A Smaller And Smaller Piece Of The (Tax) Pie

Posted on by Michael Rathbone

The state coffers are filling up faster than anticipated. At an education forum on June 7, Linda Luebbering, the state budget director, said that state officials expect revenue growth to continue, but revenue will not reach the point where it was before the recession. At that time, net general revenues topped $8 billion.

“We really need above-typical growth to get where we used to be,” Luebbering said.

Unfortunately, Missouri’s growth is far below what is typical. Last week, my colleague, Show-Me Institute Policy Analyst Patrick Ishmael, blogged about how Missouri is lagging behind other states in terms of economic growth. According to the U.S. Commerce Department, Missouri ranked 43rd in economic growth last year. In fact, Missouri grew by just .04 percent. Forget about getting above-typical growth; that is barely any growth.

Missouri can do better. For instance, Missouri can eliminate its corporate income tax to make the state more attractive for business. As taxes go, taxes on corporate income are among the most economically harmful. The corporate income tax only makes up 4 percent of general revenues, yet its removal would have a positive impact on the economy. Eliminating economic development tax credits, which should be done anyway, can offset all of that lost tax money for the state. This change would, in the short term,  be revenue-neutral at worst, but its long-term benefits for our state would be tremendous.

If Missouri wants to get going again, it cannot keep doing what it has been doing. Eliminating the corporate income tax would be a positive step toward increased economic growth and as a side effect, revenues will grow as well.

We Will Take It!

Posted on by James V. Shuls

Over the years, I have competed in a number of team sports, particularly soccer. There were times when my team barely squeaked out a win; though it may not have been pretty, the response often was “We’ll take it!” For school choice supporters, Missouri Senate Bill 576 may be one of those moments. If the governor signs the bill into law, charter schools could open in more areas of the state; in turn, charter schools and their authorizers would face increased accountability. Though the bill falls short of ensuring high-quality educational options for all Missouri students, it is a small victory for school choice.

Currently, charter schools operate in Saint Louis and Kansas City. SB 576 would allow charters to open in unaccredited districts and districts that have been provisionally accredited for three years. School districts would also have the power to authorize charter schools, however, in this case, the charter school would still be under the jurisdiction of the local school district. Currently, Riverview Gardens is the only unaccredited school district in which charter schools do not exist. There are nine provisionally accredited districts. Combined, these 10 districts have fewer than 17,000 students. This means less than 2 percent of Missouri school children currently attending a traditional public school might benefit in the coming year from expanded school choice that is outside of district control. Of course, this number could grow if more districts fall into the provisionally accredited category in coming years.

Assuming charter schools open in each of these districts, charter schools would be available for less than 7 percent of students in traditional public schools statewide.

This expansion comes at a cost to charter autonomy. For the bill to pass, a compromise was worked out: Expansion of charter schools for increased accountability of charters and their authorizers. For example, charter authorizers must develop policies for review of charter schools, including a method of rigorous evaluation. Additionally, they must lay out how they will intervene if a charter school fails to meet the standards the authorizer has set. While it is important for failing schools to close, and these regulations seem reasonable, they will lead to increased paperwork. Indeed, some authorizers may need to add to their management staff in order to comply. The increased regulatory burden on authorizers may limit the expansion of new charter schools and may inhibit other colleges and universities from joining the ranks of authorizers.

Though we applaud this expansion of charter schools, we believe students throughout Missouri would benefit from a greater proliferation of school choice. According to data from the Missouri Department of Elementary and Secondary Education, 195 of the 530-plus districts had fewer than 50 percent of their students score proficient or advanced on the state’s mathematics exam for grades three through eight in 2011. In communication arts, the number was 246. In these districts, as well as higher-performing districts, there are many parents who are unsatisfied.

SB 576 expands school choice to a limited number of students, while possibly decreasing the likelihood of additional charters being approved. Though this is a narrow win, it is a win and many students will benefit from this piece of legislation. We will take it.

