Missouri Is One of the Top States . . . in Corporate Welfare

Posted on by Michael Rathbone

Typically it’s a good thing to be ranked high. That’s certainly the case for college football and the Forbes 400. However, a high ranking isn’t always a good thing. According to a report from the Mercatus Center (H/T AEI), Missouri has given $5.2 billion in subsidies to private businesses. This gives Missouri the dubious distinction of being the ninth most generous state in terms of corporate welfare. Now, I like being in the top 10 as much as the next guy, but not for this reason.

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Tax credits and enterprise zones are among the items included in calculating the total amount of subsidies provided to these companies. We have written extensively on how these and similar programs do not generate the type of growth that supporters of these programs claim. Unfortunately, policymakers seem to be big fans of these types of subsidies, as are the companies that benefit from receiving them.

Guess which company is the biggest beneficiary of corporate welfare. I’ll give you a minute. Need a hint? They build airplanes. Give up? I’ll show you.

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Boeing collects more in corporate welfare than the next two companies combined. Missouri did its part in improving the company’s bottom line when it gave Boeing a massive handout so that it would locate additional aircraft manufacturing here. However, the state is unlikely to get enough money in return in order to justify these subsidies. To generate sufficient returns, Boeing’s investment in the area would have to be in excess of what they made in profits for all of last year. Color me skeptical that they’ll make an investment that large.

Instead of giving out all of this taxpayer money to specific businesses, why doesn’t the government just cut taxes for all businesses? The state would make itself more attractive to businesses, and it would avoid the management problems that occur with these tax credits.

Recent Missouri Travel Trends Fail to Meet MoDOT Expectations

Posted on by Joseph Miller

In February, the Missouri Department of Transportation (MoDOT) issued its finalized Long-Range Transportation Plan, titled “A Vision for Missouri’s Transportation Future.” While most of the plan rightly focuses on maintaining the current highway system and increasing transportation safety, it also outlines hopes for a department with broader funding and broader responsibilities. These new responsibilities would include an increased role in transit funding and expanding the state’s inter-city passenger rail system.

MoDOT has justified these new charges partially under the argument that Missourians in the future will drive less and use alternative transportation more. However, recent data suggests that such a transformation is not occurring, at least not yet.

In MoDOT’s long-range plan, the department cited the steady increase in passenger rail traffic from 2007 to 2012 as a reason for increased investment in this mode, including the addition of lines from Saint Louis to Springfield and Kansas City to Omaha. However, in fiscal year 2014, passenger rail travel actually fell on Missouri’s heavily subsidized inter-city line, the Missouri River Runner. Passengers declined from 197,000 in 2013 to 189,000 for 2014.

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In fact, passenger rail usage in Missouri is still lower than it was in 2001, when there were 208,000 passengers. The recent stagnation and long-term decline of inter-city rail traffic argue against a role for MoDOT in funding new billion-dollar rail lines in Missouri.

MoDOT’s long-range plan also called for a larger state role in transit spending, citing increased usage from 2010 to 2012 statewide and demographic changes as evidence of increasing transit demand. But once again, recent data shows that transit usage statewide fell from 2012 to 2013 (from 63.4 to 62.5 million UPT), reversing the post-recession trend.

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In fact, transit usage in Missouri, despite significant local and federal support (averaging more than $400 million per year), has steadily declined since 2000. There are many arguments one could make for increased transit spending by MoDOT, but rapidly increasing demand is not one of them.

The fact that recent travel data runs contrary to MoDOT’s expectations is perhaps unsurprising. In written comments to a draft version of the Long-Range Transportation Plan, we cautioned MoDOT against extrapolating weak post-recession trends (and anecdotal evidence) too far into the future. We especially cautioned against using those trends to speculate on revolutionary change in Missouri travel habits. But speculate they have. Unfortunately for Missourians, those speculations are coupled with plans to spend billions in an effort to meet, what are at present, stagnating travel trends.

Government Pensions Should Be Portable, as Well as Sustainable

Posted on by John Wright

I was hired by the California Legislative Counsel right out of law school at the age of 25. At the time, I could see myself spending the next several decades there, but I wasn’t ready to commit to the proposition. Unfortunately, in order for my retirement package to be valuable, I would have had no choice but to make a career of it.

