Highway Funding in Missouri: The Fuel Tax Option

Posted on by Joseph Miller

The failure of Amendment 7, the proposed transportation sales tax, in August has left the Missouri Department of Transportation (MoDOT) in a financial bind. In the next few years, the department will no longer have the funds necessary to maintain the quality of the state highway system, much less improve it.

Former proponents of Amendment 7 claim that sales taxes are the best solution for MoDOT’s problems because they are the most politically feasible method of raising large amounts of money. Raising the state gasoline tax (currently 17 cents per gallon)—MoDOT’s principle revenue stream, they say—is not good policy because it is a declining source of funds and it does not poll well. But as we have shown before, fuel consumption has been declining very slowly, and it actually increased in the last year. The erosion in the gas tax’s purchasing power is mostly the result of inflation; Missouri last increased its fuel taxes in 1996, since which time prices have increased an average of 34 percent.

Far from being politically unfeasible, raising the gas tax is actually the simplest method for the state legislature to raise more money for MoDOT. That is because the provision that forces tax increases to go to the voters, the Hancock Amendment, has exceptions for small increases of existing revenue streams. Under the amendment, the legislature can increase revenue in any given year as long as new revenue does not exceed $106 million ($50 million in 1980 indexed to personal income growth) or 1 percent of state revenue looking back two years ($84.2 million for last year), whichever is lower.

Using 1 percent of previous state revenue as a cap, the legislature can collect around an additional $84 million in fuel taxes next year. Missouri currently generates about $29 million per cent from fuel taxes, meaning the state could raise fuel taxes by more than two cents without triggering Hancock requirements. Or, if Missouri followed the example of the federal government and many other states in charging diesel at a higher rate than regular gasoline, the state could raise the diesel fuel tax rate by five cents and the regular fuel tax by one cent and remain under the cap. That would generate an addition $78 million for MoDOT next year.

What’s more, because state revenue has been growing and per-cent fuel receipts have been declining recently, the state legislature could raise the fuel tax in successive years, which could give MoDOT the needed funds to maintain and make necessary improvements to state highways. In fact, this is precisely how Missouri last increased its fuel taxes in the 1990s.

Fuel taxes, as indirect user fees, are a preferable and possible way of funding highways in Missouri. If more money truly is required, the legislature has the option to raise fuel taxes without sending the issue to a ballot and without resorting to new, inappropriate funding mechanisms.

We Are Thankful for Transparency

Posted on by Patrick Tuohey

There has been a lot of talk lately about transparency, especially the notion that “lack of transparency is a huge political advantage,” according to an architect of the president’s health care law. Last year, we wrote that we’re thankful for data, and that remains true.

Tied to our love of data is the assumption that government is transparent enough to provide it to us. Citizens of the Show-Me State should expect no less. And in that regard, Missouri is doing okay. In 1973, the state legislature adopted our Sunshine Law, making Missouri one of the first states to adopt such an open meetings law. The law in part reads:

It is the public policy of this state that meetings, records, votes, actions, and deliberations of public governmental bodies be open to the public unless otherwise provided by law.

In 2009 the Blunt administration sought for, and the legislature provided, the implementation of the Missouri Accountability Portal, and the Nixon administration has maintained it. The website allows users “a single point of reference to review how their money is being spent and other pertinent information related to the enforcement of government programs.” Though limited in scope and sometimes difficult to navigate, this site has been good for transparency in Missouri, helping keep citizens informed and the government responsive.

We’ll leave it to others to argue about the intelligence of voters or the political expediency of openness. But here in Missouri we’re grateful for the transparency we have and the data it yields.

Warrant Forgiveness: A Step in the Right Direction for Saint Louis County Cities

Posted on by Joseph Miller

Recently, 65 municipalities in Saint Louis County announced a warrant forgiveness program for December. In the program, defendants with outstanding warrants can get their warrant dropped if they go to the municipal court that issued the warrant and post a $100 bond. While this is a good thing for many poor residents who have, for whatever reason, failed to attend court, it does not change the underlying problem of cities relying on fines and fees to fund themselves.

We’ve written before about how many Saint Louis municipalities get large, possibly illegal, portions of their revenue from zealous enforcement of traffic laws and local ordinances. Twenty municipalities get more than 20 percent of their revenue from fines and fees, with three cities (Calverton Park, Bella Villa, and Vinita Terrace) deriving more than 50 percent of revenue from those sources.

And should one of the many recipients of these citations need to appear in local court because they wish to challenge the citation or cannot pay the fine (or fix their ticket), it is far from convenient. Calverton Park and Bella Villa both only hold traffic court one evening a month. As an in-depth story in the Washington Post described, many residents, especially the poor, have a difficult time navigating the process.

Allowing defendants with outstanding warrants to set things right is a way of relieving some of the built up stress for locals, but a more long-term solution is to make policing about law and order, not revenue collection, in all Saint Louis County municipalities. That may mean combining police or court services with other municipalities, or if necessary disincorporating cities altogether. At the state level, that could mean strengthening and enforcing the Macks Creek Law. If something isn’t done to fix the underlying problem of burdensome municipalities, this holiday amnesty’s impact won’t long outlive the holidays themselves.

