Eric Hanushek, Ph.D., shows that the quality of education is closely related to national economic growth. He has authored or edited 20 books along with more than 200 articles. He is a distinguished graduate of the United States Air Force Academy and completed his Ph.D. in economics at the Massachusetts Institute of Technology.
HB42 is on Gov. Nixon’s desk. If he signs it, children in failing school districts would be able to cross district boundaries to attend school. That would allow children in Normandy to attend accredited schools only minutes from their home like North Side Community School.
Have you ever been in Best Buy (or, for you millennials, on Amazon) and looked at a nice 70-inch 4K Ultra HD television that made you desperate to buy one? I know I have, but the thing that stops me from splurging is the knowledge that I would like to eat this month, pay rent, and heat my home. Now, a lot of government spending isn’t like buying a nice television, but the analogy holds. It’s like what people tell their kids: Sometimes you face a choice of either buying what you want or what you really need. Wonder why we aren’t fully funding the foundation formula or why spending for corrections is relatively flat (after adjusting for inflation)? The explosive growth in Medicaid might not be the sole reason why, but it’s probably playing a big part.
For this upcoming fiscal year (which begins on July 1), the state has appropriated close to $9.4 billion to Medicaid. This includes more than $1.86 billion in general revenue (state funds that include your income taxes and most of your sales taxes). This is an increase of close to $200 million ($110 million in general revenue) over this year. That sounds like a lot of money, and it is, especially considering that Medicaid continues to take up a larger portion of the state’s budget.
The two charts below show the effects of Medicaid growth on state general revenue expenditures:
As you can see, as Medicaid grows, other programs like higher education and the foundation formula shrink as a portion of the budget. That isn’t to say that such shrinking is good or bad, but since the state has a balanced budget amendment, appropriators don’t have much choice in the matter either way.
With Medicaid costs growing, one would understand a desire to get costs under control. However, there is a concerted effort in this state to actually expand Medicaid. My colleague Patrick Ishmael has highlighted several reasons why this would be a bad idea, but solely from a budget perspective, expanding the program would be disastrous.
We need to reform Medicaid, not expand it. Ishmael has laid out ways to improve our Medicaid system. If the state can save more on Medicaid or at least stop its growth, it would grant financial flexibility to policymakers to either spend on other important items or return more money to the people who pay the bills, taxpayers.
Recently, Gabe Lozano, the CEO of a local tech company, called the lack of ridesharing (like Uber and Lyft) in Saint Louis “embarrassing.” In fact, he claimed that it cost his company a potential hire. While anecdotal, this story underlines what is increasingly clear: Saint Louis is forgoing significant advantages by regulating away ridesharing companies.
We’ve gone over many times how a local regulatory body, the Metropolitan Taxicab Commission (MTC), blocks companies like Uber and Lyft from freely operating in Saint Louis. To simplify a complicated regulatory story, the MTC only allows ridesharing companies to operate using licensed premium sedans, which the MTC has made scarce. This means that only expensive types of ridesharing, like Uber Black, can operate in Saint Louis, and even then not effectively.
So while many cities across the United States, including Kansas City, have altered their regulations to allow cheap forms of ridesharing (like UberX) to operate, Saint Louis remains a closed market. In many of those cities, ridesharing has provided drastically improved mobility for urban dwellers (a ridesharing vehicle will purportedly show up faster than an ambulance in New York City). In midsized metropolitan areas like Saint Louis, ridesharing companies have created hundreds, if not thousands, of new jobs.
The MTC’s reaction to all this, along with Lozano’s latest critique, has been to claim there is no problem. According to one MTC member, Lozano’s claim that he lost a hire is “a lot of hoo-hah.” Instead of opening up the for-hire vehicle market to competition and letting residents vote over what kind and how many taxis they want with their wallets, the MTC is reviving their on-again, off-again efforts to study the supply and demand for taxis. Unfortunately for Saint Louisans, the commission (which has taxi company owners as commissioners) does not have the expertise or incentives to divine the number and kind of taxis Saint Louis needs.
