Show-Me Institute Policy Analyst Audrey Spalding was once again a guest
on Saint
Louis local roundtable discussion show Donnybrook on May 10, 2012.
Among the topics covered this time were: gay marriage, the principal of Clayton High School’s alleged use of a fake facebook account to spy on students, the possible revocation of state funding for the Sue Shear Institute, the St. Louis Rams’ request for a new roof for the Edward Jones Dome, Scott Boston’s controversial remarks about Senator Claire McCaskill, and the recent discussion and Wall Street Journal article about whether wild horses should be culled in Missouri.
Last Week For TIF Reform
In my personal opinion, the single most important thing the Missouri General Assembly needs to do this year is pass Tax Increment Financing reform. SB 721 is a great way to accomplish that for the Saint Louis area, at least. The bill has passed the senate and a house committee. All it needs now is to pass out of the full House of Representatives. Passing this bill would be a great policy change for Missouri as it would greatly reduce the tax giveaways that are killing our local property tax base and encouraging the worst types of local economic planning and eminent domain abuse.
SB 721 would limit the ability of cities to override the county TIF commissions. It would greatly reduce the absurd spectacles of city councils representing a few thousand people imposing their will over the objections of county TIF commissions representing a few hundred thousand people.
Yes, I would like to see these reforms moved to other parts of the state as well, especially the Kansas City area. But for now, limiting TIF in Saint Louis would be a great start. Passage of TIF reform and SB 721 would be an outstanding policy change for Missouri.
Land Banking is Expensive
In the final week of the legislative session, Missouri legislators may vote on the creation of a land bank in Kansas City. Given the attempts to attach the land bank legislation in its entirety to unrelated bills as an “amendment,” there is a good chance that some legislators will try to get the bill passed this week.
In addition to testifying and providing suggested changes to the legislation, I have also written here repeatedly about the pitfalls of creating a land bank, in light of the 40 years of failure we have experienced in Saint Louis City. If legislators — despite the evidence that land banking can lead to abuses of political power and poor decision making — still want to pass the land bank legislation, perhaps they should consider recent land banking news from other states:
The Columbus, Ohio land bank is asking the State of Ohio for money.
The fiscal note for the land banking bills (H.B. 1659 and S.B. 795), reports that passing the legislation will not cost the state money. However, the legislation itself mentions possible funding from the state several times. Columbus, Ohio provides a good example of what could occur if the Kansas City legislation is passed. The new land bank is requesting $8.2 million from the State of Ohio. A newly established Kansas City land bank could make a similar request.
The Saginaw, Mich. land bank bought a hotel, used it for police training exercises and now plans to spend up to $400,000 to demolish the hotel and build an “aesthetically pleasing parking lot.”
Regular Show-Me Daily readers know that we are not a fan of government development bets. Well, land banking takes that practice to the next level. Instead of government officials attempting to pick winners and losers by awarding tax subsidies, land banks can purchase and attempt to redevelop property. What could possibly go wrong?
Consider the case of Saginaw, Mich. In December, the Saginaw land bank purchased a hotel for $235,000. Since then, refrigerators and microwaves have been looted, and the sheriff’s department has conducted “emergency response exercises” there. The building is riddled with black mold, and the county is paying $15,000 per month for utility costs at the vacant hotel.
Government officials say that investors aren’t interested in the property, so the next step is to demolish the building and build a parking lot. The demolition is estimated to cost another $300,000 to $400,000.
The Missouri land bank legislation is modeled on Michigan’s land bank law. If legislators pass S.B. 795 or H.B. 1659, a Kansas City land bank would have the powers to make similar development bets with taxpayer money.
The Missouri Legislature passed land banking legislation in 1971, and it has been an abysmal failure. The Saint Louis land bank holds more property than ever, and pays more than $1 million every year just to mow the grass on its properties. Why repeat past mistakes?
The Deadline Hath Arrived
The appropriators in Jefferson City have managed to finalize a budget before the May 11 deadline. The final version of the budget amounts to a little more than $24 billion. The key differences between the Missouri House and Senate budgets that held up the conference committee from crafting a final budget seem to have been resolved.
