On 5 Aug, 2014, Missouri voters will decide whether to raise the state-wide sales tax 0.75% to fund road and bridge maintenance. The state’s roads and bridges are among the best in the nation according to two recent studies. The U.S. Chamber of Commerce ranked Missouri roads 7th best of the 50 states while the Reason Foundation ranked the Show-Me State 8th.
We have written many times that Missouri needs to invest in its transportation infrastructure. However, the need for timely and adequate funding does not mean that Missouri’s state highway system is about to crumble.
Check out our new video on the condition of Missouri’s highways and bridges:
As consumers, we like to get more for less – especially when it comes to our health. Usually we feel ripped off if we receive a lower-quality service for the same (or higher) cost of a better service. In a previous blog post, I discussed how, in some cases, certificate of need (CON) programs can be the very reason patients are forced to receive inferior care from less-skilled doctors. Additionally, CON regulations likely do not save patients much money, if any.
In a world of limited resources and virtually unlimited wants, we are forced to make trade-offs. A decrease in the quality of health care might be acceptable if CON led to lower costs. Proponents of CON argue that this regulation does contain the cost of care by preventing the “duplication of services” in a given geographic area. To illustrate this chain of reasoning, let’s say that Barnes-Jewish Hospital and Saint Louis University Hospital buy “too many” MRI machines – as a result, many of the new MRI machines go unused. Because of the outlay, CON proponents assume the two hospitals will probably charge higher prices for MRI scans to make up for the mistake.
There is evidence to suggest that theory is not well founded. One evaluation of Illinois’ CON program found that “there is little direct broad proof that overcapacity duplication leads to higher charges.” CON regulations may result in “tangible savings on the actual costs of specific medical technologies” but these programs tend to “redirect expenditures to other areas.” In other words, CON may actually prevent hospitals from spending too much on a certain type of medical technology, but any savings will be spent on other items instead of being passed onto patients. One study even suggests that strict CON programs may actually increase health care costs by as much as 5 percent.
What use is a program that can be delivering sub-optimal health care without cutting costs?
Representatives from the Missouri Department of Transportation (MoDOT) often warn that without more money, be it from a transportation sales tax or elsewhere, Missouri will not be able to match federal dollars for highways. Essentially, they are saying that if the state does not raise more money, it will leave eight to 10 times that amount in federal dollars on the table. However, these statements fail to clarify that: 1.) the federal dollars going to Missouri are limited, and 2.) the amount Missouri needs to match those funds is nowhere near $534,000,000 per year (the annual amount Amendment 7 would raise).
Federal dollars for highway improvements is a fixed amount that comes for the federal Highway Trust Fund, which the federal fuel taxes mainly support. The amount that Missouri currently receives is fixed by federal obligation limitations and the proportion that the state received in the past. State lane mileage and vehicle activity mostly determined the portion the state received in the past. Simply put, the amount of money available for state highway projects is mostly fixed, and currently, Missouri does not leave any money on the table. If Missouri decided to spend an extra billion dollars this year, it is unlikely that federal money to the state would increase.
According to MoDOT’s cautious projections, in which the federal government reduces its support to Missouri, the state will begin failing to match federal funds in 2020, leaving $186 million on the table. But to meet that match (of 80 percent federal, 20 percent state) Missouri would only have to increase local revenue by just less than $50 million, nowhere near the current $534 million proposal.
If we assume that the federal government fixes the federal highway funding problems and support does not decrease, the problem of matching funds is larger. By 2022, Missouri would be leaving about $530 million of federal dollars unmatched. However, under that scenario, Missouri would only have to increase local revenue by $130 million per year to get that money.
When it comes to federal dollars, unless there are major policy changes in Washington, the amount Missouri could get for the highways is relatively fixed whether or not Missouri raises taxes. While Missouri may lose the ability to match those dollars in the future, Missouri will eventually need to raise annually between only $50 million and $130 million. If Amendment 7 passes, the federal government will not make it rain; if the amendment fails, the sky is not going to fall.
In urban communities such as the City of Saint Louis, parents are able to send their children to magnet, charter, or public schools at no cost. All the while, tuition-driven Catholic schools are facing record low enrollment. The graph below illustrates the decline of Catholic school enrollment in the U.S. from 1960 to 2010 at the elementary and secondary levels.
With rising costs of private school tuition and concerns about public school quality, parents choose free alternatives to public schools, often charter schools. These parents do not necessarily prefer non-secular education. As Carnegie Mellon University economics professor Maria Ferreyra showed, the number of parents who want to enroll their children in private [Catholic] schools is greater than the number of parents who can afford it.
For this reason, some Catholic schools “convert” to charter schools in order to continue serving low-income communities. In “Sector Switchers,” authors Mike McShane and Andrew Kelly analyzed this phenomenon.
They found that Catholic schools that become charter schools somewhat maintain their brand. They keep “…discipline, high expectations, and formation of moral values in students,” and throw out, “the financial issues that have plagued Catholic schools…”
The authors reached two conclusions: (1) switching leads to higher enrollment, and (2) switching increases minority student enrollment. Still, questions remain about how this practice will affect cities such as Saint Louis.
If you want to take part in the discussion, join the Show-Me Institute for the Friedman Legacy Day Policy Breakfast this Thursday. The event will include a presentation from McShane and panelists Matt Hoehner, Educational Enterprises regional executive director, and Corey Quinn, president of De Le Salle Middle School.