More Streetcar Boosterism from the Kansas City Star

Posted on by Joseph Miller

The Kansas City Star recently revealed an interactive report on $1.7 billion in existing and possible new developments in downtown Kansas City. Anyone who is interested in some new exciting projects is encouraged to take a look, but be prepared for some streetcar propaganda.

While the Star doesn’t go so far as to claim that the as-yet-unfinished streetcar directly caused all the development, the report heavily implies it. As the Star states,

It also happens to be the geography linked by the new 2.2-mile streetcar line expected to be completed next year. . . . Downtown’s rejuvenation is now rolling into a new era, with the start of the $100 million streetcar line on Main Street.

The interactive report prominently places an outline of the streetcar in the middle of their map, and the companion article finishes with a prompt for more information on the starter line.

In terms of development, the benefits of streetcars are unproven, with public subsidies and city planning preferences pushing investment toward one area of the city rather than generating real growth. Moreover, the anecdotal evidence of development in Kansas City has been problematic at best, as we have shown on multiple occasions.

While the new “report” seemingly shows public and private activity around the streetcar, on closer inspection many of these improvements are not new developments at all and have no connection to the 2.2-mile route. For example, many would question the addition of the as-yet-unfunded Broadway Bridge improvements as a development at all; the bridge is certainly unconnected to the streetcar. Another example is improvements to the Central Library, which while near the streetcar line were completed by the nonprofit Downtown Council in 2004. Also included in the interactive report is the Hilton President Kansas City, which was completed in 2006, well before streetcar planning gathered momentum. Projects completed as early as 2003, and planned projects almost a mile and a half from the streetcar line, are included in the map.

The Star might claim that it is just showing the overall investment in downtown Kansas City over the last 15 years, but then why make the streetcar line the clear axis (and most prominent feature) of the map? If it is being counted as an investment downtown, why is it not represented as a dot like the other investments? If it is just because the streetcar will “connect” new investments, why not prominently feature the Max, 49, and 51 bus? They will and already do connect areas downtown. The implication that the streetcar is a catalyst or a necessary component of development is obvious. It’s also not true.

This Sounds Familiar

Posted on by Michael Rathbone

Cassandra was a Trojan princess who had the gift of prophecy. She foresaw that the abduction of Helen would bring about the destruction of Troy. Her curse was that nobody believed her. At the Show-Me Institute, we weren’t blessed with Cassandra’s ability, but when we look at the future of Missouri’s public pensions, we see potential disaster ahead.

Last year, the Show-Me Institute released a report by Dr. Andrew Biggs of the American Enterprise Institute. The report showed how Missouri public pension plans are underestimating the total amount of unfunded liabilities (total pension obligations that exceed the amount of assets the pension plan has) that they have. In fact, using more realistic assumptions, five of the state’s largest pensions have unfunded liabilities FIVE TIMES larger than what is reported ($54 billion actual vs $11 billion reported). That is a serious amount of money, and if these pensions do not have the assets to cover their obligations, then the taxpayer (you and me) will be left footing the bill.

State Budget Solutions, to my knowledge, does not have the gift of prophecy either. Yet they see what we see when they look at the status of state public pensions. Their new report discusses the unfunded liabilities of every state’s pension system. The content of the report sounds familiar because, like Dr. Biggs, they find that using more realistic assumptions about plan returns, state public pensions are significantly underfunded. According to State Budget Solutions, Missouri’s pensions aren’t among the worst nationally. That doesn’t mean things are good and the state’s pensions don’t need reform. If I’m stuck holding a stick of dynamite, while my neighbor is holding an atomic bomb, it doesn’t mean I’m going to be okay when the dynamite goes off.

Unfortunately, there has been little progress into actually achieving pension reform in Missouri. At the very least, the state needs to work to stop additional liabilities from being added to the already enormous amount the state already owes. Shifting to a defined contribution plan or a cash balance plan would be a good place to start. Then, policymakers can work on addressing the gap between pension assets and the monies these plans owe.

Cassandra warned of danger, and she was not believed. That was her curse. Hopefully, Missouri can avoid Troy’s fate.

South County Connector: Still an Opportunity to Toll

Posted on by Joseph Miller

Last week, Saint Louis County officials announced that the proposed $120 million South County Connector had been placed on hold. The proposal called for a four-lane route between Hanley Road and River des Peres Boulevard, with the purpose of providing better north-south traffic movement between Clayton and Maplewood. While the project has drawn criticism for aiding sprawl and failing to resolving the region’s major bottlenecks, the major stumbling block was funding the expensive project.