James V. Shuls is an education policy consultant for the Show-Me Institute, which promotes market solutions for Missouri public policy, and a Doctoral Academy Fellow at the University of Arkansas.

Missouri Employees To Receive Same Raise, Regardless Of Performance

Posted on by Audrey Spalding

The St. Louis Post-Dispatch reports that state employees earning less than $70,000 per year will receive a 2 percent raise, starting in July. About 54,500 state employees will get the increase, and the total impact on the state budget is estimated at $45.5 million.

The narrative being used to sell this raise is that most Missouri employees have not received a raise for years. After reviewing state employee data posted on the Missouri Accountability Portal, I agree. It is true that some employees really have had exactly the same salary for years.

But awarding tens of thousands of employees the same pay increase, without considering performance or whether those employees have been some of the lucky few to receive raises, is irresponsible. Though some have not had a raise, many employees have received raises in recent years. Many of these wage increases (some associated with promotions) are larger than the touted 2 percent raise.

A better move would have been for Missouri legislators to award each state department a lump sum to use on employee pay as needed. If the department is having trouble motivating or retaining its employees, outstanding employees could be given more substantial raises. If the department desperately needs another employee, the money could be used to hire someone.

Furthermore, it can be quite difficult to fire public employees. It is likely that some of the employees among the 54,500 should not be awarded a raise, even a small one of 2 percent.

Employees should be rewarded for performance, instead of being awarded a small pay boost because legislators feel sympathetic.

Kansas City Water Privatization Still a Hot Topic

Posted on by David Stokes

The Kansas City Star’s Yael Abouhalkah has a solid piece today on the state of water and sewer privatization in Kansas City. Or, rather, the hopeful event of water and sewer privatization in Kansas City. Saint Louis County has almost a million people who are served by private water utilities. If it works here — and it does — it can work in Kansas City.

We have written plenty on Kansas City water privatization before. Like Saint Louis sewer customers, Kansas City residents are going to face fairly large water and sewer bill increases whether privatization happens or not. They can pay a private company to fix the problems and manage the system, or they can pay the government more to fix the problems and manage the system — the same government whose management put them in this situation in the first place. (To be fair, not all of the cost issues can be blamed on Kansas City management. Many of the sewer issues are substantially the fault of over-regulation by the EPA.)

Privatizing the entire system would have many benefits for Kansas City. It would get a large amount of money from the sale which it could use in a variety of ways. It would expand the tax base by putting the water company assets on the tax rolls. The city would capitalize on all the engineering expertise right there in Kansas City. It would take the choices on rates out of the hands of politicians, who often under-price municipal utilities for political gains. There are plenty of other benefits as well. I hope Kansas City continues to seriously consider this idea.

It Is Time To Increase Public School Transparency

Posted on by Audrey Spalding

In the past three years, the Missouri State Auditor has chastised public school districts for irresponsible spending, excessive pay for administrators, awarding a no-bid contract to a school board member, failing to collect on a real estate deal, and awarding a hefty car allowance to a district superintendent.

Given that state and local property taxpayers spend billions on Missouri’s public education system every year, taking a closer look at how school districts spend money is certainly warranted.

One way to do this could be to set up a transparency site like the Missouri Accountability Portal (MAP). MAP is a site where anyone can look at (or download) recent data for state tax credit issuances, state employee pay, and state spending. The general public can use it to learn how state money is being spent, reporters can use the data to find material for an article, and policy analysts can even use it to examine the amount of tax credits issued under a certain program over time. In fact, one school board member is trying to set up a school district transparency site that would follow this model.

Posting detailed school district expenditure data, even if only for Missouri’s largest districts, could help ensure that the general public has better information to monitor how public education dollars are spent. This provides more detailed information about a district’s spending than the school-level and district-level data that the Missouri Department of Elementary and Secondary Education posts.