Two court decisions about the health insurance subsidies provided for in the Patient Protection and Affordable Care Act (Obamacare) have come down on opposite sides of the issue. As a result, the U.S. Supreme Court may take these cases to clarify the law.
Whether it is chips at the grocery store or miles per gallon, it’s always good to get more for less. This is especially true in education. That is why a new report by the School Choice Demonstration Project at the University of Arkansas is so important. A team of researchers, led by Patrick Wolf, Ph.D., calculated the return on investment of public charter schools. In other words, they looked to see if charter schools are providing more bang for the buck. It turns out they are.
Charter schools throughout the country, and especially in Missouri, spend less per student than traditional public schools. Charter schools, on average, also outperform their traditional counterparts. By combining these facts, the researchers calculated that the productivity advantage for charter schools in math and reading was 40 and 41 percent, respectively.
So, what do you call it when you get better outcomes for less money? I call it a big win for students, parents, and taxpayers.
The St. Louis Metropolitan Taxicab Commission (MTC) has long stifled competition in the name of customer safety. The MTC controls market entry, tells cab and sedan businesses how they can operate, and sets prices. When Lyft launched in Saint Louis, MTC officials claimed they needed to shut down the app to protect customer safety, despite Lyft’s extensive insurance policy, background checks, and vehicle inspections. Now, with Uber preparing to launch in Saint Louis, the MTC is at it again, proposing more regulations to shut out competition.
Yesterday, the MTC approved changes to the taxicab code that would ostensibly allow a company such as Uber (although not Lyft) to operate in Saint Louis. The MTC altered the section of the code concerning premium sedans, which previously were quite onerous, with the implication that Uber can now pursue a license as a premium sedan company. Previously, premium sedans were required to bear written placards with the names of their customers, premium sedan companies could not start a business with fewer than three sedans, and (critically) sedans had to contract services at least 60 minutes in advance of pickup. The MTC voted to remove or relax these restrictions.
While some restrictions are gone, other competition-stifling regulations remain. Sedan companies still must obtain a Certificate of Convenience and Necessity (CCN) for $2,500, essentially asking companies to prove that Saint Louis needs cab service. Furthermore, the MTC still requires that each individual vehicle be licensed as a vehicle for hire (in Uber’s or Lyft’s cases, a premium sedan) with all the controls the MTC places on the appearance and operation of such vehicles.
While Uber might be able to operate with the code changes, it would be severely limited by regulations that the MTC plans on adding. First, the MTC is still considering making sedans charge a minimum fare of $25 per trip, although the final decision on this takes place later this month. This essentially limits Uber to its premium, black car service. Second, all sedans now have to pay a permit renewal fee of $500 per year. That is more than double the current cost of renewal for sedans and almost five times the fees required for cabs. Uber has cried foul, correctly calling these practices anti-competitive.
The restrictions on sedans in the taxicab code never had much to do with safety, and it is good to see the MTC repeal some of these regulations. However, the additions for a minimum fee for sedan services and onerous renewal requirements have no safety merit whatsoever. Their only possible purpose is to prevent Uber or Lyft from operating an on-demand, cheap vehicle service that might compete with existing taxicabs. Once again, the MTC has shown its true mission is not customer safety or satisfaction, but rather control over the Saint Louis taxi industry.
As first appearing in the St. Louis Business Journal:
The St. Louis Business Journal recently published an editorial critiquing my objections to the proposed transportation sales tax, also known as Amendment 7. To set the record straight, I agree with the Business Journal on the need for timely and adequate upkeep of our road and bridge system. This is an essential public service. However, I disagree on two important points.
First, despite the various alarms that supporters of Amendment 7 have raised, Missouri’s roads and bridges are not “crumbling.” In fact, our road system ranks among the best in the country according to the Reason Foundation and the U.S. Chamber of Commerce Foundation.
Second, what has been allowed to crumble – over the course of two decades – is the underlying user-pay model that has traditionally supported our transportation infrastructure. This is a good model and it should be restored, not replaced with something new and totally inappropriate – i.e., a sales tax imposed upon shoppers as opposed to other taxes on people actually using the roads.
Historically, the bulk of the Missouri Department of Transportation’s (MoDOT) revenues came from fees imposed on drivers – most importantly, the 17 cents per gallon state gas tax. However, that tax has held steady since 1996. If the gas tax was simply adjusted for inflation, it would be 8 cents higher and generate almost $300 million per year in additional revenue for MoDOT.
Instead of shoring up the traditional model, the Missouri Legislature opted for a proposed statewide sales tax to raise $534 million a year or $5.4 billion over the course of 10 years. That is more than what is needed to keep Missouri’s infrastructure from falling into disrepair.
There is a better solution: Raise the gas tax and/or implement tolls on major highways. These user-generated fees reduce the free-rider problem inherent in a transportation sales tax. Increasing the gas tax would increase road funding in Missouri while simultaneously reducing MoDOT’s long-term costs. Tolling major highways and bridges, such as I-70, would finance major improvements. Tolls and gas taxes are a fair and economically sound solution to MoDOT’s funding needs.
If voters approve a statewide 0.75 percent sales tax, it will cause ordinary Missourians to cross-subsidize truckers and other heavy users of the roads. And when the tax expires, Missouri will face an even worse problem than it does today — after 10 years of regressive taxes and wasteful spending.
Joseph Miller is a policy researcher at the Show-Me Institute, which promotes market solutions for Missouri public policy.