It should come as no surprise that talented and mobile workers would want to live and work in a city where a cheap ride is available on demand. But more than that, what does it say about how a city is run, when, at the same time local officials want to spend hundreds of millions of public dollars on stadiums and light rail and bar districts to attract residents, they are willing to allow a regulatory body to block an innovative business model that makes urban life better at no public cost whatsoever. Saint Louis should be embarrassed that its leadership simultaneously adopts failed policies out of the 1990s and stamps out fresh ideas.
This brief video clip shows my testimony before the City Council of Kansas City on an effort to raise the minimum wage to $15 per hour.
Following my remarks, Councilwoman Cindy Circo asked me about a chart they had been shown by a previous speaker. The chart, which I had not seen in the hearing, showed worker productivity and real minimum wage tracking with each other until about 1970, when worker productivity jumped and minimum wage stayed flat. Councilwoman Circo asked what might have explained that change.
After some research, I was able to speak to the chart to which Councilwoman Circo referred. Here is the email I sent:
Dear Councilwoman Circo and City Council:
Thank you for the opportunity to testify before the Committee as a Whole today regarding the minimum wage. You may find an electronic copy of Michael Rathbone’s testimony here: https://showmeinstitute.org/publications/testimony/red-tape/1298-on-the-enactment-of-a-living-wage-in-kansas-city.html.
Furthermore, a 2012 study that is the source for my claim that only 13% of minimum wage earners live in households at or below the poverty level is here: https://showmeinstitute.org/document-repository/doc_download/356-full-policy-study-pdf.html.
You asked about a slide that showed worker wages and worker productivity parting ways about 1970. While I was not in the hearing at the time that was presented, I believe it is from the Center for Economic and Policy Research (CEPR), published in March 2012. A copy of a memo from CEPR that discusses the graph is here: http://www.cepr.net/documents/publications/min-wage1-2012-03.pdf.
My colleague Michael Rathbone has written about that memo and the attention it received from U.S. Senator Warren. He writes:
“The study… talks about average productivity. Average workers do not earn the minimum wage. This study does not track changes in the productivity of workers who make at or below the minimum wage. Isn’t it possible that the largest increases in productivity have been among more skilled employees who already earn above the minimum wage?”
A copy of his post on the memo is here: /2013/03/the-22-an-hour-question.html.
In short, because CEPR did not separate out minimum wage workers from others, the data is not very helpful. It is entirely possible, for example, that the increase in worker productivity shown the their chart after 1970 is the result of the introduction of computer technology used by white collar workers. These workers would not have made minimum wage.
Michael’s post is also helpful because it links to Christine Romer’s piece in The New York Times in which she indicates that minimum wage increases are not the best way to address poverty.
I hope this addresses your question. If you or any of your colleagues have additional questions, I will do my best to address them or find someone who can.
Thank you for your time and attention.
Regards, Patrick Tuohey
As first appearing in the Wall Street Journal:
Liberals love to hate Sam Brownback, and for good reason. The Kansas governor threatens a central tenet of liberal orthodoxy: the belief that higher taxes are a price that must be paid for progress.
“If your objective is to grow the economy, would you rather put more money into government, or leave it in the hands of small business?” Mr. Brownback asks during a recent interview in his office at the state capitol. Three years ago Kansas enacted the biggest tax cut of any state, relative to the size of its economy, in recent history. Lawmakers reduced the top rate on the personal income tax to 4.9% from 6.45%. They also eliminated the income tax for small business owners who file as individuals, a broad group that includes sole proprietors, limited liability partnerships and S-corporations.
The governor declared that Kansas was “open for business” in such strong terms that he might as well have donned a sandwich board reading “Come to Kansas / Keep Everything You Earn.” He boasted: “Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy.”
