Show-Me Institute Supports Strong Pensions For All Teachers

Posted on by James V. Shuls

The Springfield News-Leader ran an incorrect version of this op-ed on December 13, 2013. Here is James Shuls’ original version:

When my wife and I entered college and both majored in education, the furthest thing from our minds was our pensions. When we accepted teaching positions, she in the Spokane School District and I in the Republic School District, we did not care about pensions. When I entered graduate school and we moved out of state, I lost half of my pension contributions; we started to care.

As public school teachers in southwest Missouri, we were part of the Public School Retirement System (PSRS). Currently, teachers in PSRS contribute 14.5 percent of their salary to the defined benefit pension system. The school district matches that amount. The funds are not very portable. If you leave before vesting at five years, you lose your employer contributions. If you leave prior to retirement age, you lose much of your pension wealth.

This is a problem in Missouri because Kansas City and Saint Louis are on completely different pension systems. As the St. Louis Post-Dispatch reported, “Switching between these retirement systems can be costly for teachers.” For instance, if a teacher works for 15 years in a PSRS district and then 15 years in the St. Louis Public School District, she would have about half as much pension wealth as if she stays in one system for the entire 30 years.

Jonathan Shorman’s recent piece in the Springfield News-Leader reported that the Show-Me Institute requested funds to conduct research on these pension systems, “but has already determined the conclusions it plans to reach.” But that is not the case.

Research shows that there are problems with having three separate pension systems. Mobile teachers lose pension wealth and this hurts teacher recruitment in both Saint Louis and Kansas City. That fact has been well-documented in newspaper accounts and in the academic literature.

Everyone can agree that Missouri teachers should have a secure retirement. But a secure retirement can be achieved while allowing individuals to move without being penalized and to leave the profession without losing half of their contributions.

What we do not know, and hope to find out, is what type of compensation arrangements would help schools improve teacher recruitment efforts and would be appealing to teachers. Fewer than 20 percent of teachers in the two cities will make it to full retirement. This means the current system will penalize the majority of those teachers. Would these teachers rather have higher salaries now and less contributed to their pensions? Would they prefer portability over larger payouts?

We will continue to explore these questions and will continue to seek funding for our research. Those who disagree with us may think there is something nefarious about this, but perhaps they have determined their conclusions about us before fully examining our ideas.

Teacher pensions are worth caring about and they deserve an honest discussion about what is best for all teachers, even the mobile ones.

James V. Shuls, Ph.D., earned his bachelor’s and master’s degrees in elementary education and taught for four years in the Republic School District. Currently, he is an education policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy. His wife is currently vested in PSRS.

Show-Me Data: Visualizing Missouri’s Low Gas and Tobacco Taxes

Posted on by Michael Rathbone

Michael Rathbone looks at using Show-Me Data to explore the lower excise taxes in Missouri on gasoline, alcohol and tobacco. These lower taxes attract customers from Missouri’s eight neighboring states. This shifting of purchases across state lines means higher tax revenues for the state of Missouri. Now, investigate the tax policies that interest you the most at Show-Me Data.

Using Questionable Data To Back City Planning

Posted on by Joseph Miller

A recent report from the Pew Charitable Trust called for increased affordable housing in cities across America. As the Atlantic reports, the authors suggested:

Solutions like requiring developers to include affordable housing units in new projects and developing metropolitan-wide transportation are politically unpopular. But they are a necessary part of any effort to restore economic mobility and the American Dream.

While everyone supports economic mobility and the American Dream, there is not adequate evidence to back the authors’ call for more regulation and transportation subsidies.

According to the report, “Mobility and the Metropolis: How Communities Factor Into Economic Mobility,” income segregation in a city leads to low economic mobility. This is important for Missouri cities such as Saint Louis, where income segregation is high and income mobility is low. The authors of the study would have Saint Louis expand transit and entice developers to build mixed-income housing. However, the track record of Saint Louis-area transit-oriented development has been less than ideal, as exemplified by a subsidized apartment complex near the Richmond Heights Metrolink station. A closer look at statistical models of the report calls their entire conclusion into question.