As we wrote when the project was proposed last year, while there are constitutional issues with MoDOT tolling, Saint Louis County is free to do so. If the county were to place high-occupancy toll (HOT) lanes on the connector, they not only would have a reliable local funding source, but also a way to mitigate the problems of induced demand on the new roadway. As we wrote last year:

HOT routes allow high-occupancy vehicles (HOV) free use of the road while charging a fee to solo drivers. . . . Toll roads have reduced congestion and been financially successful in other localities. An example is State Hwy. 550 in Texas, which will connect two major highways with a tollway outside of Brownsville. Local officials believe the highway will serve important transportation needs, and the toll’s estimated revenue of $1 million per year makes the $41 million price tag more manageable. In California, private developers constructed HOT lanes on SR-91 in Orange County. By transferring less essential travel to non-peak times and public transportation, Orange County tollways have reduced peak congestion by more than 25 percent on most roads. The SR-91 lanes have proven successful in reducing congestion and do not take any money from general transportation funds.

That would be a win-win for both drivers and the local taxpayers. In addition, with all the criticism of the proposed connector as unnecessary, a toll-feasibility study might help to show whether there is sufficient demand for a $120 million project. If traffic models show that the connector cannot generate sufficient revenue to cover local expenses (the federal government will likely cover a large portion of the costs), that would be evidence against building the road in the first place.

Education: A Way Out

Posted on by Brittany Wagner

For some students, education is a “way out,” but in places with few educational options, the way out is often a public school that does not meet the needs of its students.

Eighteen states and Washington, D.C., have taken steps to ensure students have more choice in education. New Orleans parents Gerald and Shermane Prosper were able to take advantage of the Louisiana Scholarship program, which allows their son to attend a private school. The voucher program, enacted in 2008, serves low-income students in low-performing schools and provides educational access to more than one-third of students in the state. Show-Me Institute Fellow James Shuls has shown how this type of scholarship program could potentially save Missourians millions of taxpayer dollars.

Watch the video to learn how the Prosper family views education as a pathway to success.

University City Should Carefully Consider Privatization Proposal; Ignore Special Interests

Posted on by John Wright

University City is considering outsourcing emergency medical services (EMS). Predictably, this proposal has been the subject of debate among city council members. Two council members have questioned whether the city should outsource one of its core services, while another member urged the council to remain open minded until they have all the data on outsourcing.

The Show-Me Institute has written favorably about EMS privatization policies in the past. Privatization, when done right, can increase efficiency and expertise, provide improved services to the public, and decrease costs. However, all outsourcing proposals must be carefully considered to ensure privatization is done properly.

The University City Council ought to investigate the specifics of this privatization proposal for how it would affect services and city finances, rather than shooting from the hip and accepting or rejecting a privatization proposal on purely political grounds. Public employees, city officials, and businesses that the city may contract with are all interested parties in any outsourcing effort. When deciding whether to contract out services, the council should do its best to ignore the special interests and focus on the details of how this proposal affects the city as a whole.

Private ambulances have served parts of Saint Louis County for years, and University City might be able to benefit from private ambulances as well.

Ideas for Kansas City Schools: Pay Teachers More Sooner

Posted on by Patrick Tuohey

Kansas City Public Schools (KCPS) is seeking input from parents, school staff, and the community about how it might regain and sustain full accreditation and retain and attract students. To that end, it is forming a School Improvement Advisory Committee (SIAC) and has been seeking applicants to serve in that capacity. Previously, we shared some ideas for strengthening administration and staff. Today, we’d like to suggest at least one change to Kansas City’s teacher pay schedule: pay teachers more sooner.

As it stands, the pay schedule for Kansas City teachers starts low and provides only modest increases in the initial years. Largest pay increases come at the end of a career, in a manner to maximize pension value. As my colleague James Shuls has argued in previous posts, this is a disincentive for new and effective teachers to stay on. Dane Stangler and Aaron North of the Kauffman Foundation wrote in a March 2014 op-ed in the St. Louis Post-Dispatch:

Because most of the pension value accrues in the final years of an educator’s career, the typical new teacher in Kansas City or St. Louis does not benefit from the current system. Based on our research, we estimate the likelihood that a traditional public school teacher in St. Louis stays in the profession long enough to earn the maximum pension benefit to be about 4 percent. In other words, 96 percent of teachers in St. Louis will leave prior to reaching the full benefit and the percentage is comparable in Kansas City (approximately 3 percent).

As a result, new teachers are less likely to stay on. According to the Show-Me Institute’s Michael Podgursky, “After eight years, roughly 70 percent of teachers remain on the job. The eight-year survival rates in STL and KC are far lower, ranging from 10 percent to 30 percent.”

Podgursky’s paper urges more transparency and,

Given the relatively small share of new teachers in Kansas City or Saint Louis who can expect to complete an entire career in either district, as a strategic recruiting tool it makes more sense to raise front-end salaries, 

rather than “generous end-of-career retirement benefits.”

Certainly, there are many reasons why teachers in Kansas City and Saint Louis are much more likely to leave, and creating a more fair pension system will not solve all of them. But one thing we can do in Kansas City is to let new teachers know they are valued early on in their careers and that we want them to stay on.

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