Funny You Should Mention It …

Posted on by Dave Roland

On July 31, the Post-Dispatch ran the following letter I had written to the editor:

Society makes a promise to children that no matter their race, ethnicity, or socioeconomic status, every child should have the education necessary to realize his potential. For many children in Saint Louis, however, that promise has been broken.

Saint Louis Public Schools maintains a handful of excellent institutions, but for three years now, the state has deemed the district as a whole to be unworthy of accreditation. State law requires that if a school district fails to maintain accreditation, the students living in that district must be given the opportunity to escape their troubled schools and attend accredited public schools in nearby districts. Just as SLPS was about to lose accreditation in May 2007, however, the elected school board formally urged county school districts to deny admission to any students seeking transfer under this law — and the county districts complied. For three years, many students from Saint Louis have been denied the educational lifeline provided by state law, trapped in failing schools for years they won’t get back.

Thanks to the Missouri Supreme Court, that now seems likely to change. With a 4-3 decision in Turner v. School District of Clayton, the judges ruled that the school districts in Saint Louis County cannot turn away Saint Louis residents seeking admission to their schools.

It also ruled that SLPS must bear the expense of their students’ education and provide transportation.

The court said that when a Missouri school district has clearly failed its students, that district is required to provide access to alternatives.

Many in the county will worry about the potential challenges of integrating kids from Saint Louis into their classrooms. Elected leaders and school officials in the city will complain about the expense of sending students to other school districts. SLPS will argue that without the money those students represent, the district cannot be expected to make the changes necessary to regain accreditation, and that this decision represents the death of public education in Saint Louis.

These arguments overlook what the law and the Missouri Supreme Court did not: Public schools exist to serve the children, not the other way around. Children in Saint Louis have already had their educational progress delayed for too long. Access to better schools cannot wait until the adults straighten out the mess they created. The welcome impact of the Turner decision is that after years of hollow promises that someday all of the students in Saint Louis would enjoy access to high-quality educational opportunities, someday has finally arrived.

Today, another letter to the Post-Dispatch (predictably) responded that the real problem with SLPS is a lack of funding — which the writer attributes to Missouri school districts’ failed attempts to persuade the courts that taxpayers should be spending billions more in school funding. There are, of course, two massive failures of logic in this letter. The first is the notion that students’ academic performance is linked to the amount of money spent by their school district, a point debunked not only by the research of Dr. Michael Podgursky (who happens to be a Show-Me Institute board member), but also by the fact that SLPS maintains some of the very best schools in the state with the same per-student funding it provides to some of the very worst schools in the state.

The second failure is linked to the first. The letter complains about school funding at the state level, but the question at issue is the failing of Saint Louis city’s unaccredited school district. Last year, SLPS spent more than $15,600 per student — far, far above the state average, and on par with the best-performing districts in Saint Louis County. SLPS also maintains a student-to-classroom-teacher ratio of 18 to 1. This means that SLPS has roughly $281,000 to spend for every active classroom in the district. That’s $281,000 per classroom! Even if, say, 40 percent of that money (more than $110,000 per classroom) went to administrative costs, that would leave nearly $170,000 to pay a teacher’s salary (let’s say $60,000) and to properly equip and maintain just that one classroom.

SLPS suffers from a number of ills, but lack of funding is not one of them.

The Inalienable Right to High-Speed Internet Access

Posted on by John Payne

The federal government will spend almost $82 million in Missouri to expand high-speed Internet access in rural areas. This is no doubt a boon to rural residents who want faster Internet access, but is this really a necessary function of the government? Most people in rural areas can already get high-speed Internet access through satellite connections — although they carry the same limitations as satellite television.

More to the point, if these people deeply desire faster Internet service, they have the option of moving into a decent-sized town and getting a cable or DSL connection. The fact that they don’t indicates that, for the vast majority of these people, living in a rural area is more important than having extremely fast Internet service. Choices involve trade-offs, and if a person chooses to live in a rural area, he should either be willing to forgo high-speed Internet access or pay the market rate for the service. Because I live in Saint Louis, it is easier for me to attend large, public events like Cardinals games and the upcoming Rush concert than it is for someone from Shannon County, but that does not mean the government should subsidize trips to Saint Louis for people from Shannon County. At the same time, I cannot enjoy Missouri’s outdoors as easily as someone from Shannon County, but the government shouldn’t pay for my float trips on Current River.