Without getting into too much detail, the problem with the report is that their model only finds an effect from income segregation when they don’t include other relevant explanatory factors. For instance, analyze New York City, which has among the highest income segregation (A) and lowest economic mobility (B) ratings. The report would have you believe that A contributes to/causes B, so improving A improves B. But what if (C), the dominance of financial services or legal professions, causes both A and B in New York City? Then fixing A will have no practical impact on B. In the complicated areas of income segregation, we must account for many possible factors like C.

However, the report promotes a simplified model that only shows a relationship between income segregation and economic mobility without including enough alternative variables. The report did not even mention that their model demographic variables did not show that income segregation was associated with economic immobility. Despite this shortcoming, both the report and media coverage have used the report to make irresponsibly expansive policy recommendations.

This over-hyping of statistical data can be all too common in the social sciences, so Missouri policymakers and citizens have to be vigilant. It is easy to twist data to justify government intervention if no one challenges the strength of the result.

Could Kansas City Benefit From Student Transfers?

Posted on by James V. Shuls

On Dec. 10, the Missouri Supreme Court once again upheld the law that allows students to transfer from failing schools. This is the third time the state’s Supreme Court has upheld the law. The court had previously decided the same in a case based out of Saint Louis. That decision led to the events of this fall, where nearly a quarter of students — 2,500 —transferred from the Normandy and Riverview Gardens School Districts. The most recent case was brought by several school districts in the Kansas City area and was holding up the transfer of students from Kansas City Public Schools. In many ways, the cases and the rulings were quite similar, but the impact of the law may be quite different in Kansas City.

As I have noted previously, Riverview Gardens is among the lowest-spending districts in the Saint Louis area and Normandy is about average.  Kansas City, on the other hand, spends considerably more than most of the other school districts in the area (see below). Kansas City spends nearly $13,000 per pupil. Save for the Center School District, this is more than $1,400 above what Grandview and other neighboring districts spend. The neighboring Independence School District spends $3,800 less. This means that when students leave the Kansas City School District, in most cases, it will generate a cost savings.

KC Area PPE

Let’s assume that a quarter of Kansas City’s 15,500 students apply to transfer. If those students are spread out evenly among the 11 other districts above, the district would have to pay about $39 million in tuition. This may seem like a lot, but the district is currently spending more than $50 million on that quarter of students. If the district could make appropriate budgetary cuts, it could actually come out ahead. More importantly, the students will come out ahead because they now have the option to attend higher-performing schools.

Who Is Alicia Stephens And Why Should Kansas City Care?

Posted on by Patrick Tuohey

Alicia Stephens is the executive director of the Platte County Economic Development Council (EDC), described on its website as “a nonprofit organization [founded] to promote economic development in Platte County, Missouri.” Stephens also is a member of the Kansas City Airport Terminal Advisory Group, appointed by Kansas City Mayor Sly James to advise the City Council about the Aviation Department’s desire to build a $1.2 billion new terminal.

Unfortunately, this places Stephens in a clear conflict of interest as her boss at the Platte County EDC is none other than Mark VanLoh, who is the director of the Aviation Department. In short, Stephens has been asked to serve on a voluntary group charged with passing judgment on her boss’ magnum opus. What’s worse, Stephen’s isn’t shy about her support for the new terminal and this seems to cloud her ability to perform her job on the advisory group.

During the Nov. 5 meeting, Stephens identified herself as one of the advisory group members who is urging a quick vote on the new terminal project. Starting at the 53:45-minute mark, Stephens asserts that because of her position on the Platte County EDC, she has “that kind of opportunity to visit with many of those stakeholders that others around this table may not.” It’s reasonable to expect that a person in her position should know what airport stakeholders are thinking, after all, the airport is in Platte County.

But it appears she does not. The week after Stephens urged a quick vote based on her ‘special knowledge’ of stakeholders, Southwest Airlines — the airport’s biggest stakeholder — announced that the new terminal proposal is too expensive, creates a disincentive to serve Kansas City International (MCI), and that Southwest felt it was not adequately represented in new terminal discussions. Exactly what is the value of having the “kind of opportunity to visit” with stakeholders if these strong views from the biggest stakeholder were missed?