In 2011, the state auditor suggested that the Kansas City Metropolitan School District reconsider its $800 per month car allowance for its superintendent. But the Kansas City district is not alone.

In my study of Missouri school superintendent compensation, I found that 26.1 percent of districts surveyed provided superintendents with a car allowance, a car, or an annuity. Indeed, 17 school superintendents in Missouri received a car allowance of more than $500 per month, with a few school districts providing more than $800 each month to superintendents for their vehicles. Years later, there are likely other school districts paying $800 or more for superintendent car allowances.

With a transparency portal, reporters or the general public could find information like that easily, and before an audit is warranted. Transparency might discourage board members and administrators from awarding outsize benefits or spending frivolously.

With better technology, making it easier every day to share information online, school district transparency portals are something to consider.

Good News: Missouri Behind Only 42 Other States in Economic Growth Last Year

Posted on by Patrick Ishmael

This week, the U.S. Commerce Department reported that Missouri’s economic growth placed the state 43rd in the country last year. It is a variation on that eternal question: Is Missouri’s development glass partly full, or mostly empty?

Empty. Definitely empty.

The Commerce Department says Missouri’s economy grew much more slowly last year than the rest of the nation. Department figures rank Missouri 43rd in economic growth last year with an economy that grew by less than one percent. The National average was 1.5 percent. The department studies show almost every sector of the state’s economy grew more slowly than the average or shrank.

New reports today paint a clearer picture of how “less than 1 percent” Missouri’s growth really was .04 percent. Not .4 percent, but .04 percent. For all intents and purposes, that is zero. Throw in Missouri Journal’s report that the state’s new jobless claims increased to the third highest level in the country last month and it is clear Missouri is headed in the wrong direction, at about 80 mph.

Last month, I talked at length about how poorly Missouri has done economically over the last five years, and according to Rich States, Poor States, the state has been stuck around 40th in economic performance for basically the entirety of that period. Not much has changed legislatively in those intervening years to change Missouri’s fate – tax credits are still running amok, income taxes still dominate as sources of revenue, and local “economic development” plans are still off kilter – so the Commerce Department’s findings are not surprising (which is frustrating on its own terms.)

Missouri can do better, and the Show-Me Institute has offered a number of proposals in the last year that would make the state more competitive. Extinguish failing economic development tax credit programs. Eliminate the growth-dampening corporate income tax with the savings gained through tax credit elimination. Fix Tax Increment Financing (TIF). Cut wasteful spending.

It is time for a change.

Sorry, Film Directors: Taxpayers Should Not Have To Pay For Your Luxury Hotel Rooms

Posted on by Audrey Spalding

Film director Jennifer Lynch told KSDK Channel 5 that Saint Louis is the perfect place to shoot her film, “A Fall From Grace.” The film is about a “homicide detective tracking a serial killer along the Mississippi River who burns his victims.”

But the problem, Lynch says, is the lack of financial incentives available for movie production in Missouri. Though the state still offers the film production tax credit, Missouri Gov. Jay Nixon shut down the Missouri Film Commission in 2011, and the Missouri Accountability Portal shows that no film tax credits have been issued for 2012.

From KSDK:

Missouri actually has $4.5 million to use for tax breaks, but the Department of Economic Development doesn’t have anyone to recruit out-of-state productions.

“It hurts the city, it hurts the state and it ultimately hurts us because we’re forced to go elsewhere for monetary reasons,” said Lynch.

One way to answer the question of whether a lack of film tax credits hurts the state is to look at what film tax credit money has subsidized in the past.

The 2009 film “Up in the Air,” which starred George Clooney, was filmed in Saint Louis, and was issued $4.1 million in tax credits from the state. Under Missouri’s Film Production Tax Credit program, movie productions are reimbursed for a portion of their expenses.

In 2010, the Show-Me Institute requested documentation from the state Department of Economic Development (DED) that showed what expenses associated with the film tax credit program were deemed eligible for partial reimbursement. The documents we received are now posted online.

