The Next Half Measure

Posted on by Michael Rathbone

Now that Missouri Gov. Jay Nixon has delivered his State of the State address, legislators in Jefferson City are prepared to tackle spending in their own way. The Missouri Legislature is considering a constitutional amendment that would cap state spending increases to the annual rise in the Consumer Price Index plus population growth. Any excess money would first go to paying down public debt, then a special reserve fund (not a bad idea considering some of the potential natural disasters this state faces), and then any remaining money would go towards temporarily reducing income taxes.

Along with the Hancock Amendment, this amendment would restrict the power of the legislature. Therefore, the legislature should be commended for proposing this amendment. Constitutional amendments like this, along with a balanced budget requirement (which Missouri has), give legislators an easy way to say “no” to special interests.

Now, this is not a full-throated endorsement of the proposed amendment. There are a couple of things that bother me. First, there was an amendment that passed setting the cap at fiscal year 2008, the so-called “high water mark” of state revenues. Considering that the general revenue is expected to increase 3.9 percent  from $7.3 billion this year and that net general revenue for fiscal year 2008 was slightly more than $8 billion ($8,004,309, to be exact), the cap probably will not matter for . . . a while. Second, the spending limits will expire in five years unless lawmakers extend the time limit. So even if the voters approve the amendment, there is a distinct possibility that the cap can expire before it ever has the chance to restrict spending. Finally, the cap only applies to general revenue, which is where lawmakers have the most leeway in regards to spending, but it is not hard to imagine lawmakers putting down in statute specific spending items they want preserved and directing specific monies to funding them.

Despite my issues with the proposed amendment, the legislature should be commended for trying to push spending restrictions. However, it is unfortunate that such restrictions would have to be so watered down before it can pass.

It Is Time To Reform Teacher Tenure In Missouri

Posted on by Audrey Spalding

It is no secret that Missouri Rep. Scott Dieckhaus (R-Washington, Mo.) is not a fan of Missouri’s teacher tenure law. Last year, he filed legislation to require annual teacher evaluations. Under that bill, the public school teachers who perform best would receive four-year teaching contracts, and those performing the worst would receive single-year contracts. If poor teachers failed to improve, they could be terminated.

There also was good news for some teachers in Dieckhaus’ 2011 legislation. The proposal called for the best teachers to be paid at least twice as much as the poorest-performing teachers. While this may seem like common sense (why not pay the best teachers more, as a reward for their effort?), it runs contrary to the current system of paying Missouri public school teachers.

The 2011 legislation did not pass. However, Dieckhaus is considering submitting tenure reform legislation again this year. The bill is not yet available, but I have listed two areas of reform that are needed to help improve student academic achievement in Missouri. Our priority should be educating  children, not rewarding those who happen to have been teaching for the longest period of time.

Let’s pay good teachers more: In Missouri, teachers are paid under what is known as a “teacher salary schedule.” Broadly, teachers who have more years of experience and higher levels of education are paid more (here is an example). At many school districts, these are the only components of teacher pay — teachers who teach difficult subjects, at-risk students, and teachers who have the best track record of helping students learn do not get a pay boost.

Teachers who do a poor job of teaching students can actually earn more than the good teachers if the poor teachers have a higher education level and/or more years of teaching experience.

Dieckhaus told the St. Louis Post-Dispatch in 2011 that “It’s time we move away from paying people based on how long they’ve been teaching and what piece of paper they have hanging on the wall.” I certainly agree.

Paired with the issue of teacher compensation is the question of how to deal with teachers who have a track record of failing to teach students. Right now, those teachers can stay at a district for years, if not indefinitely.

Let’s help school districts get rid of bad teachers: State law awards teachers “indefinite contracts” if they have taught at the same school district for at least five years. These “permanent teachers” can be terminated, but only through a lengthy process. If a school district terminates a teacher (after going through all of the notification requirements specified by state law), that teacher can appeal the termination, triggering a court case. If the teacher wins in court, the school district must pay that teacher all of the compensation he or she would have received had he or she stayed at the district during the period of appeal.

