Empty and Broke

Posted on by Kacie Barnes (Galbraith)

In Missouri, we are no strangers to airports that are deep in debt. Lambert-St. Louis International Airport is still facing the consequences of its $1.1 billion expansion. Passenger traffic was declining when the airport expanded, and traffic is still declining.

MidAmerica Airport in St. Clair County, Ill., was built in the 1990s with high hopes that business would materialize. Have you ever flown out of MidAmerica? Me neither. The airport failed to ever gain a significant amount of passenger traffic. The government provided subsidies to airlines that did fly there, and many still quickly left the market. Fast forward to today: the airport continues to operate. This is when I wish I could tell you that there was a miraculous turnaround and MidAmerica found a way to become profitable. Oh, how I wish. The airport is still open because it has more than $100 million of debt to pay off. Where would MidAmerica find the money to pay?

The Manhattan Institute just published an article about the growing number of new or expanded airports that are underused or virtually empty. It gave me a sinking feeling in my stomach when I thought about the future of the Columbia Regional Airport. We have written about the airport’s expansion plans and Delta’s recent departure from the Columbia market. The Manhattan Institute article points out that “… airport expansions often increase ticket prices, driving businesses away. After airports have built new facilities, they pass the expense on to passengers in the form of pricier tickets.”

I do not know what the future has in store for Columbia Regional Airport. But MidAmerica’s failure shows us that “if you build it, they will come” is not necessarily true. I am not in a position to say whether Columbia is in need of expansion or improvements. But I take Delta’s departure from the market as a sign that they do not see Columbia as an area for growth in air travel. Columbia officials need to evaluate whether there are real opportunities for growth. If there are not, then a costly government-funded airport expansion is not a wise decision.

A Minimum Wage Hike . . . Good for Missouri?

Posted on by Michael Rathbone

Beginning Jan. 1, due to a ballot initiative approved in 2006, Missouri will see its minimum wage increase by 10 cents. There is a healthy debate as to whether this wage increase is a good thing for Missouri. Advocates for the wage hike argue that increasing the minimum wage will increase the buying power of low-income workers. Opponents of the minimum wage increase argue that increasing the minimum wage will hurt Missouri’s business competitiveness.

Who is right? According to research conducted for the Show-Me Institute, David Neumark, an economics professor and director of the Center for Economics and Public Policy at the University of California-Irvine, found that there is no evidence to suggest that increasing the minimum wage will help stimulate the economy. Nor is there a basis for concluding that minimum wages help reduce the proportion of families living at or near poverty. In fact, according to Neumark, “Minimum wages can have unintended harmful distributional effects — possibly increasing the number of poor or low-income families.”

A 10-cent increase in the minimum wage is not going to change things much one way or another. However, even if the minimum wage were to increase by $1 an hour, there are still better ways to help poor people. In Neumark’s paper, he suggests expanding the Earned Income Tax Credit (EITC) as one way to help poor families. Patrick Ishmael and I think eliminating the corporate income tax and the tax on small business income will enable Missouri businesses to further expand their businesses and create jobs.

Despite what a majority of Missouri voters thought at the time, the automatic increases to Missouri’s minimum wage are not good for the state. Markets should determine wages, not government. The state would be better served if, at the minimum, it would desist with the automatic wage increases.

Crossfit Creates Jobs

Posted on by Kacie Barnes (Galbraith)

This week is Global Entrepreneurship Week. It is a time to celebrate the innovators and job creators who, simply put, make our lives better. They bring ideas to life, they create jobs, and they persevere.

Greg Glassman is a true entrepreneur. He is the CEO and founder of Crossfit, a rapidly growing fitness program (of which I am a huge fan). This week I heard him speak at a conference about the development of his business.

If I could recite his whole speech for you I would, but here is my takeaway: Glassman uses freedom to grow the Crossfit movement. Standardization works for some businesses, such as McDonalds, but Glassman realized that Crossfit would touch more lives if he allowed affiliates to use his fitness program and run their businesses how they chose.