California’s retirement system uses a defined benefit plan and would have paid me a generous amount each month during retirement, but only if I spent several decades in the system. If I stayed at my job for less than a decade, my retirement benefit hardly would have been worth the contribution I was paying into the system.

Situations like mine are common where government employees are in a defined benefit system. The following chart illustrates my point by showing benefit growth in the New York City Teachers’ Retirement Plan.

NY teachers pension graph

 

An employee who stays in that system for a full 15 years will only earn $100,000 in benefits, but 15 years later, the value of the benefits will quadruple. These types of formulas often incentivize employees to stay at a job longer than they would like. They also make the position unattractive to new hires who might not want to stay with the job for 20 or 30 years.

Sustainability is the main problem with defined benefit pensions. Unlike with a 401(k)-type retirement system, where an employee invests a definite amount each paycheck and collects the return during retirement, defined benefit plans commit public institutions to vast pension obligations to be paid out years in the future. The discrepancy between promised benefit and actual amount invested means that defined benefit systems are often inadequately funded and can create fiscal crises when pensions mature.

An important side benefit of pension reform is the potential increase in the quality of government workforces. By switching to a more portable system, governments would attract a more experienced and a more diverse workforce. Employees would join government workforces at the middle and end of their careers, bringing valuable private-sector experience with them, and people would feel free to take a government job at the beginning of their careers, even if they weren’t sure they wanted to be there until retirement.

Support Local Control? Oppose Teacher Tenure Mandates

Posted on by James V. Shuls

In November, Missourians will vote on a constitutional amendment that would change the way school districts manage the teacher workforce. The amendment would strip away current teacher tenure protections for new teachers and limit contracts of these new teachers to a maximum of three years. Additionally, it would require school districts to use student performance data in teacher evaluations.

Now, there are good and compelling arguments on both sides of this issue. Ironically, however, one of the main arguments against Amendment 3 is that it constitutes a loss of local control.

There is some truth to that claim, but it is important to ask the question, “As compared to what?”

Under current state statutes, Missouri public school districts are forced to enter into an “indefinite contract” when teachers receive tenure and that it shall last for an “indefinite period.” Talk about top down!

What’s more, state statutes mandate a specific process for removing a tenured teacher. This is illustrated in the graphic below (from my paper, “The Power to Lead”).

It is perfectly fine for opponents of Amendment 3 to call it a “top-down mandate” that will strip away local control. I just hope that after November 4, these groups will continue to support local control and oppose top-down mandates for teacher tenure.

Mo Tenure process

Brakes Still On for Uber and Lyft

Posted on by Jessica Stearns

After living in Saint Louis for several years, I’ve learned from experience that cabs are unreliable and too expensive for many individuals on a tight budget. As a college student who has used Uber many times in other cities, I know that Uber and Lyft bring more competition into the market and lower prices for consumers while still providing them with a safe and efficient service—elements that are nonexistent in the Saint Louis taxicab market.

This past week, when the St. Louis Metropolitan Taxicab Commission (MTC) unanimously approved Uber’s application to function as a third-party dispatcher for existing premium sedans, I was initially excited, figuring that cab services would be cheaper and easier to use. My excitement, however, was misguided, as the commission’s recent decision still puts the brakes on any meaningful competition that Uber and Lyft would provide.

The MTC, “in its continuing endeavor to provide safe, high quality taxi service to St. Louis,” has retained and added regulations that will prevent Uber or any other ridesharing company from offering anything but an expensive, premium service. Some examples of these regulations include:

  • The price of a premium sedan must be greater than $33,000.

  • The price of a premium SUV must be greater than $42,000.

  • The vehicle cannot be more than six model years old while in service.

  • For-hire services must have a non-residential business address.