A person should be free to live where and however he pleases provided he does not interfere with the equal right of others to do the same. It is not the government’s role to subsidize one way of life over another.

Link via John Combest.

Nothing Comes From Nothing

Posted on by Audrey Spalding

On Tuesday, Saint Louis city residents voted overwhelmingly to pass a $155 million bond for Saint Louis Public Schools (SLPS). According to the city’s Board of Election Commissioners, nearly 76 percent of the city residents who showed up at the polls voted for the bond.

One of the primary strategies with which proponents of a school bond promote such measures is to say that the bond will not result in an increase in taxes. This is misleading at best, and disingenuous at worst.

There are two main ways that school districts ask residents for more money. The first is by asking voters to approve a tax levy increase, which, if approved, results in a direct increase in the property tax rate. The second is by requesting that voters approve a bond. A bond is an issuance of debt. It does not directly raise your property tax rate, but the debt must be paid off in the future. And school districts pay off the bond issued today with property taxes tomorrow, plus interest.

According to St. Louis Public Schools’ 2009 Comprehensive Annual Financial Report (CAFR), district residents paid $3.8 per $100 of assessed property valuation. Of the school property tax rate, $0.6211 was used to pay off debt and debt-related costs. That means that more than 16 percent of the property taxes that district residents pay for SLPS are used to pay for the district’s debt. Tax dollars will be used to pay for the just-approved $155 million bond. Those millions will not appear out of thin air.

Reading the coverage leading up to the election, one statement stood out as particularly bad. As St. Louis Post-Dispatch reporter Elisa Crouch put it, “The bond measure would not result in a tax increase, [h]owever, taxpayers would pay the levy longer if the bond is approved. The district would retire its bonds in 2025, rather than 2018.”

Read that quotation again. It’s kind of ridiculous. Rationalizing school debt by saying that it won’t increase the tax rate, only the duration of payments, is akin to justifying taking on more credit card debt because it won’t increase your monthly payment — you’ll just have to spend a few more years making the minimum payment. If I applied this logic to my own finances, I’d have many wonderful impulse purchases (ooh!), but it would take me years of austerity to climb out of debt in the future.

I wonder when SLPS will get around to paying off all of this debt it has accumulated. Going back to the 2009 CAFR, you can see on page 105 that since 1999, SLPS has never managed to reduce the rate of taxes it charges residents for debt purposes. The rate has only increased, from $0.55 to $0.6211. In 2009, SLPS had accumulated a total of more than $245 million in bonds and notes payable, according to the CAFR. Furthermore, SLPS paid down $14.3 million of its debt last year, while paying an additional $8.95 million in interest charges. In fact, according to the CAFR, only $1 of every $2 that SLPS spent in 2009 on debt service went to paying down its debt. The rest was eaten up by interest, payments to an escrow agent, and bond issuance costs.

Debt is expensive. I’m sure SLPS — and Nicolas Cage — would agree.

Some Observations on Prop C

Posted on by Dave Roland

Yesterday’s primary election featured a statewide vote on Proposition C, otherwise known as the Health Care Freedom Act. The bill originated as a proposed amendment to the Missouri Constitution, but when it became clear that the bill could not be brought to a vote in the Senate, its proponents reached a compromise that would allow citizens to vote on it as a statute. The new statute is unlikely to have much legal effect, but it was touted as a way for Missourians to concretely express their opinions about the individual health insurance mandate that serves as the cornerstone for the federal health care reform law adopted by Congress earlier this year.

The Health Care Freedom Act passed with more than 71 percent of the vote, but this alone does not truly tell the story. Primary elections have a different dynamic than general elections, with lower turnouts that can be dominated by one party or another; a measure passing with 71 percent of the vote might not be surprising if, say, the party most likely to favor that measure had far more supporters going to the polls. And, in fact, about 64 percent of those who voted yesterday chose Republican ballots, while only 35 percent chose Democratic ballots. The Health Care Freedom Act was sponsored by and primarily driven by Republicans, and its target was a provision in a bill passed by a Democratic Congress and a Democratic President — so, given the turnout, perhaps the landslide victory for Prop C was just to be expected.

Not so fast.

