Brittany Wagner reviews some of the highlights from her recent interview with Joshua Schindler. Schindler is the lawyer representing Normandy students who are trying to transfer to accredited school districts.
Public Transportation in Columbia, Missouri: The Good, the Bad, and the Ugly
Officials in Columbia, Missouri, are celebrating the successful launch of “CoMo Connect,” the city’s rebranded bus system. The heightened service is part of Columbia’s recent push to improve its public transportation system through a significant increase in spending. While that investment has yielded positive results for the level of service the bus system provides and the overall ridership, increasing transit costs may become a burden for local taxpayers.
The Good: Setting aside the overall merits of the increased transit spending, Columbia’s bus system has better service and many more riders than it had a decade ago. From 2006 to 2012, Columbia made more than $10 million in capital improvements to its bus system. These improvements have come in funding spurts, one between 2006 and 2007 and another from 2010 until today. Columbia has spent the money on new buses, better facilities, and increased service. As a result, the number of buses plying Columbia’s streets has almost tripled and vehicle revenue hours have more than doubled since 2006. Technology has improved as well. Today, it is easier to track your bus in Columbia than in Saint Louis.
The Bad: While ridership has almost tripled since 2006, most of that increase followed the first $4 million in capital improvements made from 2006 to 2007. Significant spending in 2010, 2011, and 2012 actually has been followed by decreased ridership. Officials have blamed an increase in fares for the drop-off, but at $1.50, Columbia’s fares are cheaper than many cities and still highly subsidized; annual fare revenue only accounts for 10 percent of the system’s operating costs. Furthermore, improved service has steadily pushed up operating costs, from $2.7 million in 2006 to more than $6 million in 2013.
The Ugly: More taxes might be on the way for city residents. Although officials claim CoMo Connect is resulting in record ridership, they fail to mention that they temporarily have made the bus free. At the same time, the bus system’s goal of holding down growth in its operating budget is increasingly unlikely, and city officials are looking at ways to increase funding. Columbia currently funds transit with a local sales tax, student housing contracts, bus fares, and downtown parking fees. Columbia might have to further increase these taxes and fees to fund transit, despite the fact that less than 1 percent of Columbians use the bus to get to work.
Columbians would do well to consider what they hope their bus service can achieve and how much those achievements are worth. Otherwise, the decisions will be made by those who have made transit usage an end in and of itself.
How to Attract Jobs, or at Least Not Repel Them
Public officials in Kansas City and elsewhere are eager to be seen as job creators. Almost every taxpayer-subsidized development project, every act of crony capitalism, every public project like a new $1.2 billion airport terminal, $62 million-per-mile streetcar, or convention hotel is discussed in terms of the jobs it will create. Politicians tells us, as they did in the TIF Commission hearing for the Burns & Mac handout, that the city cannot “wait for the free market,” that government must act.
But is government’s use of taxpayer dollars more successful than people making their own decisions?
Economist Enrico Moretti was interviewed on NPR’s Here and Now about his book, The New Geography of Jobs. He was asked about how successfully innovative regions are created and replicated [segment begins at 8:27]:
“[Interviewer] This is the unsettling part of your book: How do cities replicate these innovative job clusters?
“[Moretti] It’s very tough, because if you look historically where the innovation clusters are located, almost none of them [were] created by some deliberate, explicit policy. It’s really hard to engineer an innovation cluster. We talk about Seattle, but if you look at a lot of the clusters, they were all born in very random, often serendipitous, ways. So it’s really hard for policy makers to engineer from scratch.”
There is no magic formula known to bureaucrats or politicians about which companies and industries will be successful in the future. But they use public resources time and again chasing that white rabbit of jobs and growth. And unfortunately, the impact of taxing many businesses to subsidize a few is more often than not a recipe for destroying jobs, or at least keeping them away.
