New CATO Report: Cracking The Books

Posted on by James V. Shuls

CATO_Cracking_The_Books

The CATO Institute recently released a report, “Cracking the Books: How Well Do State Education Departments Report Public School Spending.” Researchers at CATO scoured the websites of each state’s department of education. They did not judge how much money each state spent, rather how well each state reported those expenditures. Missouri’s Department of Elementary and Secondary Education (DESE) did not fare well in the report, receiving an “F-” and a ranking of 42nd.

Among other things, DESE was marked down because the website is “somewhat difficult for the layperson to navigate.” Heck, I would say it is somewhat difficult for someone immersed in education policy to navigate. As the report notes, “There is a link to ‘School Finance’ under the ‘Financial & Admin. Services’ dropdown box on the main menu, but the expenditure data is not located there, nor at the ‘Financial Reports’ or ‘Data & Reports’ links on the menu bar.” That is certainly confusing.

The CATO report brings to light several other areas that could be improved:

  • Allow per-pupil expenditures over time to be adjusted for inflation.

  • Provide data on capital expenditures.

  • Provide data on total salary expenditures.

  • Provide data on pension contributions.

  • Provide data on employee benefits.

I think the CATO suggestions are reasonable. If implemented, they would be of tremendous help to Missourians who want to track where our tax dollars are going. Government agencies don’t always respond well to criticism. Nevertheless, I hope the folks at DESE will take this criticism seriously and look for ways to improve their presentation of data.

Why Support A Broken Pension System?

Posted on by James V. Shuls

A couple months ago, I wrote a piece that detailed a specific problem with the Public School Retirement System of Missouri (PSRS) — spiking of the final average salary. In my op-ed, I described how Terry Adams would gain an extra $15,000 a year for the rest of his life by simply working one extra year. Adams moved from his position as superintendent in Wentzville to the interim superintendent gig in the Rockwood School District with a significant pay raise.

My op-ed has received some pushback from individuals, typically PSRS retirees, who believe it was an unwarranted attack on the “good work” of PSRS. Most recently, a retired teacher wrote in Mid Rivers Newsmagazine that “we should all be working to support the [PSRS retirement] plan.”

The example I provided illustrates how pension systems can be gamed. The response in Mid Rivers Newsmagazine correctly mentions that measures have been put in place to prevent salary spiking. Within the three years used to calculate a PSRS member’s final average salary, the retirement plan places a 10 percent “cap or limits on increases in salary during the period that is used to calculate your Final Average Salary.”

This cap is like putting a Band-Aid on a mortal wound. The cap does little to help the situation for one obvious reason — it does not apply when an individual changes jobs. For instance, when Adams switched from one district to another, the cap did not apply. Similarly, when a teacher switches to a principal job within a district, the cap will not apply. The cap only applies for an individual staying in the same job. Moreover, it does not prevent spikes occurring in the year before the three final years. It simply does not fix the fundamental problem that Missouri’s defined benefit pension plans are not directly tied to an employee’s contributions.

I’m sorry, but it makes little sense to support a plan that is fundamentally broken and needs reform. Missourians should not simply ignore these problems and “support the plan.” Missourians should improve the plan.

Texas And Taxes: Time To Set The Record Straight

Posted on by Michael Rathbone

Texas Gov. Rick Perry released an ad (paid for by TexasOne, a public-private partnership aimed at economic development outreach) in Missouri touting Texas’ business-friendly climate and criticizing Missouri Gov. Jay Nixon for vetoing a tax cut. In some quarters, this has not been well received. Missouri Secretary of State Jason Kander criticized Perry for trying to entice Missouri companies to move to Texas. However, if all Missouri can do to respond to Texas is write strongly worded letters, then we’ve already lost the economic development battle. It is time for real reform, and mirroring Texas isn’t a bad way to go about it.

It’s true that Texas faced a serious budget shortfall after a recession hit. So did many states. However, Texas has managed to climb out of the hole it was in. Now, according to the Texas comptroller, Texas is looking at an $8.8 billion surplus. Even after making up for much of the cuts imposed by earlier budgets, Texas is still looking at a surplus. Texas also has significant assets in its “Rainy Day” fund. According to the Tax Foundation, Texas’ “Rainy Day” fund is 18.58 percent of general spending compared to 3.28 percent for Missouri.