Looking more closely at the data, it appears that a significant percentage of Democrats also voted in favor of Prop C, presumably indicating dissatisfaction with the individual health insurance mandate. How can we know? Just compare the number of Democratic ballots cast in the race for U.S. Senate (315,787) to the number of votes cast against Prop C (271,102). That means that even if we assume that every person using a Republican, Libertarian, or Constitution Party ballot voted in favor of the Proposition (an unlikely prospect), more than 40,000 people using Democratic ballots also supported the measure. In St. Louis city, at least 29 percent of those casting Democratic ballots voted in favor of Prop C (26,696 Democratic ballots; 18,989 votes against Prop C). In Kansas City, at least 20 percent of those casting Democratic ballots voted in favor of Prop C (20,534 Democratic ballots; 16,383 votes against Prop C). When one considers that it is likely that at least a small percentage of Republican, Libertarian, and Constitution Party voters voted against Prop C, that means that anywhere from 25 percent to 40 percent of Democrat voters statewide probably supported the measure.

There are limits to what yesterday’s vote can tell us. For example, are Prop C’s supporters opposed to all parts of the federal health care law, or just the individual mandate? At a minimum, though, it does seem remarkably clear that Missouri voters have demonstrated a broad and bipartisan opposition to the idea that Congress should force people to purchase health insurance.

Lost Entrepreneurial Initiative: An Unseen Cost of Auto Bailouts

Posted on by Christine Harbin

Over at Cafe Hayek, Donald Boudreaux writes a letter to the editor that impugns an editorial in the Wall Street Journal for ignoring the unseen costs of the auto bailout. He argues (emphasis mine):

[T]he heart of the case against the bailout is that it saps the life-blood of entrepreneurial capitalism. The bailout reinforces the debilitating precedent of protecting firms deemed ‘too big to fail.’ Capital and other resources are thus kept glued by politics to familiar lines of production, thus impeding entrepreneurial initiative that would have otherwise redeployed these resources into newer, more-dynamic, and more productive industries.

The ‘success’ of the bailout is all too easy to engineer and to see. The cost of the bailout – the industries, the jobs, and the outputs that are never created – is impossible to see, but nevertheless real.

This is particularly relevant to Missouri, because the $150,000 tax credit package that Missouri decided to give to Ford is Missouri’s version of the auto bailout, and is also associated with unseen costs. Although it is easy to see the benefits of the policy, it is impossible to see the economic activity that would have otherwise occurred (Merci, Frédéric Bastiat!). When the state government provides financial assistance to specific companies or industries, it crowds out private investment and entrepreneurial initiative. In addition to many other negative consequences, it incites the producers to invest their resources in an activity for which the state does not have a competitive advantage, at the expense of investing in activities that are “newer, more-dynamic, and more productive.”

The U.S. Department of Great Rivers and Rat Sperm

Posted on by David Stokes

U.S. Sens. Tom Coburn and John McCain just released “Summertime Blues,” a report chronicling 100 wasteful uses of stimulus dollars. Let’s leave aside the question of whether the entire thing has been a waste, and tacitly agree that some types of stimulus spending can be relatively better than others. Spending $1 million for a highway that people need and use is better than spending $1 million for a highway that people don’t need and don’t use. But on to the waste and pork!

The report includes two examples in Missouri. Really, though, one should have been counted for Illinois rather than Missouri, which leaves us with only one citation for the Show-Me State. The expenditure that I dispute should be classified for Missouri — but without any dispute over its uselessness and absurdity — is the $430,000 given to the Army Corps of Engineers to enhance a museum about the Army Corps of Engineers. It’s no. 27 on p. 24 of the report. The museum, which I sheepishly admit I had never heard of (I go to the East Side Metro East for one thing and one thing only), is dedicated to the Mississippi River and the Army Corps of Engineers, and is in East Alton, Ill. So, that’s $430,00 more in spending so that the Army Corp of Engineers can tell the public what a good job they do.

This is not to say that the Army Corps of Engineers doesn’t do a good job. Rather, they should just do a good job without feeling the need to tell us about it. If I lived in Louisiana in 1927 or 2005, though, I might feel differently.

The Missouri example is $180,000 for scientists at the University of Missouri to deal with the pressing problem of why rat sperm becomes less useful when it is thawed after freezing. (This is example no. 95 on p. 45.) Apparently, this is exactly the type of project for which the stimulus was designed.

All in all, it could have been worse for Missouri. Many of the projects in other states cost millions of dollars more, and most closely resemble a project akin to: dig hole; fill in hole; repeat. Example no. 10 is one of my favorites: $100,000 for “Town replaces new sidewalks with newer sidewalks that lead to ditch.”