I suppose that if you are trying to discourage teacher termination, the above makes sense. But, as a state, our concern should not be to hire and keep on as many teachers as possible. We should instead be concerned with how to provide quality education to students. Allowing failing teachers to continue to teach students does nothing to help students, and may be hurting them.

It is an uncomfortable truth, but one we must acknowledge. As U.S. Secretary of Education Arne Duncan put it, “We can no longer pretend that all teachers or all principals are from Lake Woebegone where everyone is above average.” Many academic studies have shown that teacher quality matters. Eric Hanushek, an education economist at Stanford University, has shown that good teachers can teach students three times as much as bad teachers — in a single year. Improving student academic achievement can be achieved in part by attracting more good teachers to the profession, and encouraging the bad teachers to leave the field.

I hope that the 2012 teacher tenure reform legislation can help enable school districts to have more autonomy when it comes to rewarding good teachers and terminating the worst teachers. When the full text of the bill becomes available, I will post my take on it here.

Private School Choice and the Turner Decision

Posted on by Michael Podgursky

It is serendipitous that the Missouri Legislature has gone back to work this month, just in time for the kick-off of national School Choice Week (Jan. 22). One of the many challenges our lawmakers face is what to do regarding the Saint Louis and Kansas City public school districts. The Missouri Supreme Court ruled in the Turner decision that students in unaccredited school districts have a right to enroll in a nearby accredited district. Unfortunately, the suburban districts have made it clear that they will not accept these students in any significant numbers. Thus, thousands of city students and their parents are in limbo while lawsuits are litigated.

The good news is that two high-performing school districts have offered to take these students in large numbers. These districts do a great job of educating high poverty and minority children, and do so at much less than the $15,000 and $16,000 per attending student spent in Kansas City and Saint Louis, respectively. Moreover, decades of social science research has demonstrated that the types of schools that these districts run are exceptionally good at educating poor urban youth. So why isn’t our legislature rushing to take advantage of this remedy? The districts in question are the Saint Louis and Kansas City dioceses. This high-quality yet affordable option is off the table.

Why? Opponents argue that it is inappropriate to provide public funds for private religious schools. Indeed, strong language to that effect — Blaine Amendments, named in honor of the Maine senator who led the movement — was placed in Missouri’s and some other state constitutions in the late-19th century precisely to prevent public monies from flowing to Catholic schools.

The Blaine Amendment, and the associated ideology, has warped K-12 education policy. In other areas of policy — including education — faith-based organizations routinely receive tax dollars to provide services for the general public. Missouri students can take their Bright Flight or Access Missouri scholarships to public institutions like the University of Missouri as well as private religiously-affiliated colleges such as Hannibal-Lagrange, Saint Louis University, or Rockhurst. Low-income parents in Missouri can use tax-supported vouchers to purchase pre-school care from religiously-affiliated providers.

In nearly all other areas of social welfare policy, public funds flow to faith-based organizations for social services. This is based on a recognition that government support for a service does not mean the government should be the only, or even the primary, producer. The public interest is best served if multiple vendors can compete to provide services and give consumers choices.

Freedom of choice is the key. In a voucher system where money follows the student to a school that parents choose, government is not favoring one religious doctrine over another. When a student takes his Bright Flight scholarship to Hannibal-LaGrange College or Saint Louis University, the state is not “establishing” or promoting one religious doctrine over another.

Charter schools provide valuable options to parents. The Missouri law, currently limited to just Kansas City and Saint Louis, should be extended to all school districts statewide. However, the charter schools currently operating in Saint Louis and Kansas City have a mixed achievement record. Some are producing above-average achievement gains for their students, whereas many are performing no better, and in some cases significantly worse, than the district schools. Over time, the low performers will be winnowed out. Unfortunately, substantial capacity of high-performing charters is needed now, not 10 years from now.

With each passing school day, the harm inflicted on Saint Louis and Kansas City children grows. The private schools have thousands of seats available for these children now. A remedy is looking us in the face.