Below are some expenses that the production of “Up in the Air” incurred and the DED deemed eligible for the Film Tax Credit program:

* More than $11,000 in living allowance money for Director Jason Reitman.

* $5,600 for George Clooney to stay at the Chase Park Plaza.

* More than $8,500 in living allowance money for Vera Farmiga.

* More than $11,000 in living allowance money for Executive Producer Michael Beugg.

If having state taxpayers fund living expenses for high-paid actors and directors while working on “Up in the Air” is not concerning enough, recent reports have found state film tax credit programs lacking.

If Lynch really thinks Saint Louis is the best place to film her movie, then make it here. But if tax credits are necessary, I would prefer she stay in East Saint Louis.

P.S. Lynch is not the first person to think that using film tax credits to subsidize a movie about a serial killer is a good idea. Jack Donaghy ran with that in 2011.

Missouri’s Buildings Immemorial, And The Right Place For Preservation

Posted on by Patrick Ishmael

Last week, the historic preservation group Missouri Preservation released its list of the state’s “Most Endangered Historic Places.” They describe their publication as such:

Now in its twelfth year, the program has sought to bring statewide attention to endangered places through a media campaign and offers support services to the properties on the list.

The list is a good one overall, calling attention to some notable structures that with some love and money — emphasis on money — could be saved.

But there seems to me to be one significant outlier in the mix: Kemper Arena, Kansas City’s 1970s-era predecessor to the new Sprint Center downtown. The cavernous space hosts few events these days since Sprint opened, and even the family of the arena’s namesake is calling for the place to be torn down. (It is worth noting that our Chairman of the Board (who also is a Show-Me co-founder) is a Kemper, although I have not discussed this issue with him.)

Is Kemper Arena historic? Sure. It housed the 1976 Republican National Convention, countless sporting events, and served as the backdrop of some of the greatest rodeos and barbecues in the country. But does that, therefore, mean it is off limits for demolition, if it comes to that? No.

State-underwritten historic preservation efforts, particularly in and around Saint Louis, have been operating with an open throttle for more than a decade now, with the state issuing more than $1 billion in tax credits for preservation since 1999. As obvious preservation projects have dwindled, the preservation net has widened in some cases to simply keep the subsidies pumping. But are we saving historic buildings, or just saving — and oftentimes subsidizing — aging properties under the pretext of historic preservation? Shouldn’t that blurring distinction bother preservationists?

As a born-and-bred Kansas Citian, a movement to save Kemper absent a plan the private market would embrace would be mystifying to me. There is a difference between advocating for ingenious uses of old properties and trying to force old and obsolete properties on the community for all time. I support the former. I am not keen on the latter. Indispensable history is all around us, but not every building is indispensable.

Kemper Arena has certainly had some fine days, and to the extent Missouri Preservation is highlighting that history, the organization should be applauded. But while Kemper has had historic days, much like so many buildings of its kind, that does not mean it should stand until the end of days.

Preservation has a place. It’s just not every place.

Episode V: The CVC Strikes Back

Posted on by Michael Rathbone

The St. Louis Convention and Visitors Commission (CVC) has rejected the St. Louis Rams football team’s proposal for upgrading the Edward Jones Dome into a “first-tier” facility. Both sides have until June 15 to reach some sort of agreement or they will go into arbitration.

I think my position on this whole situation is pretty clear. First, Saint Louis City, Saint Louis County, and the state of Missouri are not awash with cash and it is doubtful that they can afford to spend much public money on Dome upgrades. More importantly, however, I would like to reiterate that there is no economic justification for using public funds to upgrade sports facilities. In Saint Louis, one study showed that the use of public funds on sports facilities was economically HARMFUL.

If the Rams want to make the case that keeping them in Saint Louis would be beneficial to civic pride, they should be free to do so. However, it is important for the general public to know that if they are counting on a Dome upgrade to act as an economic stimulus, they will be sorely disappointed.

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