGE Act Could Help Fund Missouri Infrastructure Improvement

Posted on by Joseph Miller

As we have written about many times before, Missouri continues to grapple with an impending funding shortfall for the Missouri Department of Transportation (MoDOT). At the same time, mirroring the failure of state policy makers, the federal government is facing a transportation funding crisis of its own. A new bi-partisan bill, the BRIDGE Act, may provide more federal support for Missouri infrastructure projects if the state can solve its own funding mess.

For some background, in recent years federal highway revenue has failed to keep pace with the federal government’s transportation spending. This has caused the federal highway trust fund, which takes in highway user fees and funds highway and transit projects across the country, to hemorrhage money. Only regular infusions of general revenue, to the tune of more than $55 billion in recent years, have kept the trust fund solvent. Missouri is heavily dependent on the highway trust fund to build highways and transit improvements, among other needs. Missouri has no backup plan if there are large federal funding cuts.

National leaders have suggested many ways of fixing the funding problem, including drastic spending cuts, raising the fuel tax, developing congestion taxes, introducing more tolling, cutting funding to transit, tapping repatriated tax dollars, and even eliminating the trust fund altogether. The BRIDGE Act side steps the ultimate fate of the highway trust fund, and instead will try to extend financing to important state projects outside the traditional funding system. The act proposes to set up an Infrastructure Financing Authority (IFA), which would finance up to 49% of large state and local infrastructure projects of “national importance.”  The remaining 51% of project financing would need to come from local dedicated revenue streams. While the Authority would have $10 billion in seed money, the goal is self-sufficiency, with IFA charging state and local governments fees for loans.

While the BRIDGE Act is just the latest reform idea for federal infrastructure funding, it has significant bi-partisan support and does not entail increased taxes or spending cuts. If this proposal were to come into force, it could mean more financing for infrastructure projects across Missouri, but only if the state and local governments get their own funding sources in order. IFA would only loan money, which will have to be paid back, and local governments need to secure financing for the non-federal portion of the debt.

MoDOT could best use this act to alleviate its funding crisis by introducing tolling on major projects. That would create the revenue stream to apply for IFA support without raising taxes. Local governments could also fund necessary infrastructure projects, without raising taxes, by choosing projects where user fees could pay back IFA loans. And while the Bridge Act may or may not pass, getting transportation funding in Missouri on stable footing will pay dividends whatever happens at the federal level.

Father’s Day Thoughts On the Summer Solstice and the Minimum Wage

Posted on by Andrew B. Wilson

As first appearing in the Weekly Standard:

As this father’s day coincides with the summer solstice, it is an appropriate time to recall the astonishingly accurate calculation of the circumference of the Earth that was made on this same day more than 22 centuries ago by one of the founding fathers of mathematics and scientific measurement.

Like other Greek astronomers and scholars at the time, Eratosthenes (276-195 B.C.), the head of the famous Library at Alexandria in Ptolemaic Egypt, assumed the Earth was round and revolved around the Sun. From his research, he discovered a fascinating fact: Every year, at noon time on this day (June 21) and no other, the Sun shone directly to the bottom of a deep well in the town of Syene (site of today’s Aswan Dam).

Syene was almost due south of Alexandria, and Eratosthenes estimated distance between the two cities to be 5,014 stadia (or 800 kilometers).

When the Sun was at its zenith in Syene—shining directly down a well and reflecting back up again—Eratosthenes surmised that it must cast a tell-tale shadow in more northern Alexandria. Using the obelisk located in front of the library (or using some other tall, vertical object), he calculated the angle of the Sun to be 7.2 degrees south of its zenith in Alexandria.

Since 7.2 degrees is 7.2 / 360, or one fiftieth of a full circle, Eratosthenes reasoned that the circumference of the Earth must be 50 times the distance made by the curvature of the Earth between the two cities. That worked out to 252,000 stadia, which is within 1 percent of the modern measurement of 40,008 kilometers.

Just as the Sun cannot be directly overhead two distant cities at the same time, it is impossible to think that suddenly doubling the minimum wage in the cities of Saint Louis and Kansas City (with the mayors of both cities strongly supporting legislation to mandate a $15 an-an-hour minimum wage) will not cast a long and dark shadow over the prospects for future employment in those same core city areas.

The law of supply and demand is as immutable as rules of geometry and the law of gravity. If you make something more expensive, demand for it will decrease. That holds true for lemons, lightbulbs, and labor. By dictating businesses double the pay of the lowest-paid workers, cities that pass such laws are making it less attractive for businesses to hire or to continue to employ inexperienced and unskilled workers.

