Page 678 – Show-Me Institute

How to Save $26.6 Million Annually

Posted on March 29, 2010May 5, 2026 by Christine Harbin

Having a huge state budget deficit does have positive consequences, albeit few. One particular example is that the Missouri state government is making an effort to curb excessive spending.

The prison system in Missouri is one area of the state budget that would benefit from some fiscal restraint, as John Payne has noted before. According to an op-ed in the Saint Louis Post-Dispatch, the Missouri legislature has proposed to reduce the number of nonviolent first offenders sent to state prisons, and it is projected to realize significant savings as a result. From the editorial:

If 1,200 offenders were put into judicially supervised drug treatment programs and 800 received “enhanced probation,” costs would go down to $7.1 million.

Those savings would increase steadily and reach $26.6 million a year if a prison were to close. Aggressively pursued, the financial goal could be reached within a year.

Additionally and parenthetically, the article also points out that the practice of incarcerating nonviolent felons has some negative unintended consequences that perpetuate the state’s fiscal troubles:

Recidivism and re-incarceration rates have risen, guaranteeing that “this cycle will continue to worsen at a faster and faster pace, eating tens of millions of dollars in the process,” [Missouri Chief Justice William Ray] Price said.

Missouri would be wise to consider the competing needs of other programs for this money, such as education and incarceration of felons that committed violent crimes. Alyssa Curran articulated this point in a previous post on this blog:

Regardless of how one feels about the morality of such activities, it’s hard to justify expending so many resources on their prosecution when the core functions of the judicial system — protecting life, liberty, and property from actual direct, measurable harm — is suffering from a lack of resources.

The Earnings Tax Is Still Bad, for All the Reasons We’ve Already Said

Posted on March 29, 2010May 5, 2026 by Josh Smith

The Kansas City Star‘s website has a piece today by two Saint Louis University professors arguing against the repeal of the earnings taxes in St. Louis and Kansas City. The bulk of their commentary is intended to be a criticism of this 2006 study by Show-Me Institute executive vice president and University of Missouri–Columbia economics professor Joseph Haslag, but the SLU professors, Lisa Gladson and Jack Strauss, have crafted an argument that doesn’t really address Haslag’s findings. In fact, they seem to have missed the point entirely.

In the Show-Me Institute study, “How an Earnings Tax Harms Cities Like Saint Louis and Kansas City,” Haslag shares his findings that there is a measurable negative impact for cities with an earnings tax. The opening of the paper itself provides an ideal summary: “About one in four large cities in the United States has an earnings tax. I attempt to quantify the relationship between the earnings tax rate and the growth rate of cities relative to their metropolitan statistical areas (MSA). I find that cities with an earnings tax tend to have a significantly lower ratio of city income to MSA income than those without them.”

Haslag goes on to argue that the earnings tax distorts the growth of the MSA, encouraging people to locate in outlying areas rather than in the city center — discouraging investment in the city and reducing per-capita income.

The counter offered by Gladson and Strauss is responding to a different point — one not made in the Show-Me Institute study. They claim that Haslag’s study “offers a simple negative correlation between cities with earnings taxes and real per capita income growth.” This is emphatically not the point being made in the study. Growth implies a comparison over time, whereas the Show-Me Institute policy study to which they refer used side-by-side comparisons of population proportions and where they happened to be located within the MSA. Haslag does not make any arguments about the level of growth, but rather about where the people are located. It may be that the MSAs grow faster or slower because of the presence or absence of an earnings tax, but Haslag’s study drew no connection between growth and the presence of an earnings tax. Haslag may or may not be surprised to learn that Gladson and Strauss “found no relationship between earnings taxes and a city’s income growth, and no evidence that earnings taxes are a reason for a city’s slow growth,” because this is not what he looked at in his study.

Haslag found, with careful, externally reviewed analysis, that the presence of an earnings tax negatively impacts the income of the cities that implement them when residents can easily shift to a nearby area without such a tax. Perhaps after a more careful reading of the piece, Gladson and Strauss will find some salient point on which they can disagree with this study, but for now their offering is an argument without an opponent.

“Consider the Competing Needs”

Posted on March 29, 2010May 5, 2026 by Christine Harbin

In an op-ed published today, the editorial board at the St. Joseph News-Press encourages Missouri’s legislators and leaders in economic development to “consider the competing needs” when deciding whether to continue financially supporting the Tour of Missouri. (Link via Combest).

Taxpayers understand you don’t add to your stock investments when you are struggling to buy food and pay for college tuition. Business owners rarely add a second location, no matter the potential, when times are tough and they have payrolls to meet.

So, too, the state’s legislators and economic-development leaders must choose between funding the cycling competition or fully funding such things as teachers and early-childhood education.

This is an example of the “hard choices” that Sarah Brodsky described earlier on this blog. Before they spend money on any program — be it a cycling competition, a light-rail expansion, or anything else — state and local governments should perform this kind of cost-benefit analysis to determine whether the money can be spent more wisely elsewhere.

Counties, Not Municipalities, Should Determine TIFs

Posted on March 29, 2010May 5, 2026 by David Stokes

The core of this issue has already been argued on the eastern side of the state. A 2007 change to state law granted more authority to county TIF commissions within the Saint Louis area, at the expense of municipal TIF commissions. This led cities within Saint Louis County to file a lawsuit attempting to overturn the change. Municipalities in the area had been enacting tax incentives, particularly TIF, with much greater frequency and much less fiscal prudence than the counties themselves. Fortunately, an agreement was reached between the cities and the county, and a modified version of the TIF commission still giving more power to the counties was agreed upon.