Stephens may mean well in her service to the advisory group, but she is not as dialed in to the views of airport stakeholders as she presents. And how can her input be taken seriously when her very livelihood is dependent upon the man on whose plan she is being asked to pass judgment?

Missouri Should Say No to Boeing Subsidy

Posted on by Andrew B. Wilson

As originally appearing in The American Spectator on December 5, 2013:

It makes your head spin! Two months ago, Gov. Jay Nixon vetoed a bill that would have provided some tax relief for all Missourians. Today he is calling for a gigantic tax cut — amounting to an estimated $150 million a year or $1.5 billion over the course of a decade — for one company.

The governor is hoping that would be enough to entice the Boeing Company to locate its 777X commercial airplane assembly plant in north St. Louis County.

In vetoing House Bill 253 earlier this year, Nixon went around the state arguing that cutting state income taxes for individuals and corporations would harm education and mental health. Where is the same concern today in offering a lavish gift to a single, deep-pocketed company?

If Boeing is short of the cash needed to build the new airliner, you wouldn’t know it from its generosity in compensating its top executives. In 2012 Boeing CEO Jim McNerney received $21.1 million in compensation — or 469 times the median family income in Missouri. J. Michael Luttig, the top lawyer at Boeing and a former federal judge, had $9.6 million in compensation in 2012 — or 214 times the median family income in Missouri. No doubt the Boeing general counsel is highly skilled in minimizing taxes (Boeing reportedly paid no federal taxes from 2008 to 2010) and maximizing tax rebates and other forms of corporate welfare.

How much should a state (and Missouri is just one of about a dozen states waving fistfuls of cash in trying to get Boeing’s attention) be willing to pay a company like Boeing to open a plant and create jobs?

Nixon is urging Missouri lawmakers to adopt a special tax package that would pay Boeing up to $75,000 per job per year — based on annual subsidies of $150 million spread over a minimum requirement of 2,000 jobs. No doubt that will strike some observers as money well spent — given much higher subsidy costs in other areas, such as solar energy, where federal subsidies have exceeded $350,000 per job.

Nevertheless, there are good reasons for being strongly opposed to the Boeing package.

First, it is crony capitalism and a misuse of taxpayers’ money. It makes the same mistake that many cities and town have made in cutting deals for Walmart and other big-name retailers that are not available to smaller retailers in the same community. It unfairly and unwisely diverts scarce resources to businesses with the biggest and most powerful lobbying organizations.

Second, tax credits are not free money. Our state government is supposedly straining to meet its current commitments. Every dollar that is given away in tax credits is a dollar that the state government must replace with cuts in current programs, or — more likely — increased taxation.

And third, there is a better way to promote business and job growth. Instead of chasing after Boeing and other corporate behemoths with more hand-outs, Missouri lawmakers should do something truly innovative: They should lower taxes across the board for all Missourians. That way, growth can occur organically, and in ways that politicians and lawmakers cannot even begin to anticipate.

Andrew B. Wilson wrote this article in his position as a resident fellow and senior writer at the Show-Me Institute, a free-market think tank based in St. Louis.

The St. Louis Business Journal carried a version of this op-ed in the December 13, 2013, edition.

 

Southwest’s Decision To End Service Could Doom Branson Airport

Posted on by Joseph Miller

Southwest Airlines announced on Dec. 5 that it will halt service to Branson Airport next year. Branson Airport is the only privately built commercial service airport in the United States, and there were high hopes that it would serve as a model for private airport operations across the county. The Show-Me Institute has been interested in this project since the early days as an example of private sector possibilities for U.S. airports.

Unfortunately, the airport has had trouble from the start. Timing didn’t help, as the airport opened in 2009, just months after the onset of the largest post-war recession in American history. Falling demand for air service and “capacity discipline” from air carriers meant actual passengers at Branson fell far short of meeting both expectations and operating expenses. In 2011, Branson Airport LLC went into debt forbearance. On top of these financial woes, the airport’s runway has had structural problems that led the airport to sue the construction contractor.