Here are three entirely predictable consequences of artificially setting the price of low-skilled labor far above the market price. First, it will make sense to substitute capital for labor through increased automation. Second, it will depress earnings and cause businesses to raise prices or cut corners in striving to deliver the best value to their customers. Third, many businesses will consider moving to other locations—with ample opportunity for doing so in surrounding suburbs.

Summer solstice comes but once a year. Doubling the minimum wage would damage job growth in Saint Louis and Kansas City every day of every year. It’s a matter of simple math and logic.

We Didn’t Lose the GOP Convention Because of Hotel Rooms

Posted on by Patrick Tuohey

KCRC2016The 2016 Republican Convention will be hosted in Cleveland. Kansas City was considered but not chosen. Kansas City leaders want you to believe it is because Kansas City does not have enough convention hotel rooms. This claim does not stand up to scrutiny. According to Derek Klaus of VisitKC.com, the Smith Travel Report’s (STR) numbers for April 2015 assess Kansas City with 290 hotel properties and 31,970 rooms. In downtown Kansas City, STR counts 15 properties with 3,993 rooms. According to a  November 2014 piece in the Cleveland Plain Dealer,

The Cleveland metro area – roughly defined by STR, a hospitality research firm, as Cuyahoga, Lorain, Lake, Geauga, Medina and Ashtabula counties – is home to nearly 22,000 hotel rooms, up about 4 percent from two years ago. In downtown Cleveland, the increase in room inventory is even more dramatic: up 16 percent since late 2012, to 3,945 rooms, according to STR.

Cleveland, which is considered a lower-tier market for conventions than Kansas City, has the same number of rooms in the downtown area. The Kansas City region has many more hotel rooms than Cleveland. Cleveland won the GOP convention likely due to other important political considerations that have nothing to do with the specifics of convention bids, including hotel room count. Keep this in mind next time you hear someone claim that Kansas City needs to spend tens of millions of dollars on a convention hotel.

Minimum Wage Bills Under Consideration

Posted on by Michael Rathbone
The debate over increasing the minimum wage has been a hot topic recently. Below are the two minimum wage bills under consideration by the Kansas City City Council and the Saint Louis City Council.
 
Also below is a bill recently passed by the state legislature that would prohibit political subdivisions (cities, counties, and such) from raising the minimum wage above that set by state or federal law.

Corinthian College Crisis

Posted on by Michael Highsmith

Everest College

At its peak Corinthian Colleges had over 100 colleges throughout the United States and Canada, including Everest College campuses in Earth City, Kansas City, and Springfield. Last month Corinthian Colleges, Inc., a large for-profit post-secondary education company, announced it would cease operations in all remaining U.S. locations effective April 27, 2015. The closure of Corinthian has left 16,000 students in quite the predicament. Many have taken on burdensome student loans, and now their school is closed.

In response, the Department of Education (DOE) announced a plan to wipe the debt slate clean for all students that attended these schools, a move that potentially could cost taxpayers $3.6 billion. Secretary of Education Arne Duncan defended the plan saying, “You’d have to be made of stone not to feel for these students.”

While I agree wholeheartedly that it is more than a minor inconvenience to have your school close, this is the wrong course of action. Indeed, this plan is wrongheaded and will simply encourage more of the behavior that created this crisis in the first place.

First, there is no need to forgive loans for courses students have already completed. They did not spend their time at Corinthian schools in vain. These students are still eligible to transfer their credits to other schools and continue their educations. Countless universities have made it clear that they want to help and are willing to open their arms to students who take the initiative to transfer credits and continue their pathway toward a better life. Long Beach City College President Eloy Oakley summed it up perfectly back in April: “They have options and no matter what, at the end of the day, we want them to finish their education, stay in the community and become economic assets to the community.”

Unfortunately, one of the catches of the DOE’s plan is that closed-school debt relief is only available to students who have not transferred their credits to another university. This bailout encourages students to throw away the years they have dedicated to attaining a degree and bettering themselves.

Second, this is potentially the largest debt relief program the government has ever offered students, and it sets a bad precedent. Taxpayers should not be held accountable for the billions of dollars students borrow in full knowledge of the consequences. Most of these students never would have attended a Corinthian College if it were not for the government’s subsidization of college loans. This bailout essentially means students bear no risk when making college selections; they can easily obtain college loans, and the government will forgive them if things go badly.

The students of the now-defunct Corinthian Colleges certainly got a raw deal, but that is no reason to enact measures that will encourage the same type of behavior in the future.

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