It gets worse. Aside from controlling the downstream pricing of ridesharing services, the MTC still plans to tightly control the supply of premium sedans available to Uber through the issuance of permits. Initially, the MTC will only issue 26 permits for premium services, and only five will be rewarded to new, single-vehicle operators. The rest will go to existing sedan companies that can afford three or more sedans. These smoke and mirror tricks, designed to make it appear that the MTC is becoming friendlier to other services and companies, are in reality reinforcing the restrictions on the entry and pricing of the taxi market.

These arbitrary restrictions become even more evident when trying to order an Uber. When I attempted to order a car through the Uber app, the message appears that “no Black cars are available.” So even after the changes, trying to use Uber is just as difficult as when they were barred from entering the market. Clearly, the MTC’s decision is not doing anything to fulfill their duty of providing enough supply to meet the demand.

The Columbia Police Department and Pennies from Heaven

Posted on by Joseph Miller

As Columbia residents prepare to decide whether to increase the budget of the police department through property tax increases, they might be interested in how the police department spends the funds available today. In the video below (begin viewing at 8:43), from Last Week Tonight with John Oliver, Columbia’s chief of police explained how the department used funds derived from civil asset forfeiture. Reducing the tax burden for Columbia residents, however, was not one of those uses.

Without addressing the propriety of civil forfeiture laws, a department does not inspire confidence when it claims it needs more taxpayer dollars although it spends the proceeds of assets seized from residents on “toys,” as though they were “pennies from heaven.” Columbia residents might consider whether the funds the department currently receives are prudently managed before more is allocated.

Ain’t No Sunshine: What’s Going On Behind Government’s Closed Doors?

Posted on by John Wright

This month, the Missouri State Auditor’s office released a report on state and local government compliance with Missouri’s Sunshine Law. The Sunshine Law requires government bodies to keep meetings open to the public, provides procedures and safeguards when a meeting needs to be held in private, and imposes other requirements on government bodies to ensure transparency. According to the auditor’s report, state agencies and local governments across the state are not complying with these laws.

The report includes numerous violations of public records and public meeting requirements. The following government bodies failed to abide by the proper procedure for making meetings closed to the public:

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  • Gentry County

  • City of Savannah

  • Ste. Genevieve County

  • City of Liberal

  • Southern Dallas County Fire Protection District

  • Daviess County

  • City of Brentwood

  • Department of Public Safety/State Emergency Management Agency

  • City of Buckner

  • City of Diamond

  • Cedar County

  • Caldwell County

  • McDonald County

  • Lake Lotawana Community Improvement District

  • Vernon County

  • Montgomery County

  • Kansas City Board of Police Commissioners

  • Clark County

  • Stone County

  • The School District of Springfield, R-XII

  • Monarch Fire Protection District

  • Natural Resources/Soil and Water Conservation Program

  • Higher Education/Southeast Missouri State University

  • Madison County

Most of the government bodies that failed to keep meetings open were cities and counties, but some of these bodies, including the Kansas City Board of Police Commissioners, the Department of Public Safety/State Emergency Management Agency, and the Southern Dallas County Fire Protection District, are charged with ensuring public safety. The Kansas City Board of Police Commissioners, for example, failed to comply with the provisions of Missouri law that require a body in a closed meeting to properly document issues discussed, to discuss only authorized topics during the closed meeting, and to properly disclose the final disposition of matters discussed in closed sessions.

Government bodies have the power to deprive us of life, liberty, and property. They are charged with providing public safety and education services that Missourians depend on. They are given the power to extract payment for these services whether an individual wants them or not. The open government requirements of Missouri’s Sunshine Law are essential safeguards against abuse of government power.

Increasing the Health Care Supply to Meet Health Care Demand

Posted on by Patrick Ishmael

Robert Graboyes is a senior research fellow for the Mercatus Center. Later this month Dr. Graboyes will release a report about health care innovation, which I intend to talk about at some length on this blog. In the meantime, I want to re-up the Reason video from earlier this year. The video features Dr. Graboyes talking about a wide array of reforms that would get care to the neediest among us. If you’ve read our work before, you’ve probably heard of many of the recommendations he talks about, including regulatory, Medicaid, certificate of need, and scope of practice reforms. I highly recommend the video, particularly the section about prosthetics and 3-D printing, which captures well how quickly the market for health care could change in the coming years.

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