Michael Podgursky is a professor of economics at the University of Missouri–Columbia and a member of the Show-Me Institute Board of Directors.

Promote Kindness, Not Taxes

Posted on by Bruce Stahl

An unpopular item in Missouri Gov. Jay Nixon’s budget proposal is the 12.5 percent funding cut to higher education. Considering there are more frivolous, untouched state expenses like tax credits for wine or beef production, I can understand why. What I cannot understand is why one of the first things individuals consider is more taxes. Grover Cleveland offers a lesson for such thinking:

The friendliness and charity of our countrymen can always be relied upon to relieve their fellow citizens in misfortune. . . . Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood.

Although Cleveland was talking about federal aid during a drought, the lesson is applicable to our current situation: Charity should be preferred over taxes. After all, taxes do not lend themselves to a “kindly sentiment.” And is charity such a radical option? Don’t universities already receive such donations? It seems that if the state believes citizens want to support universities, the government should let the people voluntarily display their support.

But suppose charity falls short – what then? Tuition increases should be considered. After all, let’s not forget that students are the ones choosing to attend college. When the price of education goes up, there is nothing wrong with charging a higher fee. And for those who cannot afford the higher fee, there are alternatives: scholarships and student loans. If both those options do not work, there is the alternative of a less costly education at a community college. Finally, if all else fails, college can be deferred. I have known several individuals who have put off college in order to accumulate savings for it. All options should be exhausted before reaching into the public purse.

Tomahawk Chop: Tax Credits On Block In Senate

Posted on by Patrick Ishmael

Last night I was in Cape Girardeau, Mo., to talk tax credit issues. I noted that the Missouri Legislature could eliminate hundreds of millions of dollars’ worth of failing tax credit programs and basically wipe out the corporate income tax if it assigned the tax credit savings toward the tax’s elimination — shifting the state from a system where the government picks winners and losers in business to a system whereby all businesses benefit equally with a reduced or extinguished tax. (I have discussed this before.) Missouri’s tax credit problem is titanic, but its enormity also offers an opportunity to change the game when it comes to giving Missouri a competitive advantage in the national economy.

The good news? It seems the idea is picking up some steam with at least one Kansas City area legislator, who is considering a veritable tomahawk chop to some of the worst offending programs (via The Missouri Record):

[Sen. Will] Kraus’s bill would eliminate certain tax credits and apply the savings from the programs to lower the corporate income tax rate. Kraus said he hoped there would be enough additional revenue to get rid of the corporate income tax all together.

“This would make Missouri a much more business friendly place for businesses to come. It eliminates the picking of winners and losers by different tax credits,” Kraus said.

The measure would lower the low-income housing and historic preservation tax credits to 25 percent of their current value by 2016. The low-income housing credit costs the state $60 million a year, while the historic preservation costs $140 million.

The legislative session just began, so certainly a lot can change in the next few months that may temper my optimism. But in terms of policy, it is satisfying to see that the right, liberty, and free-market ideas are moving to the forefront of the state’s agenda. The state must realign its economic development program to reflect that in practically every circumstance, the best allocators of capital in the market are the participants in the market themselves.

As my colleague Michael Rathbone noted, there are only three states in the country that do not have a corporate income tax or a gross receipts tax, and none of them border Missouri. It would be a great way to get a leg up on our regional competition by telling businesses that Missouri is not only business-friendly, but that its tax laws are simple, predictable, and unencumbering. It also means that the unseen cost of the corporate income tax — higher consumer prices that compensate for the taxes that companies pay — would disappear, lowering costs of Missouri goods and making Missouri corporations more competitive.

It would be the right thing for Missouri, and I hope Missourians give the idea serious thought.

School’s Out: Closing Bad Schools

Posted on by Audrey Spalding

Show-Me Institute Policy Analyst Audrey Spalding reports on a Saint Louis-area charter school which will soon be shut down for under-performing. Charter Schools provide alternatives to traditional, district- or neighborhood-based public schools, and unlike many public schools, if they fail to serve their students, they can be shut down and the children sent to schools with a better performance record.