The most recent stumbling block involved funding for the Sue Shear Institute for Women in Public Life. The Institute’s goal is to help prepare women to run for public office. There is nothing wrong with that, but should taxpayers foot the bill? In economic times such as these, it should be a relatively easy call to cut funding for programs like this one. Apparently in Jefferson City, the call was not so easy. The Shear Institute gets to keep state funding. This fracas is indicative of the problems that plague Jefferson City.
If deciding on whether to cut funding for a non-essential program like the Shear Institute can cause the budgeting process to screech to a halt, what would happen if something much bigger was on the table, such as tax credit reform? Organizations on the left and the right have called for tax credit reform, but yet there seems to be little movement to actually enact any meaningful reform (a reform, by the way, that, if enacted, would do a lot to alleviate the current budget situation in which the state finds itself).
The budget impasse has been resolved. However, this situation is indicative of the obstacles facing any reform measure that might be proposed.
A Rare, Wonderful Opportunity To Deliver Better Health Care To Missouri’s Underserved
In February, I wrote at length about an important charitable organization, Remote Area Medical (RAM), which delivers free health care to those who otherwise could not get it. Indeed, RAM and organizations like it have helped patients all around the world. As I found out from RAM’s founder Stan Brock, however, excessive Missouri licensing laws have hampered his group’s mission to help the needy in this state.
Mr. Brock told me that RAM wanted to do more in Missouri, but onerous state requirements — such as requiring licensed in-state medical personnel to participate in a clinic before RAM could provide its services — had stifled his organization on several occasions. Most recently, he said, Missouri regulations prevented RAM from providing free eyeglasses to the southwest corner of the state.
Well, Missouri may be on the verge of rectifying the problem if one bill gets to a final vote. Introduced by Rep. David Sater, House Bill 1072 appears to adopt much of the same legislative language used to facilitate volunteer medical services in Tennessee, which was a pioneer of the volunteer health services law. Better still, the legislation passed through the Missouri House in March and is now close to a vote in the Senate.
Given the movement in the health insurance exchange policy field and the Senate’s earlier allowance for a grade school optometrist mandate to lapse, this session may just be a banner one for health care policy in the state of Missouri. For more information on how burdensome occupational licensing laws affect Missouri, please check out our work in the area, which you can find here, here, and here.
Acts Of Land Bank Desperation
It was comical that Missouri legislators, apparently blind to irony, tacked a lengthy land bank bill onto a bill that was supposed to increase government transparency.
Well, lawmakers have done it again. The latest bill to get what I am now going to call the “Kansas City Land Bank Bump” is Senate Bill 692, a bill that was initially intended to help counties manage their budgets. This time, the bill ballooned from two pages to an impressive 93 pages. It appears that about 30 of those pages are dedicated to creating a land bank in Kansas City.
Given that a land bank created under this bill could entail unlimited amounts of debt, the addition of the land bank language to a county budget bill is almost as ironic as the previous act of desperation.
Moreover, these moves may not even be constitutional. The Missouri Constitution states that bills cannot contain more than one subject, and that subject must be clearly stated in the bill’s title. Does “decreasing county budgets” accurately describe a bill that would create a land bank? Perhaps, if SB 692 passes, a court will have to decide.
Look, if a land bank is such a great idea (and after extensive study, I do not think it is), why can’t legislators pass it on its own merits, instead of continuing to try and hide it as an amendment to unrelated bills?
If You Need A Subsidy In Chesterfield, Where Don’t You Need One?
Monday night, the Chesterfield City Council gave preliminary approval to a new outlet mall development that plans to impose a Community Improvement District (CID) sales tax of 1 percent to help finance the project. This CID is a tax subsidy and a tax giveaway, just like any TIF (Tax Increment Financing), EEZ (Enhanced Enterprise Zones), or other route of central economic planning.
I will admit that CIDs are a little less noxious than TIFs. But, no matter what grading scale, tax subsidies are not needed in Chesterfield. The market for retail shopping is plenty strong that the city does not need to turn over the taxing authority to private developers. The real issue, however, is that with projects like this, we must acknowledge that we long ago passed the tipping point where basically every major development in Saint Louis and Kansas City is subsidized by the taxpayers. When you are going forward with subsidies for things like outlet malls in one of the nicest parts of the region, the idea of a free market is basically defeated. Once you subsidize outlet malls in wealthy areas, at what possible good or service do you draw the line?