A better investment, as Show-Me has argued for years, is for government’s action to be broad and neutral: keep taxes low for everyone, maintain infrastructure, deliver necessary city services, and ensure quality education. Maybe those aren’t as appealing as large edifices named after politicians, but they are more successful.
Missouri Should Stop Funding Ghost Students
Like most states, Arizona felt a financial crunch in the wake of the economic downturn of 2008. As a result, funding for education could not keep pace with the expected increases. An Arizona judge recently ruled that state lawmakers did not fund schools properly during this time and must appropriate an additional $317 million to Arizona public schools, immediately.
However, as Jonathan Butcher of the Goldwater Institute points out, much less money would be needed if “ghost students” were removed from the funding formula. A ghost student is essentially when the state pays for the same student twice.
In The Arizona Republic he writes:
“Arizona schools can apply for additional funding for current-year enrollment growth, but they do not have to adjust for enrollment decreases in the same year. Traditional school payments are generally not updated until the following year, which means schools get funding for students who aren’t in their classrooms anymore.
“As Goldwater Institute research has reported, the state pays about $125 million for empty seats every year.
“Traditional school payments should be based on the number of students in the classroom, with payments updated accordingly throughout the year.”
In Missouri, we often hear that the state’s foundation formula for education is not fully funded. That is true, but Missouri’s formula is riddled with the same features that create ghost students in Arizona. Schools are funded based on the number of students from the current or two previous years. Thus, a district with declining enrollment could get funded based on their enrollment from two years ago, while a district with increasing enrollment gets funded based on the current year’s student count.
In addition, there are several other features that do not allow a district’s funding to decrease when it should. For instance, the amount counted as “local dollars” is pegged to 2004 assessment levels. If local property taxes increase, the state should pay less to the school district, but they don’t. On top of all of this, Missouri has a “hold-harmless” provision that prevents state funding from decreasing below a set level, even if the district should receive less based on the formula. As of 2013, there were 174 hold-harmless districts.
If Missouri were to remove these provisions it would allow the formula to adjust to the changing demographics of our schools. Then the formula would not be as dramatically underfunded as is claimed. This would be a wise step, because we simply cannot afford to continue to fund ghost students.
For more on the funding formula, check out our handy primer.
Local Road Funding in Missouri
The Missouri Department of Transportation’s (MoDOT) growing funding problem has put the issue of state highway funding on the center stage. This focus on the state road system obscures the fact that most of Missouri’s streets are the responsibility, in terms of funding and maintenance, of local governments.
Missouri has more than 90,000 lane miles of local roads that are the responsibility of cities and counties, as compared to 33,000 lane miles of highways under MoDOT’s purview. While MoDOT receives most of its funding from fees placed on drivers, local roads do not. Counties and municipalities partially fund their streets with the 25 percent of state fuel taxes remitted to localities, but in most areas that is inadequate. Local governments, therefore, rely on local sales taxes, property taxes, and specially formed taxing districts known as transportation development districts (TDD) to pay for road improvements.
One source of funding localities technically could use—but do not—are local fuel taxes, even though they might be a fair and economically sound way to fund roads. Paying for streets with fuel taxes, as opposed to other forms of local taxation, also might have the benefit of limiting wasteful spending, because the Missouri Constitution stipulates that all local fuel tax proceeds must be spent on roads.
The likely reason no Missouri localities collect fuel taxes (although attempts have been made) is that the state constitution stipulates that voters approve any such measure by a 2/3rd majority. Other forms of local taxation, such as transportation sales taxes or property taxes, require only simple majorities. TDDs, semi-democratically created ad hoc taxing districts, also are much easier to implement than fuel taxes. It is, perhaps, unsurprising that while no city has a fuel tax, there are more than 170 TDDs in Missouri, collecting revenue with little accountability or oversight.
Moving forward, many of the funding problems that MoDOT faces for highways is mirrored on the local level. Counties and cities face street maintenance backlogs, and residents have noticed. Recent surveys in Springfield and Kansas City showed residents were highly unsatisfied with the state of local streets.