The comment was subsequently picked up by critics who wondered why the Kansas economy wasn’t suddenly leaping ahead at, say, 4%-5% growth annually. When Mr. Brownback ran for re-election last year, national reporters descended on the Sunflower State and quickly made Kansas the national symbol for the alleged depredations of “trickle-down economics.” A sampling of headlines includes: “How Tea Party tax cuts are turning Kansas into a smoking ruin,” L.A. Times, July 9; “Kansas’ Ruinous Tax Cuts,” the New York Times, July 13; and “The Great Kansas Tea Party Disaster,” Rolling Stone, Oct. 23.
Yet voters re-elected Mr. Brownback by a four-point margin. What the news coverage missed was that if Kansas hasn’t exactly catapulted into the front ranks in economic growth and employment, then it has at least moved a long way from the stagnation of recent decades. Consider:
• In March 2013, unemployment in Kansas stood at 5.5%. It has since dropped to 4.2%, tied for 14th lowest in the country.
• From 1998-2012, Kansas ranked 38th in private-sector job growth, according Bureau of Labor Statistics data crunched by the Kansas Policy Institute. In 2013—the first year after the tax reform—the state climbed to 27th place, and in 2014 it moved to 21st, placing it in the top half of states.
• In the second half of 2014, hourly wages in Kansas grew 3.5%, according to BLS data, far faster than the national average of 1.9%.
Then there is the Kansas City metropolitan area, a living laboratory that straddles the border with Missouri. On Mr. Brownback’s side of the divide, the top personal income-tax rate is now 4.9%, beginning at $15,000 for single filers; in Missouri the top 6% rate starts at $9,000.
“I just think Kansas City is a great study,” the governor says. “This is an unusual place, where you’ve got a city virtually equally divided between two states.” The results? Over the past two calendar years, private-sector jobs increased by 5.6% on the Kansas side and only 2.2% on the Missouri. In the same period hourly wages grew $1.22 on the Kansas side, compared with $0.61 on the Missouri side.
To Mr. Brownback, those kinds of statistics show the success of his tax cuts. He says a reporter recently asked whether he could “definitively say this wouldn’t have happened” without the reforms. “We don’t have the studies that say that,” he replies, “but we’re in terrain that we have not seen before—and it’s good terrain.”
Such results make intuitive sense. Patti Bossert, who owns two employment agencies in Topeka, estimates the tax cuts saved her firms $40,000 last year. Seeing a windfall on its way, she spent $375,000 to buy and remodel an old building for a new company headquarters. “Our business has been phenomenal,” she says. “Wages are going up, and the big problem now is that there are many more available job openings than there are qualified people to fill them.”
Critics contend that Mr. Brownback’s tax cuts have blown a hole in the state budget—$344 million in the 2015 fiscal year and $600 million in the next. The governor is filling those gaps by moving money from highway projects and delaying some public pension contributions. He has also proposed raising cigarette and alcohol taxes and pausing some of the tax cuts still scheduled to take effect. But he insists that the state will maintain a balanced budget and at the same time “continue our march to zero income taxes.”
Even so, Ms. Bossert worries that budgetary issues could cause the legislature to roll back the tax cuts. “Kansas can’t afford to break the promise it made to small business in 2012,” she says. “We have to stay the course to reap the real long-term benefits of this reform.”
If Mr. Brownback has anything to do with it, Kansas will stand firm. The governor expresses mild regret that his use of “colorful language”—the shot of adrenaline line—became a distraction. But he’s still eager to take on liberal assumptions across a host of issues, including the best way to eliminate poverty.
“I love the debate on wage growth because the left wants to push mandatory minimum-wage growth,” he tells me. “They want to do it by statute, and we will do it by growth.”
Mr. Wilson is a resident fellow and senior writer at the St. Louis-based Show-Me Institute.
In an effort to research the so-called food desert in Kansas City, I shopped around at some of the grocery stores on the east side. I found several grocery stores with well-stocked produce aisles. I even did some grocery shopping as I wanted to know what locals were paying in sales tax. What I found surprised me.