None of the Crossfit methods are protected, and affiliates only pay to use the Crossfit name. There are no requirements to use a certain brand of equipment, to operate specific hours, or to run the gyms in any specific way.

Because of this, Glassman has enabled thousands of Crossfit gyms to open in the past few years. Glassman gives all of his affiliates an equal opportunity to survive and thrive on their own. This is important. Entrepreneurs like Greg Glassman create jobs, not the government.

Missouri, please learn from Glassman’s success. Show-Me Institute analysts have written about the importance of treating businesses fairly and allowing them to grow or fail on their own. Business growth means more job creation, less unemployment, and happier Missourians. Entrepreneurial growth such as Glassman’s means all the above plus more individual and economic freedom for all. Isn’t this what all of us want?

What Missouri Could Learn From Its Deer Hunters

Posted on by Patrick Ishmael

Hunting season is in full swing, and for many Missourians it’s a family affair. As one hunter put it in the Kansas City Star on Sunday, “For me, it’s a lot more than just the hunting….I get to see people that I only see a couple times a year. Deer season is always a big deal for our family.” From learning how to safely handle rifles and bows to enjoying time with family outdoors, today thousands of young Missourians participate in an enduring — and growing — tradition of hunting in the state.

In fact, the Missouri Department of Conservation announced last week that hunters had eclipsed the mark set in 2011 for deer harvested during the annual youth hunting season — over 19,000 deer, and a more-than three-fold increase above the state’s first youth hunt, instituted in 2001. Growing awareness of the hunt has no doubt increased participation in it over the years, but permit fees imposed by the state could easily have tamped down the season’s growth, if the costs were fixed high enough. Fortunately, Missouri’s hunting permit costs are generally quite low — and that’s a fact the Department of Conservation readily promotes on its website.

Low permit cost is another reason Missouri is a great place to hunt. Missouri’s $17 Resident Firearms Any-Deer Permit is a bargain compared to the average of $46.63 for equivalent privileges in surrounding states. Missouri charges only $8.50 for a resident any-deer permit for kids under age 16. Resident youths pay just $3.50 for antlerless-deer permits.

Missouri has kept the state-imposed costs of joining the hunt relatively minimal, and it’s reasonable to believe that participation in the youth hunt has risen at least partially because the barriers to engaging in it are so low.

Shouldn’t the state apply this lesson to other areas of policy? The lower the fees and taxes, the more likely it is that you’ll get more of an activity — here, hunting, but the idea applies elsewhere, too. Imagine: What would happen to Missouri’s economy from the perspectives of growth and competitiveness if the state got rid of its taxes on corporations and pass-through income?

Kansas opened the season for economic innovations earlier this year by dumping its tax on pass-throughs and reducing its income tax, but there’s no telling which state in the region is going to take down the big, long-term economic prizes in this highly competitive tax environment. Suffice to say, Missouri should join that hunt, and very, very soon.

The State Needs To Stop Acting Like A Bank

Posted on by Michael Rathbone

During this time of year, no one wants to say, “Bah, Humbug!” However, I would be remiss if I did not mention that the state might run into a revenue shortfall (between $400 million and $600 million) next year.

That can be troublesome, but it also presents an opportunity for the state to re-examine some of its questionable spending decisions. In earlier commentary, I have listed some areas where the state should reconsider spending money.

However, for now, I will focus on the state’s support of the Missouri Agricultural and Small Business Development Authority.

The mission of the authority is to make “capital available to Missouri farmers, particularly independent producers; agribusiness; and small business at competitive interest rates on a scale to make a major impact.”

This raises a red flag for me. An entity that makes capital available to businesses at a “competitive” interest rate sounds an awful lot like a bank to me. In fact, a couple of the programs that the authority administers include: Missouri Agribusiness Revolving Loan Fund, Alternative Loan Program and Animal Waste Treatment Loan Program.

The total state funds loaned to the Animal Waste Treatment Loan Program alone is close to $500,000 ($485,333.56 for fiscal year 2011, specifically).