It is hard to tell what portion of the need arises from a genuine lack of funding and what portion is the result of misplaced priorities. However, as Missourians consider if more must be spent, they also should question how more would be raised, and whether the current methods are transparent and economically sound.
The Pension Problem Non-Teaching Personnel Pose
In a recent post, Education Policy Research Assistant Brittany Wagner discussed a new study examining the large growth in non-teaching personnel in schools. The study found that over the past 60 years, schools have increased non-teaching personnel positions by 702 percent.
Besides their salaries, non-teaching personnel also accrue pension benefits through the Public Education Employee Retirement System of Missouri (PEERS). According to the PEERS annual report, “PEERS is a mandatory cost-sharing multiple employer retirement system for all public school district employees (except the school districts of St. Louis and Kansas City), employees of the Missouri Association of School Administrators, and community college employees (except St. Louis Community College).” Members of the plan and their employers both contribute to the pension.
Over the last five years, the unfunded liabilities (liabilities minus assets) of this plan have increased by more than $64 million. Pension benefits like PEERS benefits are guaranteed and must be paid out. If PEERS can’t make those payments, taxpayers (i.e., you) will have to.
One way to prevent a situation like the one described above is to shift these pension plans away from a defined benefit plan (PEERS) to more effectively structured plans like defined contribution plans, hybrid plans (a plan that is a mix of defined benefit and defined contribution), or cash balance plans.
Maybe the addition of new non-teaching hires over the past 60 years is justified, but maybe it isn’t. School districts are making the public pension bomb bigger, and if they aren’t going to defuse it, shouldn’t school districts at least give the taxpayers, who are ultimately on the hook if these pensions can’t make their payments, some evidence to support their increase in hiring?
The Future of Transit
My colleague Joe Miller just wrote a piece asking if Kansas City really needs rail transit at all, as many claim. His conclusion: It does not. Not only have rail transit options fared poorly at the polls, but they also are expensive and not a guarantee of improved development or transit.
Recently in San Antonio, voters were outraged over their city’s efforts to fund a streetcar without a public vote. As a result, the council is adopting a proposal that
“would amend the city charter so that no money could be spent on streetcar or light rail, nor would the city grant permission to use city streets for those kinds of rail projects, unless a majority of voters agrees to it.”
Opponents in San Antonio echo arguments elsewhere, that transit needs can be met much more efficiently through existing or new technologies such as rapid transit like the MAX bus or through driverless cars. Technology of Tomorrow shows a video summarizing their viewpoint. The video contains a segment of a TED talk by (speaking of creative class) Sebastian Thrun, director of the Artificial Intelligence Laboratory at Stanford University, in which he says [starts at 16:30],
“If you’re one of these people who argue the only way to solve the congestion problem is to move traffic off the road on to rail, think again. We have the space, we’re just not using it.”
[youtube http://www.youtube.com/watch?v=r_T-X4N7hVQ?rel=0]
The advent of driverless cars and their impact on urban transit is nothing new. We’ve written about their impending arrival in Kansas City, and we’ve lamented City Hall’s inability or unwillingness to prepare for it. It’s difficult to know exactly if or when driverless cars will be in every driveway and precisely what effect they will have on a traffic system. But if Kansas City wants to be the city of the future, it needs to prepare to quickly integrate all the opportunities the future presents, not protect the special interests of their cronies or rebuild the infrastructure of the past.
The problem in Kansas City is that government does not appear to respect the will of voters on this matter, unlike San Antonio. Despite tenuous claims of need, despite the cost, despite numerous ballot defeats, despite coming new technologies, City Hall can be expected to try again to come at voters with expensive rail proposals regardless of what better options new technology presents.
