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.

Could Nine People Stop Tax Credit Nonsense In 2012 (And Maybe Help State Budget)?

Posted on by Audrey Spalding

The St. Louis Post-Dispatch editorial board is urging Missouri Gov. Jay Nixon (D) to stall the awarding of state tax credits. Why? Missouri is facing an estimated budget shortfall of $500 million, a number very close to annual state tax credit awards. As the Post editorial points out, tax credits for corporate welfare have grown unabated while funding for schools has been cut.

Tax credit reform is difficult. We saw that during the last legislative session, and during the Tax Credit Review Commission’s hearings (beneficiaries of state tax credits tend to fight hard to keep their credits). And those interested in benefiting from a new tax credit program seem to fight almost even harder to establish a new program.

Perhaps more difficult for politicians is the fact that tax credit reform does not cut cleanly along party lines. Some Republican legislators strongly support tax credit reform, while others oppose it — just as some Democrat legislators strongly support reform, while others oppose it (or even advocate for the creation of new programs).

I disagree with the Post‘s rosy optimism that Nixon will act responsibly. Our governor has a history of waffling on tax credit reform, something my colleagues at the Show-Me Institute have documented repeatedly. He also seemingly likes to travel to announce the “creation” of jobs under questionable state tax incentive programs. Personally, I would pin tax credit reform hopes on legislators.

Did you know a single committee might have the power to vote to halt some tax credit programs this year?

According to state law, “…no new tax credits, except the senior citizens property tax credit…shall be issued or certified…unless the estimate of such credits have been reviewed and approved by a majority of the senate appropriations committee and house budget committee.”

If a majority of either the Missouri House or Senate committees referenced vote to not approve one or more of the more egregious tax credit program estimates (and there are several), then perhaps no money would be issued for those programs this year.  Under this scenario, the daunting challenge of convincing many legislators who may have constituents and contributors who benefit greatly from tax credit programs seems to be reduced.

It is time for legislators to put the needs of Missouri taxpayers ahead of their own political concerns. Concerns about party politics should not dictate the budget solutions pursued in 2012.

The state is facing a budget shortfall of hundreds of millions — perhaps approximately $500 million. Defunding a few of the more wasteful tax credit programs could certainly help address that. And it may be easier to do than some may think.

Missouri Public Schools: Policy Discussion

Posted on by Michael Podgursky

On December 6, 2011, the Show-Me Institute was honored to host Saint Louis Public Schools Superintendent Kelvin Adams along with University of Missouri economist and education expert Michael Podgursky in a discussion on the state of education in Missouri and what the future may hold in education policy. Seating was limited, but the capacity crowd brought their questions and participated in a lively and informative discussion.

Are Missouri Public Schools Failing to Make the Grade?

Posted on by Josh Smith

If you have not done so lately, check out the latest videos on our video page.

A couple recent videos:

Both videos are embedded below.

Clumsily Lurching Towards Comprehensive School Choice In Missouri?

Posted on by Greg Aubuchon

The Kansas City Star has reported a delay in the lawsuit between five suburban school districts and the Kansas City Public Schools. The five districts allege that Kansas City Public is not following the law in paying the tuition expenses of students that transfer from the unaccredited district, as allowed under a state law and a Missouri Supreme Court decision (Turner v. School District of Clayton). The law, as it currently stands, grants students in unaccredited districts the choice to transfer to accredited districts and public schools in the same or adjoining county. The unaccredited district pays tuition to the receiving district for the transferees.

But let’s not get bogged down in the legal details here. Instead, notice how the law represents one giant step for students, yet one small step for Missouri school choice (my apologies to Neil Armstrong). Why is this so?

First, under the law, the unaccredited status of a school district triggers the right to school choice. While this is fine as far as it goes, what about students who suffer academically in failing schools in accredited districts? If the evil to be remedied is students victimized by failing schools, then the law should target all failing schools, not merely schools in unaccredited districts.

Second, the Missouri law limits transfers to other public schools in close proximity. Why not extend school choice to any public or private school in the state of Missouri? In this way, students will have greater choice, and increased opportunities, to reach their dreams and to receive a first-class education. Ask yourself: Why not?