Nixon and liberal advocacy groups such as the Missouri Budget Project worry about effects an income tax cut will have on education. Yet Texas, without an income tax, performs just as well as Missouri on a variety of education metrics.

Income taxes are among the most economically damaging taxes a state can impose. The Show-Me Institute has published research on how Missouri could eliminate the state income tax, or for the less bold, eliminate just the corporate income tax. Maybe instead of letters, Missouri can try real reform.

Time For A Game Of ‘UNION… OR… TEA PARTY!’

Posted on by Patrick Ishmael

The rules of the game are pretty simple. I give you a statement, and you tell me whether it came from a union or the Tea Party.

Here we go.

Question 1: Who said the following – a union, or the Tea Party?

[F]or two years we have sought from the Administration and Congress interpretations to the ACA [Affordable Care Act] that merely allows us keep the health plans we currently have: nothing more, nothing less. No special treatment. …

Question 2: Union … or … Tea Party?

[T]he unintended consequences of the ACA will lead to the destruction of the 40 hour work week, higher taxes …

Question 3: Union … or … Tea Party?

[T]he Congress and the Administration have demonstrated they have the authority and power to make dozens of other corrections to the ACA, including taking care of big business and well-paid Congressional staff members…

And Question 4: Is this a union … or the Tea Party?

[T]hat [this group urges] Congress and President Obama to undertake immediate changes to the implementation and regulation of the ACA.

If you answered “Tea Party” to all of these, you would be … completely wrong. The statements come from a resolution that the Nevada chapter of the AFL-CIO passed last week “Urging the President and Congress to Uphold Their Promise for Unions to Keep their Current Healthcare Plans Under the Affordable Care Act (ACA).”

As it turns out, even if union members like their plans, they may not get to keep them, thanks to provisions in the ACA that incentivize employers to dump some workers into the exchanges rather than provide them health benefits. Indeed, union health care benefits are a big reason many members join a union in the first place; without the robust health benefits that the union negotiates, union membership would become considerably less valuable and paying union dues would become less attractive to union members. Less union power means fewer union members means less union power … you get the picture. Let’s just say unions should have read the bill more closely before they supported it.

But at least it seems like we’re all in agreement on one thing: it’s time to reopen the law. The question now is, when will the obstructionism in Washington, D.C., end so real health care reform can begin? How long will Americans, union and non-union, have to stomach the ACA before the ACA’s architects concede they made a lot of mistakes and that the law needs to be overhauled? Stay tuned.

Tear Down The Wall Between Public Dollars And Private Schools

Posted on by James V. Shuls

As first appearing in the Education News on August 14, 2013:

Growing up in one of the most dangerous neighborhoods of Saint Louis a decade ago, Korey Stewart-Glaze knew where he went to school mattered. Korey’s neighborhood high school is a dropout factory; fewer than half of the students graduate on time. If he had attended that school, he says “I might have fallen in with the wrong crowd and be in jail or dead today.” That was the fate for many of his friends, but that would not be his fate. At a key moment in his life, Korey’s path was altered. His story can teach us a valuable lesson about what it means to provide a great public education to all students.

Rather than continue on in the traditional public schools, Korey’s family scraped together enough money to send him to a school that would put him on a different path, De La Salle Middle School at St. Matthew’s. He then earned a scholarship to a well-regarded private high school and went on to graduate from Westminster College in Fulton, Mo., in 2012.

Korey’s decision to attend De La Salle proved to be very beneficial for him — and for the public at large. We all benefit every time our schools — public or private — succeed in turning children into motivated and productive citizens. Yet, for some reason, we have constructed a Great Wall that absolutely prohibits public funds from going to private schools to support the education of children whose parents cannot afford to pay tuition. In essence, we have decided that only government-run schools are capable of providing public education. This just is not so. No such wall exists in higher education, where students can use publicly subsidized loans to attend private schools.