Is anybody uncomfortable that a part of state government is acting like a bank? Why can’t the recipients of these loans get private financing? If they are great deals, why are private banks and/or financial institutions not jumping at the chance to invest in these projects?

Farms already face lower property tax burdens compared to commercial businesses (farm property has an assessment ration of 12 percent compared to commercial at 32 percent and residential at 19 percent, and the soil quality grading system sets a very low appraised value already) so why do they need additional help with subsidized loans?

Also, how can a government and a private enterprise compete when it comes to financing? By issuing below market interest rates to different businesses, isn’t the state undercutting private financial institutions?

Even if a state department/agency/program loses money, it can acquire new financing by compulsion with increased taxes. A private organization does not have that same power to tax (although with TDDs and CIDs, we are getting there).

Thus, with the ability to achieve easier financing, what real incentive is there for the state to make wise spending decisions when it comes to these loans besides avoiding grief from dedicated bloggers such as me? Isn’t it time for the state to get out of the business of lending with your money and return to the basics?

Just some food for thought.

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

St. Joseph’s Development “Plan” Not Exactly Focused On Actual Development

Posted on by Patrick Ishmael

Let me pose a hypothetical to you. Let’s say you were in charge of revitalizing a languishing downtown area but you didn’t have the money to develop the properties yourself. Would you let property owners renovate their properties so that they could attract new tenants? Or would you block their renovations because you didn’t think the renovations were consistent with your “vision” of the new downtown?

Enter St. Joseph, Missouri.

Geneo DeSpain, owner of 616-620 Felix St., said he was denied an approval to modify and update his buildings’ existing facades so he could accommodate businesses that have expressed interest in the property. It’s the “red tape” and multitude of guidelines that makes it difficult for small businesses to grow Downtown, he said.

The St. Joseph Downtown Partnership, however, says while it encourages business development, those guidelines are put in place to keep businesses in line with the city’s vision of Downtown.

Like most acts of civic development these days, St. Joseph has a “plan.” In late 2001 the city instituted the “Downtown Precise Plan,” a document which is chock-full of contemporary urban development conventional wisdom — including the notion that the city should be in the business of trying to “guide future private sector actions.”

“It used to be that anything goes Downtown. Then we got to the point that we realized in order to make positive changes Downtown and to bring back these historic buildings, there needed to be these regulations in place,” [Rhabecca Boerkircher, executive director of the St. Joseph Downtown Partnership,] said.

Well, it looks like St. Joseph might just “guide” one of its current property owners right out of town. Says DeSpain, “My fight is done. I’m not going to get any more white hair trying to get these people to understand why I want to be Downtown… It’s not like there’s people in line waiting to get their buildings done Downtown.”

“Development.” Cities keep using that word, but I don’t think it means what they think it means.

A New Homegrown Option Downtown

Posted on by James V. Shuls

Soon, more than just homegrown produce will be available in the Soulard area. Next year, a homegrown charter school is slated to open downtown: Lafayette Preparatory Academy.

The school received final approval at the October Missouri Board of Education Meeting and school leaders are planning for the opening. The head of the school, Susan Marino, stopped by the Show-Me Institute to tell me a bit about this new school.

Marino has worked in the education field for many years and lives in downtown Saint Louis. She came into contact with a group of parents in her neighborhood who were concerned about the availability of quality educational options in their area. So they banded together, drafted Marino to lead the efforts, and started sowing the seeds for a new charter school.

The school will focus on the core academic areas and will have a lengthened school day. Marino notes that the school will “have at least 2 ½ hours dedicated to literacy . . . [and] an hour every day for science and an hour for math.”

Marino hesitates to define the school; rather, she wants the students’ needs to shape how the school operates.

“We are committed to being responsive to our students and allowing our teachers to really build around the needs of the students,” Marino said.

Read more about Lafayette Preparatory Academy on the Show-Me Institute’s website.

They Stole My Idea!

Posted on by James V. Shuls

Have you ever had a really great idea, then found out later that someone else is already doing what you thought of doing? I recently experienced that, but my response to seeing others stealing my idea was not displeasure, it was joy.