Delays and Blockades: Certificate of Need in Saint Louis
Imagine you are eight years old, and you want to go into the business of selling lemonade. When walking around the neighborhood, you determine that all of the competitors are making sour lemonade, even though most people prefer sweet lemonade. Unfortunately, the neighborhood association denies your application for an operating permit to sell sweet lemonade—saying that there already are too many lemonade stands in the neighborhood.
It does not take a Ph.D. in economics to realize this is a foolish regulation. In the absence of proper competitive incentives, the other lemonade stands will continue serving sour lemonade.
Now replace the words “lemonade stand” with “three-bed hospital” and “your eight-year-old self” with “Paul McKee,” and you have a real-life situation.
McKee, a well-known real estate developer in the area, has been working on a project to renovate a portion of North Saint Louis City. On July 9, he unveiled a plan to establish a three-bed urgent care facility within the redevelopment area. According to state law, a certificate of need (CON) must be obtained in order to open a new hospital with costs of at least $1 million. It appears his proposal meets this threshold. However, requiring McKee to obtain a CON to open a small urgent care hospital in an underserved and impoverished area is a totally unnecessary government regulation.
CON programs initially were implemented in order to prevent the duplication of health services in a given geographic area, thereby controlling costs. The reasoning was that an excess supply of medical services would compel hospitals to increase prices in order to cover the high fixed costs associated with medical treatment.
There have been many different studies on how CON regulations impact the cost of care. A thorough survey of the relevant data reveals that CON regulations do very little, if anything, to control the overall cost of care. Furthermore, with respect to certain procedures, CON regulations have been shown to limit patient choice, resulting in worse care delivered from less capable doctors. Additionally, these regulations can create an inefficient market structure and grant existing hospitals monopolies over certain regions.
Some may even argue that McKee will attempt to use the regulatory program to prevent competitors from entering the market in North Saint Louis. Given CON rules, if his project is approved, it likely will be more difficult for new medical facilities to open nearby. But doesn’t the potential to abuse and use CON regulations to create a monopoly give all the more reason to eliminate them?
Additionally, Missouri’s CON program delays groundbreaking on new hospitals. McKee said he intends to submit his proposal by Aug. 22 and, in all likelihood, his application will not be reviewed until early November.
Christien West is an intern at the Show-Me Institute, which promotes market solutions for Missouri public policy.
Education: A Brief History Of Federal Overreach
When Americans think of federal overreach in education, they might think of programs like Race to the Top, Common Core, or No Child Left Behind, but federal education interventions began long before the Age of Standardized Testing.
Fifty years ago this week, President Lyndon B. Johnson enacted a series of welfare programs called the War on Poverty. One of these programs was Head Start, a program aimed at preparing low-income children for kindergarten.
Also under the umbrella of the War on Poverty, the Elementary and Secondary Education Act (ESEA) was enacted in 1965. The purpose of ESEA was to start funding schools with federal money, but it forbade a national curriculum.
Under President Jimmy Carter’s administration, the Department of Education was founded in 1979. Just a few years later, in 1983, the American public was shocked by the findings of A Nation at Risk, a report issued by the National Commission on Excellence in Education during President Ronald Reagan’s presidency.
President George H. W. Bush and President Bill Clinton left their mark on standards-based education in the 1990s with America 2000 (Bush) and Goals 2000 (Clinton).
In 2001, President George W. Bush reauthorized the ESEA under a new name, No Child Left Behind (NCLB), and in 2011, the U.S. Department of Education began awarding states with flexibility waivers from NCLB if they did things like adopt Common Core or evaluate teachers based on student achievement.
In just 50 years, federal oversight in education has grown and evolved. On the anniversary of one of LBJ’s key initiatives, some are calling for even more government intervention to fix the inequalities that still plague the United States today.
But federal intervention will not solve Missouri’s education problems—just look at the results. Few would argue the education system in America is in good shape, or that every child is receiving a quality education. So why institute more government intervention?
If the past 50 years has taught us anything, it’s that Missouri needs to enter a new era of education reform, one in which choice and competition are embraced.