The Less-Is-Better Approach to Talking about Jobs

Posted on by Andrew B. Wilson

Missouri Gov. Jay Nixon wants to be known as the Energizer Bunny of job creation. At taxpayer expense, he goes hopping about our state — and, indeed, the world — banging his trusty drums and promising to broker deals that will secure more jobs for Missouri.

In his State of the State address on Tuesday evening (Jan. 17), Gov. Nixon mentioned jobs no fewer than 39 times.

By way of comparison, former U.S. President Ronald Reagan mentioned jobs only six times in his first State of the Union address in 1982 — when the U.S. economy was reeling from the effects of a downturn of comparable magnitude to the 2008-2009 recession.

In his 1983 State of the Union, Reagan mentioned jobs eight times, and then just five times each in his 1984 and 1985 addresses — delivered in the midst of the most robust economic recovery of the post-World War II era, a two-year span in which the United States added 7.3 million new jobs.

So perhaps the governor (and the current occupant of the White House) could take a less-is-more cue from the late president in thinking and talking about job creation.

There is much to be learned from the sparingly few remarks that Ronald Reagan made about jobs in his State of the Union speeches.

With unemployment at 9 percent and headed to a peak of 10.8 percent, Reagan spoke in his first State of the Union of the need to unleash the private sector through lower tax rates and reduced federal spending: “Raising taxes will slow economic growth, reduce production, and destroy future jobs. So, I will not ask you to try to balance the budget on the backs of the American taxpayers.”

In 1983, he noted that “We’re witnessing an upsurge in productivity and impressive evidence that American industry will once again become competitive in markets at home and abroad, ensuring more jobs and better incomes for the nation’s work force.”

In 1984, as the economy was beginning to boom, Reagan delivered one of the most quoted lines of his presidency: “The problems we’re overcoming are not the heritage of one person, party, or even one generation. It’s just the tendency of government to grow, for practices and programs to become the nearest thing to eternal life we’ll ever see on this earth.”

In his fourth State of the Union — delivered February 6, 1985 — Reagan reiterated the principal themes from his earlier addresses, saying, “Every dollar the federal government does not take from us, every decision it does not make for us will make our economy stronger, our lives more abundant, our future more free.”

In contrast to Reagan’s extraordinary success in boosting employment following a major downturn, employment in Missouri continues to lag about 150,000 jobs behind where it was before the onset of the 2008-09 recession.

To his credit, Gov. Nixon did talk about the need for balancing the state budget, holding the line on taxes and “making government smaller, smarter and more efficient” — worthy goals, all of them. Without giving specifics, he also spoke of the need for “comprehensive tax credit reform.”
Unlike the late President Reagan, however, Gov. Nixon speaks of the private sector as if it were a willing but slow student — putting himself (and government) front and center in the role of providing much needed direction and encouragement to the dim-witted pupil.

Missouri Rep. Tim Jones (R- Dist. 89), who serves as majority floor leader, made a similar mistake in the Republican response to the governor’s address.

“A true leader fights for every job, every time,” Jones said.

If that were the case, we still would be “fighting” to preserve jobs in the buggy-whip industry.

The fact is, at both the state and national levels, jobs are continually created and destroyed and politicians and government leaders have no way of knowing from where the jobs of the future will be coming.

The real key to our future prosperity is freedom — the right of every individual to control his own labor and property. People are able to find their own way when freed from the shackles of overreaching and overbearing government.

Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute, which promotes market solutions for Missouri public policy.

Independence Privatizes Its Bus Services

Posted on by David Stokes

I saw this excellent story on Tony’s Kansas City. Independence, Mo., is privatizing bus and transit services within the city. The Independence City Council has decided to contract with a private bus operator to meet the city’s transit needs, and I think that is great. (The city intends to maintain some service from ATA, the Kansas City public transit provider, so this is not a 100 percent privatization. But it is close.)