No matter where this spending occurs, though, we all pay taxes for projects like this, and elected officials all (or almost all — there are a few exceptions) fight for local spending and spoils.

Missouri’s “Subsidies-for-Development Disease”

Posted on by Christine Harbin

An editorial in the Kansas City Star argues that Missouri should stop training companies to expect subsidies. It describes the phenomenon as a “subsidies-for-development disease [that] has become dangerously pervasive” in Missouri. This is something that contributors to Show–Me Daily have been arguing all along, and I am glad that others are beginning to assess tax credit programs critically.

Here’s one of the editorial‘s major points:

It’s understandable that lawmakers would want to do something to protect the Claycomo jobs in the face of competing offers from other states that are equally shameless. Yet the whole process, despite the studied silence of Ford, had the feel of extortion. Ford never had to say a thing, but everyone knew the company was expecting something.

Ford expects handouts from other states too, despite the fact that it’s a profitable, private company. Ford is playing a game, and it is one that a state like Missouri can’t win. Unfortunately for taxpayers, Ford is not the only company playing — many other companies in other industries also pit states against each other in search of the biggest handout.

Additionally, from the editorial (emphasis mine):

“[Offering incentives] always has an unsavory feel,” said economist Chris Kuehl of Kansas City-based Armada Corporate Intelligence. “It’s not unlike the sports guy, dangling six different teams.” Kuehl said he actually heard someone compare the Ford deal to the bidding war over NBA star LeBron James.

Is Kuehl a Show-Me Daily reader? Perhaps the someone he refers to was Joseph Steelman, who made that exact comparison in a recent blog post. Or perhaps that person was myself, because I also previously discussed how the bidding war over James is an example of how taxes can incite people and businesses to change their behavior.

Individuals Make Better Decisions About Land Use Than Do Government Commissions, So Why Won’t the LRA Sell?

Posted on by Thomas Duda

What a difference a month makes.

In July, the city of St. Louis’s Land Reutilization Authority (LRA) Board of Commissioners heard public testimony from six persons seeking to purchase property, and the board actually approved three of the sales! (Commissioners deferred action on one of the properties and offered a five-year “garden lease” on each of the other two parcels subject to public testimony.) Per its usual practice, the LRA sent buyers off with the encouragement that they “will receive a letter in the mail” enumerating their required next steps for taking title to the city-owned properties.

All other agenda items received their recommended actions.

The above may seem like nothing more than minutiae to persons unfamiliar with the problems associated with LRA ownership of formerly private lands, but for persons who live next door to any of the LRA’s thousands of parcels in the city or for taxpayers anywhere in the city, the above actions are of particular significance.

LRAMarch2009StockPhoto

One person who testified this month seeking to purchase a vacant lot adjacent to her home spoke of how burglaries are “a constant problem,” and that she hoped the acquisition of the lot would allow her to better protect her property. Another potential purchaser expressed her desire to become a homeowner, only to be rebuffed by the commission with an admonishment that she “talk to the alderman,” demonstrate stronger financial abilities, and await further review by the commission at the next meeting. A husband and wife expressed their desire to purchase the lot adjacent to their home in order to provide space for room additions to accommodate their daughter, son-in-law, and grandchildren. Two representatives from a church spoke about how the purchase of a fenced parking lot would greatly assist in the church’s programming and outreach.

Considered together, the myriad of motivations and the multitude of proposed uses for LRA-owned land parcels suggest to me that individuals, when free to conduct land transfers, make better decisions about land use than do any seemingly well-intentioned bureaucrats on an executive commission.

The LRA meets in the Board Room at St. Louis Development Corporation, 1015 Locust Street, Suite 1200, at 8:30 a.m. on the last Wednesday of each month.

Milton Friedman Legacy of Freedom Day

Posted on by Administrator

July 31, 2010, would have been Milton Friedman's 98th birthday. To honor his vision and the impact he has had on our society, The Foundation for Educational Choice collaborated with policy groups from around the world to hold events in Professor Friedman's honor on Friday, July 30. The Show-Me Institute was among the groups participating.

In the three years since the first "Friedman Day," we have seen a wide variety of events. There have been field trips focused on the prosperity of a free market, a live web chat with Emmy Award winner John Stossel, and viewings of old Friedman videos. There have been events with celebrities and events with children. Most events have been as simple as a luncheon and a presentation.

For more information on the Milton Friedman Legacy of Freedom day, please visit the website of The Foundation for Educational Choice.

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