So what was my brilliant idea? To find out, check out one of the charter schools slated to open next year, Eagle College Prep.

I recently sat down with two of the school’s leaders and talked with them at length about the new school, which will be opening in the South Tower Grove neighborhood. You can read the full interview on the Show-Me Institute website.

Below are just a few of the highlights.

Teachers at the Eagle College Prep will utilize research-based instructional practices in the classroom and will “differentiate [instruction] using a blended learning model.” The Show-Me Institute has been a big proponent of harnessing the power of technology to improve instruction.

The school also will have an affordable (maybe free) after-school program, which the school’s management company, Educational Enterprises, will run. Matt Hoehner, Saint Louis regional executive director of Educational Enterprises, noted the after-school program will be faith-based: “We . . . recognize that many families want a faith-based option. Through our free public charter school and a separate, optional faith-based after-school program, we believe we can meet the need for a high-quality school and faith-based instruction.”

A school that utilizes technology to meet the unique needs of each child and partners with the faith-based community to offer optional after-school care . . . what a marvelous idea.

(Now, if I could just get someone to follow through with some of my other great ideas.)

Nixon: Missouri Will Not Implement Health Insurance Exchange By Federal Deadline

Posted on by Patrick Ishmael

In a victory of sorts, Missouri Gov. Jay Nixon said on Thursday that the state will not be able to implement an Affordable Care Act health insurance exchange this year. It is not that Nixon does not want the state making an exchange — just that it has run out of time.

Under the federal health care law, states face a Nov. 16 deadline to submit blueprints to the federal government if they want to run their own health insurance exchanges when the online shopping sites are due to open in 2014. If states don’t set up their own sites, the federal government will run one for them.

Nixon said he would prefer Missouri run its own insurance exchange. But that’s not possible, at least not at this point. Voters on Tuesday passed a ballot measure barring the governor from taking steps to establish a state-run insurance exchange without legislative approval. The Legislature has not granted its approval. And it’s not scheduled to be in session until January, meaning lawmakers could not meet the Nov. 16 deadline even if they wanted to do so.

It is a good thing voters explicitly blocked the governor from instituting the exchange, given the governor’s statements. As the news report notes, just days ago Missourians resoundingly passed Proposition E, which prohibited the creation of a health insurance exchange without voter or legislative approval. Given the governor’s position in favor of the state exchange and the timing of his announcement, it appears he may have considered acting unilaterally to implement the exchange if the avenue was still available.

Why is the state-run vs. federally-run exchange issue important? As I said when I wrote about Oklahoma’s challenge to the ACA:

Many employers under the ACA can be fined/taxed if they do not provide health insurance to individuals who qualify for the federal government’s subsidies. However, if a state does not build its own exchange, then no employee would qualify for the subsidy, and therefore employers in the state would not be subject to the tax because none of their employees would meet the criteria set out in the law.

No state exchange? Then the law’s text suggests that there would be no employer penalty.

More to the point, a state-created exchange does not mean an exchange effectively run by the state; such exchanges will still have to comply with the rules the federal government imposes, as Christine Herrera and I explained earlier this year in an editorial in the Southeast Missourian.

The theory of a state-run exchange, designed to navigate and subsidize the purchase of health insurance, is simply that — a theory. Rules that officials in Washington issued to implement the law say that every detail of Missouri’s exchange must have the approval of federal bureaucrats.

And because federal grants and subsidies will flow through state-based exchanges, Washington will always be able to control Missouri’s exchange through ongoing regulation. This “my house, my rules” scenario underscores the new parent-child dynamic occurring between Washington, D.C., and the states, and the Missouri Senate was right to reject the governor’s ability to implement an exchange.

I support returning greater power to the states, which are often closer to the governed and better engaged with their problems. Put simply, a state-based exchange under the ACA is, for all intents and purposes, a federal exchange, effectively controlled by the federal government and designed to implement federal policy. The governor is right to prefer more localized solutions to big federal government solutions. Unfortunately, a state-based exchange does not further that objective.

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