The Aldi grocery store in Gladstone charged the least sales tax at 4.725%. The Aldi at 721 Paseo Blvd in Kansas City charged me 6.35% sales tax. The one at 6415 Troost charged me 5.85% sales tax.
While I expected Kansas City taxes to be higher than taxes outside the city in Gladstone, I did not expect the Aldis on the east side of Kansas City to tax so differently than one another.
This is troubling. A tax on food is bad enough as it is the most regressive of all taxes. Everyone must eat, and as the poor pay a larger portion of their income on food than the rich, this tax impacts them disproportionately. Add to this the apparent fact that grocery stores on the east side–in the middle of the so-called food desert–pay an even larger tax bill than grocery stores elsewhere, and you have a double whammy.
When the legislative session began earlier this year, there was some hope that policymakers would be able to modernize the Missouri Department of Transportation’s (MoDOT) user-fee tax base to avert a growing funding crisis for Missouri’s highways. The session is now completed, and unfortunately lawmakers took no concrete actions in this area.
While this is a setback for Missouri’s transportation system, and will likely mean some loss in federal matching funds next year, the conversation in Jefferson City has moved in a positive direction. In previous years, policymakers essentially ignored the idea of having highway users pay for the roads (through fuel taxes as tolls), and instead put forward a general statewide sales tax as the only possible solution for MoDOT. This year, there were many bills in the senate and house that would have increased fuel taxes, changed the way fuel taxes were calculated, or even introduced tolling. The bill that made it furthest in the legislature, SB 540, would have both increased the fuel tax (1.5 cents regular and 3.5 cent diesel) and allowed tolling highways through public-private partnerships.
We can only hope that next year state policymakers will turn this positive momentum into policy. Because while MoDOT should have enough funds to maintain the state highway system in 2016, by 2017 this may no longer be the case. At that time the “325 Plan,” which would allow many heavily used highways in the state to fall into disrepair, will go into effect. That’s not a result anyone wants, and it’s unnecessary if the state raises highway user fees commensurate to the level needed to pay for highways.
The Columbia Tribune reported that Columbia Public Schools Superintendent Peter Stiepleman and other superintendents across the state are telling Gov. Nixon to veto House Bill 42. If signed into law, the bill would allow students to transfer from an unaccredited school into another district or charter school at the expense of the sending district.
HB 42 also would create a new accreditation process, in which individual schools, not districts, are accredited, as is currently the procedure. This would allow students attending unaccredited schools to first transfer into an accredited school within their home district if there is space available. In short, school-level accreditation is going to affect more than just districts like Normandy and Riverview Gardens.
Stiepleman bases his concerns on the possible fate of a school in his district. Douglass High School is an alternative high school. Most alternative “schools” in Missouri are really programs carried out within a larger school, but Douglass is a stand-alone school. Under HB 42, the school would be accredited individually.
Stiepleman is worried that Douglass will not get a fair shake. As he put it, “Because of the population of fragile students at Douglass, the lack of Advanced Placement courses and other issues, it could become provisionally accredited. That designation is one step removed from being unaccredited, which could trigger student transfers.”
I recently reported on DeLaSalle Education Center, an alternative charter high school in Kansas City with similar fears. Like Douglass, DeLaSalle serves only at-risk students. As my video shows, students like senior K’ Von Williams are thriving at DeLaSalle.
Despite DeLaSalle’s low state standardized test scores, the charter school is delivering a quality service to both the community and students. If regulations are only based on test scores, they can miss the good things the school is doing.
Schools in Missouri should be held accountable for the quality of education that they provide for their students. But the mechanism by which those schools are held accountable has to be sensitive to different educational models (in the charter or traditional public sectors) and different populations of students across the state.
If HB 42 become law, DESE and the legislature will need to reevaluate the metrics Missouri uses to determine if a school is accredited or not. If they’re not careful, they could risk harming schools that are doing right by kids.