Legislators Can Rebalance Tax System — And Make Missouri More Competitive — Without Raising Taxes

Posted on by Patrick Ishmael

Last week, I highlighted one good-intentioned but misconceived proposal that a Missouri legislator suggested to get the state’s economy moving. This week, there is a proposal that may have a kernel of a good idea in it, though the implementation leaves something to be desired.

State Sen. John Lamping, R-Ladue, has followed through with his plan to file a bill that eliminates state income taxes on the first $2,000 in individual income and replaces the money by hiking the state’s cigarette tax — now among the nation’s lowest.

Lamping says the bill is revenue neutral.

Under his proposal, SB 638, no Missourian would pay taxes on the first $2,000 of earned income. Now, state income tax is levied on all income, no matter how small. That cut would cost the state $128 million a year.

As David Stokes noted Thursday, non-smokers and infrequent smokers would be net beneficiaries if the legislation is implemented. The problem is, who would not be a net beneficiary? Smokers tend to be poorer than non-smokers, and any hike in the cigarette tax will tend to hit those living in poverty fairly hard. In 2009, the CDC found that “[t]he prevalence of current smoking was higher among adults living below the federal poverty level (31.1%) than among those at or above this level (19.4%).” Will there be a deterrent effect if there is a marginal increase of 26 cents in the cigarette tax? Possibly, but it also is fairly likely that what the poor gain from the income tax reduction could get eviscerated by the cigarette tax hike. If income taxes were exempted at a higher level, a “worse off” scenario for poor smokers would be less likely.

But there is an alternative to a straight cigarette tax hike if legislators really want to exempt income from the individual income tax. I wrote last week that major reductions to the corporate income tax could be made with the elimination of millions of dollars in failing tax credits. There also is ample room for a deeper cut to the individual income tax that would increase the likelihood that the poor would be net beneficiaries in a tax system rebalancing. Aside from the drastic hikes in the cigarette tax that have been proposed elsewhere, which would exacerbate the problem for the poor, a reduction in tax credits could account for much of the revenue required to make major cuts to the individual income tax.

Put more succinctly, to reduce income taxes, other taxes do not necessarily have to go up if state tax credits go down to a more manageable and appropriate level. Instead of picking winners and losers, let everyone benefit. It would make for a better Missouri and a better-balanced tax system.

Who Should Pay for Highways?

Posted on by David Stokes

The Missouri Department of Transportation, MODOT, is looking into ways of funding necessary maintenance on the main east-to-west highway across Missouri — Interstate 70. One funding option is to raise the gas tax state-wide. An alternative proposal from MODOT is to institute a toll on the highway. In this video, Show-Me Institute Policy Analyst David Stokes suggests the the latter option makes more sense economically, as the people using the highway will be the ones paying for it. This video is a companion to Stokes’ recent op-ed, which can be found here.

Still At The Starting Gate . . .

Posted on by Michael Rathbone

Missouri is not alone in wanting to give its economy a boost in 2012. But what is the best way to do it? As Missouri Gov. Jay Nixon’s (D) State of the State address approaches on Tuesday, it might be useful to take a look at what some of our neighbors are doing. Recently, Kansas Gov. Sam Brownback (R) unveiled his proposal for tax reform in that state.

Highlights of the Brownback Plan include:

  • Lower the top individual income tax rate from 6.45 percent to 4.9 percent (Missouri’s is 6 percent).

  • Double the standard deduction to $9,000 for head-of-household filers.

  • Eliminate various tax breaks, including those for home mortgages and earned income.

  • Eliminate individual income taxes on non-wage business income like limited liability companies.

  • Preserve the 1-cent state sales tax.

Now, the plan is described as “close to revenue neutral” and the article quotes a legislator who states “the devil is in the details,” and I happen to agree. However, this proposal points Kansas in the right direction. Any attempt to lower tax rates and broaden the tax base (i.e., closing loopholes and ending tax breaks) should be commended. Is Missouri going to follow (Kansas is not alone in proposing tax reform; Nebraska also is looking at cutting taxes)? State officials in Jefferson City have the opportunity, with the new legislative session, to make some serious changes and set Missouri on the right path to compete economically.

At the Show-Me Institute, we have proposed various tweaks in the state’s tax code that could be beneficial and make the state more competitive. Is Missouri going to move down this road, or are state officials going to continue promoting economic development debacles like Mamtek (and other projects that should remain dead), which make for good photo-ops but have resulted in a failure to grow Missouri’s economy?

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