Noted economist Milton Friedman regularly argued that government funding of education does not necessitate government provision of education. Echoing this sentiment, former Arizona Superintendent of Public Instruction Lisa Graham-Keegan wrote in 2000, “If we want to save the public schools, we mustn’t confuse the ideal of public education — that every child has the right to a good K-12 education at public expense — with any particular system, including the one we’ve got.” The system “we’ve got” is not public education, it is just that — a system. Public education should not mean assigning students to a specific type of school, regardless of quality, but rather that we provide access to a quality education, regardless of the type of school delivering that education.

Our traditional public schools are filled with thousands of Koreys. Some are trapped in failing schools. Some are in good schools that simply are not meeting their needs. Our narrow definition of public education prevents more students like Korey from receiving the education they deserve.

It is time to tear down the long-standing wall between public dollars and private schools so that more students like Korey can benefit from the increased educational options it would bring. Private schools should be enlisted into the cause of providing publicly financed education. Many private schools could do that very well.

James V. Shuls, Ph.D., is the education policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.

Meet Me In Saint Louie, Louie! Meet Me At CPAC (on Sept. 28)

Posted on by Patrick Ishmael

I am happy to announce that on Sept. 28, I will be part of a panel discussion at CPAC St. Louis titled “How Americans Are Changing ZIP Codes for Good Tax Codes.” Among the many topics we’ll discuss: my assertion that Missouri is at the heart of a Midwestern growth corridor, a fact that offers both an opportunity and a threat to the Show-Me State’s economic future. Joining me on the panel are:

  • Ted Dabrowski, vice president of Policy, Illinois Policy Institute

  • Jonathan Williams, director of the Tax and Fiscal Policy Task Force, American Legislative Exchange Council

  • The Honorable Larry Parman, Oklahoma Secretary of State

  • Travis Brown, author of How Money Walks, who will also serve as our moderator

Our talk is tentatively scheduled to begin at 11:45 a.m., following speeches from former U.S. Sen. Rick Santorum and current Texas Gov. Rick Perry. Suffice to say, if you want to get a good seat . . . you may want to arrive early. And if the formal schedule changes between now and then, I will update this post with the new details.

It should be a fantastic event. I would be utterly delighted to meet our readers, so if you have time that day, I’d encourage you to register and attend our event. You can sign up for the conference here.

About Those Aviation Department Funds…

Posted on by Patrick Tuohey

We’re told time and again that aviation funds cannot be used for a city’s own financial needs. Federal law is clear on this. The Show-Me Institute has mentioned this, as have the leaders of the Kansas City mayor’s advisory group on Kansas City International Airport (MCI).

As with many of the arguments in favor of building a new $1.2 billion terminal, it’s true . . . sort of.

In July and August of 2010, the Kansas City Aviation Department gave $10.2 million to the city of Kansas City in the form of an interdepartmental loan with an interest rate of 3 percent. The initial Memorandum of Understanding (MOU) indicated the loan was “for the use by Finance in connection with the historical liabilities associated with various TIF [Tax Increment Financing] projects” and would be paid back by July 1, 2013. Not surprisingly, the city later renegotiated and the debt won’t be fully paid until 2017, at the earliest.

The Federal Aviation Administration (FAA) says that such loans are legal as long as they are at the prevailing rate of interest (see page 7,720 of the Federal Register). The 3 percent the city is paying is within the prevailing rate of interest.

What is troubling is that the loan from the Aviation Department was going to cover TIF payments the city couldn’t otherwise afford to make. In other words, Kansas City is borrowing money from the airport, with interest, to cover losses it incurred in tax abatements to things such as the Power & Light District. (Gamblers Anonymous includes this activity as one of many signs of addiction.)

A $1.2 billion new terminal will upset an already out-of-balance apple cart. Consider the following:

Not only is building a new terminal a bad idea on its merits, but it puts at risk a source of money the city is using to cover losses on all its other bad ideas. Worse yet, a new terminal may turn the Aviation Department from a source of funds for the city to another drain on resources.

Support Us

The work of the Show-Me Institute would not be possible without the generous support of people who are inspired by the vision of liberty and free enterprise. We hope you will join our efforts and become a Show-Me Institute sponsor.

Donate
Man on Horse Charging