Southwest’s decision in early 2013 to begin service to Branson Airport looked promising to help save the venture from financial demise. Passenger levels increased, but not enough to satisfy Southwest’s bottom line. So on Dec. 5, the airline announced it would end service to Branson as well as two other small airports.

While no one wants to see Branson Airport fail, the overall story is one that shows the benefit of using the market to build transportation infrastructure. Private developers saw an opportunity and took a risk. As it turned out, actual demand is falling short of projections. A private company sought to make a profit and now they, not local taxpayers, may pay the cost.

Education Establishment On Boeing Tax Subsidies: Crickets

Posted on by James V. Shuls

When the Missouri Legislature passed a bill (House Bill 253) that would have cut taxes for individuals and corporations for the first time in decades, opponents of the bill came out of the woodwork. Among the most vocal, and influential, critics was the education establishment.

Roger Kurtz, executive director of the Missouri Association of School Administrators (MASA), insisted that the tax cuts would take our state over the fiscal cliff. His organization sent out a document that warned each school district of the impending funding cuts that would ensue if the bill passed.

Commenting on the tax cuts, Bruce Moe, executive director of the Missouri State Teachers Association (MSTA), stated, “Now is not the time to turn our backs on our teachers and their students.”

The Missouri School Boards’ Association (MSBA) actively lobbied against last session’s tax cut bill. In recent months, they have continued warning their members about the evil tax cuts.

Not to be outdone, the Missouri National Education Association (MNEA) placed television ads against the tax cut bill:  “It’s hard to believe. Corporate special interests got an $800 million tax break, paid for by cuts to local schools.”

With the vocal opposition of the MSBA, MASA, MSTA, and MNEA to broad tax cuts and their insistence that Missouri shouldn’t cave to “corporate special interests,” we should have heard a lot from these groups in the past few weeks. After all, the legislature reconvened in Jefferson City to contemplate $150 million annually in tax subsidies to “corporate special interests.”

What did we hear from the alphabet soup of education groups?

crickets street sign

Public Transit: What Does Success Look Like?

Posted on by Joseph Miller

There often is talk of trying to improve the public transportation system in Kansas City and Saint Louis, usually with expensive rail and streetcar projects. Both cities are in the process of creating starter streetcar lines, with proposals to build more. There is pressure in Saint Louis to expand Metrolink and Kansas City to build light rail. Activists point to low percentages of transit usage in both metropolitan areas, claiming that Missouri cities can reduce congestion, spur growth, and help the environment by getting people out of their cars and onto trains or streetcars. Unfortunately, transportation agencies and transit activists forget to ask what success looks like and how much it costs to achieve that success.

In Saint Louis and Kansas City, less than 4 percent of the population uses public transportation regularly. While both cities have bus services, Saint Louis has only two light-rail lines and Kansas City has none. Both have streetcar systems in the works, but they have not been completed. This, if we believe those who push for trains and trolleys, is failure. To them, success is a city like Portland, Ore.

Portland, with a comparable metro population to Saint Louis and Kansas City, has a light-rail system, extensive streetcar service, buses, transit-oriented development, and bike share programs. Transit heaven. However, according to the U.S. census, only 10 percent of Portland residents use transit to get to work while 81 percent drive (71 percent drive alone). Despite the city’s much publicized streetcar investments, the major growth category for commuting in Portland is telecommuting, not transit. Providing 10 percent of the population with transit cost Portland almost $4 billion in capital expenses in the last 20 years, none of which has been recovered from commuter fares. That number does not include the cost of maintenance and regular operation. In fact, Portland invested $1.7 billion of capital in transit since 2000 to see total public transit commuters rise from 7 percent to 10 percent.

To sum it up, if Kansas City and Saint Louis invest billions in infrastructure, cordon off growth, and subsidize transit-oriented development (as Portland has), they might get 10 percent of people to commute on public transportation. This is progress if the only measure of success is getting people on transit regardless of cost. However, if the goal is to create economically efficient transportation options for Missouri, this approach is ineffective. Even if your goal is to get as many people on public transit as possible, there has to be a better way.

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