The obvious answer is that there is no line and the use of tax dollars for subsidized, politically-connected developers is just a fact of life now in much of Missouri. That is repulsive.
A Note Of Praise To The House Health Insurance Committee
Word came yesterday afternoon that the Missouri House Health Insurance Committee has finally voted to send a key piece of legislation to the full House for consideration before the close of this year’s legislative session, which ends Friday. This is the same legislation — which the Missouri Senate already passed — that Christie Herrara and I wrote about in March which, if implemented, would block the unilateral implementation of the ObamaCare exchange in the state. I expect the referendum to pass swiftly through the lower chamber and for voters to approve the measure when the question is posed to them later this year.
The process was not without its share of drama, of course. The hearing for the bill before the House Committee was held at the end of March, leaving the bill with little margin for error to get the required votes done before the legislature adjourns. But whatever the reason for the delay, the committee deserves credit for getting the job done. On to the full House.
Laffer’s Important Lessons For Growth, And A Note About Missouri
Last month, Art Laffer and Stephen Moore wrote in the Wall Street Journal about how high taxation destroys economic growth. As they put it, “Liberal utopias are losing the race for capital. The rich, the middle-class, the ambitious and others are leaving workers’ paradises such as Hartford, Buffalo and Providence for Jacksonville, San Antonio and Knoxville.” And they note, as we have noted so many times, that taxes on income are some of the worst you can levy if you want to keep people and capital in your state.
In our new report Rich States, Poor States, prepared for the American Legislative Exchange Council, we compare the economic performance of states with no income tax to that of states with high rates. It’s like comparing Hong Kong with Greece or King Kong with fleas.
Every year for the past 40, the states without income taxes had faster output growth (measured on a decadal basis) than the states with the highest income taxes. In 1980, for example, there were 10 zero-income-tax states. Over the decade leading up to 1980, those states grew 32.3 percentage points faster than the 10 states with the highest tax rates. Job growth was also much higher in the zero-tax states. The states with the nine highest income tax rates had no net job growth at all, and seven of those nine managed to lose jobs.
There are many excellent analyses and anecdotes in Rich States, Poor States. From state-specific stats to broader policy discussions, RSPS serves as a fine starting point for assessing our states’ economic health.
But some RSPS history needs to be noted regarding the book’s specific discussion of Missouri’s “economic outlook” (RSPS‘s forward-looking metric). Laffer and Moore’s observations about states without income taxes bears repeating — they have grown significantly in contrast to other income tax-reliant states — but from the perspective of policymakers and legislators here, the view RSPS paints of the Show-Me State is starting to diverge from the book’s own backward-looking “economic performance” metric.
How has Missouri done according to RSPS‘s metrics over the book’s last five editions? Well, the state has risen to seventh from 25th of the 50 states in “economic outlook” over the last five years, even as its actual performance has languished by RSPS‘s standards around 40th (roughly consistent with BEA and BLS statistics).
As the chart shows, the disparity between “where Missouri is going” and “where Missouri has been” has never been greater. I think that is a problem with RSPS‘s “outlook” metric, not the policy Laffer and Moore advocated in the Wall Street Journal. More to the point, the state has continued to flail in growth, arguably in part because the state continues to cling to its income tax and tax credit system, rather than shifting to a more effective, and less destructive, taxing system that does not pick winners and losers and does not penalize income.
Unfortunately, that hugely important point could get clouded when people see Missouri’s “outlook” ranking, which only considers the impact of income taxes as fractional, evenly-weighted components among more than a dozen factors of varying real-life importance. Missourians across the ideological spectrum do not agree on much, but what they certainly do agree on is that Missouri’s economic status quo is unacceptable and is not improving. In substance, Laffer and Moore agree with that assessment, despite what RSPS‘s “outlook” metric suggests.
The pathway to state growth that Laffer and Moore articulate is a clear one; Missouri is lacking only the political will and leadership to take it over the finish line. The outlook for finding that sort of political leadership, unfortunately, is decidedly more mixed, and while it remains mixed, Missouri’s economic performance will continue to suffer.