I look forward to seeing how this works out for the city and its residents. I am confident it is going to work out great. In our policy study on public-private partnerships for Missouri transportation, we discussed these options for transit at length (see Section VII, pages 32-36). There are many examples of successful transit privatization efforts in the United States, including Las Vegas and Denver. Here is a key finding from Wendell Cox, a local authority on transit and highways, as quoted in the policy study (note: competitive contracting is a common form of privatization):

Competitive contracting has produced positive results for transit agencies in the United States and abroad. The quality of competitively bid transit has been found to be equal to or better than that provided previously, and ridership has generally risen as cost savings allow for expanded service. According to Wendell Cox, direct savings from competitive contracting have ranged from 14 to 52 percent, with an average of 30 percent, over the former non-competitive service in cities that have competitively contracted out at least 10 percent of their service.

After this transit privatization works out to everyone’s benefit, I hope Independence can privatize a few more things. To their additional credit, at least the golf courses in the city are all privately operated.

State of the State: Reasons for Hope . . . But More Reasons for Skepticism

Posted on by Patrick Ishmael

Last night, Missouri Gov. Jay Nixon delivered his annual State of the State address. The speech — part pep talk, part agenda setter — was nothing if not optimistic, which is good as far as that goes. Like New Year’s resolutions, SOTS addresses are meant to give at least a little hope to anyone paying attention that this legislative year will be better than the last. But just like New Year’s resolutions, big reforms, whether legislative or personal, too often turn out to be major failures without follow-through and personal sacrifice.

So with this hope, skepticism. It remains to be seen whether the governor will risk much political capital for the agenda he has outlined, particularly if his ideas are greeted with opposition in the Missouri General Assembly. And the governor appeared to concede as much last night when he talked about tax credits.

While we’re talking about government efficiency, let me make a related point. For the past three years, I have called for comprehensive tax credit reform. Some of you in this room stood with me on this issue. Others did not.

The consequences of this inaction are clear. Over the past four years, more than $2 billion in state tax credits have been redeemed. Effective tax credits are used to create jobs and grow our economy. But tax credits that aren’t delivering for Missourians must be retooled and reformed. We all know that dollars spent on tax credits are dollars we cannot invest in other critical priorities.

Once again, I ask you to pass comprehensive tax credit reform to get this spending under control.

One hundred and twenty three — that is how many words of the governor’s 5,814-word speech were devoted to the state’s budgetary equivalent of a billion dollar bunker buster. It is good that the governor even talked about tax credits, but the subject constituted just 2 percent of a speech that often detailed how the state is tightening its belt. That such a tiny amount of time was spent on highlighting such a huge problem is baffling and disappointing. But more frustrating, the content of those 123 words revealed nothing new, nor did they suggest any greater commitment to “getting it done” when it comes to tax credit reform. Says the governor, just do it. Or, you know, not.

That is despite the fact that ideas are bursting out from across the ideological spectrum on how to combat the tax credit problem. But whether the idea is blocking tax credit issuances (that is, the distribution of tax credits) or even going as far as the desperate step of unilaterally blocking tax credit redemptions altogether — as the left-leaning St. Louis Post-Dispatch suggests — there is growing interest to get a tax credit system that has spun out of control back in line so that our constitutionally-mandated priorities remain in order.

It is concerning that in the same speech where the governor paid brief homage to tax credit reform, he simultaneously, and at length, talked about new industry-targeted incentives under his “Missouri Works” program. Unless an appetite for legitimate reform develops in Jefferson City, Missourians are looking at not only “same old, same old” in the Capitol, but much “more of the same,” as the tax credit fiefdoms that have developed in the last decade fight off legislative incursions and new duchies get created for the next “big idea(s),” Aerotropolis included. (Yes, legislators may try to resurrect it.)

If state officials cannot get serious about a budgetary problem measurable not only in millions, but in billions of dollars, I am not sure they can get serious about much of anything. Gov. Nixon struck the right optimistic tone, as is required of these events, but when it came to the substance, the speech last night was woefully lacking. The state of the state could be worse, but if the governor’s speech is any indicator, Missourians should not expect it to get much better anytime soon.

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