Do We Need Amendment 7 To Match Federal Highway Dollars?

Posted on by Joseph Miller

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).

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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.

Decline In Catholic School Enrollment: Is Sector Switching The Answer?

Posted on by Brittany Wagner

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.

catholic school enrollment

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.

Charter Schools – More Bang For The Buck!

Posted on by James V. Shuls

Doritos

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.

St. Louis Taxicab Commission Giveth With One Hand, Taketh With The Other

Posted on by Joseph Miller

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.

Proposed Amendment 7 Is Bad Policy

Posted on by Joseph Miller

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.

 

Show Me Better (Part 2): Certificate Of Need And Access To Care

Posted on by Christien West

One of the benefits of free markets is their ability to match buyers with sellers. Potential customers assess the supply of goods and services, the parties agree to the prices, and, generally speaking, purchases are efficient – delivering comparable value to both parties.

Unfortunately, Missouri’s certificate of need (CON) program may be erecting barriers to the market functioning efficiently when matching care providers and care consumers. A recent working paper by the National Bureau of Economic Research examined how hospital entry deregulation in Pennsylvania affected the market for cardiac revascularization. Because Pennsylvania eliminated its CON program in 1996, economists were able to compare clinical outcomes before and after the program’s repeal — the ideal conditions by which to conduct an experiment. The researchers found that “free-entry improves the match between underlying medical risk and treatment intensity” and “improved access to care.”

Another study conducted in the same state, on the same topic, found that the post-deregulatory market did a better job at matching the appropriate procedure to the appropriate risk level. After deregulation, better doctors also saw an influx in demand for their services.

Removing the CON program in Pennsylvania empowered patients to attain better care from better doctors. Certainly, a market uninhibited by cumbersome regulations does a better job at matching the right patient to the right procedure, performed by a better doctor, than a nine-member regulatory board. Missouri could follow Pennsylvania’s lead in doing away with the micromanagement and creating a system conducive to competition and innovation.

This Illustration Of Missouri Pension Enhancements Says It All

Posted on by James V. Shuls

Costrell_2014_Figure_2

Today, the Show-Me Institute released a new case study by Robert Costrell, professor of economics and education policy at the University of Arkansas. His paper, “Teacher Pension Enhancement In Missouri: 1975 to the Present,” illustrates how state lawmakers have consistently enhanced retirement benefits for teachers. These enhancements have helped create the system we have today, which has an incredible spike in benefits around a teacher’s 25th year and many other flaws.

For more information about pensions, I encourage you to check out our “Missouri Government Pension Fast Facts.”

 

 

 

 

 

 

 

 

A Transportation Sales Tax Is Bad Policy For Missouri

Posted on by Joseph Miller

As first appearing in the Southeast Missourian:

In the 1929 Rose Bowl, the speedy Roy Riegel of the University of California football team achieved immortality in the annals of college sports when he picked up a fumble, bounced off a tackler, and raced 69 yards – in the wrong direction.

In picking up another loose football — namely, what to do about a sudden decline in revenues for transportation infrastructure — it now seems Missouri may be about to duplicate “Wrong Way” Riegel’s feat. In hoping to correct a severe budgetary problem at the Missouri Department of Transportation (MoDOT) through a statewide 10-year, 0.75 percent sales tax, Missouri is pointed in the wrong direction from a policy viewpoint — one that can only result in inefficiency and waste and undermine the department’s ability to maintain and improve the road system.

How bad is MoDOT’s funding situation? Just a couple of years ago, MoDOT had $1.3 billion annually to spend on road and bridge improvements. By 2017, that amount could fall to $325 million – or just a quarter of what it was a few years ago, when MoDOT had more than $250 million in federal stimulus money. The expiration of stimulus spending is just one of the problems. Historically, the bulk of the department’s 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. But instead of tapping this traditional funding source to plug the spending gap, the Missouri Legislature proposed implementing a statewide sales tax. That tax could raise $534 million a year or $5.4 billion over the course of 10 years. That might be a good deal more than the amount needed to keep Missouri’s infrastructure from “crumbling.”

Anticipating the funding bonanza, local governments around the state have put forward wish lists that would tap into sales tax money. Rather than confining themselves to critical transportation needs, cities and counties put forward lists filled with expensive wants. For example, in Southeast Missouri, municipalities plan to spend money lengthening runways at the Poplar Bluff and West Plains airports. These small general aviation airports generally mostly serve recreational fliers, and local governments and federal and state grants heavily subsidize them. They are in no need of additional sales tax money. Other requests are simply bizarre, such as the pedestrian bridge across a creek in the tiny rural community of Williamsville. Someone should explain why such a bridge is necessary when there are few homes and no sidewalks on either side of the creek in question. Certainly the shoulder state road, which sees only 700 cars a day, is an easy enough route for the occasional pedestrian seeking to traverse the creek.

While some sales tax money will be wasted on popular, if not useful, pet projects, most money will go to fixing MoDOT’s highway funding crisis. And a 0.75 percent sales tax is not an economically sound way to fund roads and bridges. Paying for highways based on how much people shop, and not how much they drive, creates a free-rider problem. It promotes congestion, road degradation, and sprawl. It also is fundamentally unfair to force occasional drivers to pay as much or more for new roads as interstate trucking companies.

There is a better solution: Raise the gas tax and/or implement tolls on major highways. These user-generated fees greatly reduce the free-rider problem inherent in a transportation sales tax. Adjusting the gas tax for inflation would increase road funding in Missouri while simultaneously reducing MoDOT’s long-term costs. Tolling major highways and bridges, like I-70, would enable major improvements financed through public-private partnerships. By charging drivers for the roads they use, tolls and gas taxes are a fair and economically sound solution to MoDOT’s funding problems.

If the Missouri Legislature and voters approve a statewide 0.75 percent sales tax, it will only be a temporary fix. When the tax expires, Missouri will face an even worse problem than it does today — after 10 years of running in the wrong direction.

Joseph Miller is a policy researcher at the Show-Me Institute, which promotes market solutions for Missouri public policy.

 

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