When it comes to TIF authority in the Kansas City area, though, cities still dominate. The Kansas City TIF Commission has 11 members, six of which are appointed by the city. The county, school districts, and other districts share the other five positions. Even if there is total opposition to a tax incentive proposal by every other government jurisdiction on the commission, the city can still pass any tax incentive it wants. Put simply, municipal TIF commissions are a rigged game and a closed process, whereby city officials can make decisions that have a dramatic effect on people outside of that city.

Which level of government should really be making these decisions about TIF or other types of tax incentives? The debate tends to weigh two sides: city officials who presumably have a better idea what might work for their city and their residents, or higher levels of authority that would hopefully consider a larger picture, because these tax exemptions and incentives generally have an economic effect that radiates much farther than just within the cities involved. I believe that the county level works best for these types of decisions. After all, county government is local government by every measure. I trust that the powers that be in Jackson County government are not so far removed in their courthouse skyscraper that they have no idea what might work well for the people of Kansas City, Independence, and Grain Valley.

Counties are also large enough that they can put proposed tax incentives into perspective, making decisions outside of a municipal vacuum. If these incentive decisions were made at the county level, cities would no longer face the fear and pressure to remain competitive with surrounding cities by issuing generous incentives to favored businesses. County officials would also have a much better claim to represent and, more importantly, remain accountable to the various entities and residents affected by such decisions. Cities would certainly maintain a voice in the process, as would school districts, through rotating appointments on the county TIF commission that could be determined by the locations of future proposals. That is how the commission now functions in Saint Louis County, and how it could (and should) work in Jackson County, as well in as the metropolitan areas other counties.

If judges and elected officials ultimately determine that TIF commission power should rest at the county level, we could expect an end to TIFs and similar giveaways in some counties, and a reduction in their use in many others. Saint Charles County, near Saint Louis, has been one of the fastest-growing counties in the state for three decades, yet its leadership flatly refuses to support TIF. It has never passed a TIF project in the unincorporated part of the county, and it has fought every TIF proposal within its cities. The tremendous fiscal discipline shown by Saint Charles County, while still experiencing great economic growth, helps demonstrate why these decisions work well at the county level.

The prominent abuses of TIF in Missouri have occurred within municipalities that push for tax incentives, rather than in the unincorporated areas of counties. Similarly, most of the ugly cases of tax incentives involving the threat of eminent domain abuse have also occurred in cities, such as Sugar Creek. So, what should be done with the Kansas City TIF commission? Area residents would benefit if it were abolished, and all its authority transferred to county commissions. I believe residents throughout Missouri would be better served by appointing countywide TIF commissions to be responsible for tax incentive determinations.

David Stokes is a policy analyst at the Show-Me Institute, a Missouri-based think tank.

Which Education Reforms Are Most Likely to Succeed?

Posted on March 29, 2010May 5, 2026 by Jay Greene

On Feb. 18, the Show-Me Institute proudly presented featured speaker Dr. Jay Greene in conjunction with the Kansas City Public Library. His presentation, “Which Education Reforms Are Most Likely to Succeed,” is part of our successful continuing series with the library, “What Works in Urban Education.” Greene is a professor and head of the Department of Education Reform at the University of Arkansas. He holds a B.A. in history from Tufts University and an A.M. and Ph.D. in political science from Harvard University. Greene’s work has appeared in scholarly publications such as The Public Interest and City Journal, as well as popular outlets like the Wall Street Journal and the Washington Post.

Audio file — 1:25:50 — 78.5 MB (MP3)

An Opportunity for SLPS

Posted on March 28, 2010May 5, 2026 by Sarah Brodsky

Now that the Missouri Virtual Instruction Program has lost state funding and is charging tuition, it’s an opportune time for the St. Louis Public School District to expand its Virtual School.

Enrollment in the SLPS Virtual School is constrained by the district’s rule that online students spend one or more days a week in a classroom, working with Virtual School teachers in person. This policy is unusual for an online school; most such schools allow children to talk to teachers through video conferencing or by telephone, and require less frequent meetings. If SLPS made weekly in-person meetings optional, it could open enrollment to students who live far from St. Louis.

Another factor that has limited the Virtual School’s growth is its policy that elementary students must be enrolled full-time. Permitting young students to enroll in individual classes would give more children the ability to participate.

Medicaid Cuts: As Scary as They Look?

Posted on March 27, 2010May 5, 2026 by Caitlin Hartsell

Gov. Jay Nixon has proposed $120 million in cuts for the state’s Medicaid program. There has been a lot of talk on both sides of the partisan aisle about whether this was a good move, so I decided it would be useful to try putting that number into perspective.

These numbers, though, may not matter for too long. The federal health legislation, set to go into effect in 2014, is expected to expand the Medicaid pool drastically and add at least $1.34 billion total cost over 10 years.

The Kaiser Family State Health Facts website has data on Medicaid spending per enrollee, as well as on total state expenditures. Unfortunately, the site did not have both Medicaid spending data and total state expenditure data available for the same ranges of years, so my comparisons are not perfect. They do, however, serve to illuminate the spirit of the argument. The figures for Medicaid spending per enrollee are from 2006, the state expenditure figures are from 2004, and total Medicaid spending is from 2007.

Here are some spending facts for Missouri:

Year	Type of spending:	Amount	Rank
2006	Missouri Medicaid spending per enrollee	$4,387.48	35/51
2007	Total Missouri Medicaid spending	$31,316,577,800	16/51
2004	Total health care spending in Missouri (all sources)	$6,592,655,741	37/51

According to American Academy of Pediatrics in Missouri in 2007, the state will lose $1.60 in federal matching funds for every $1 it cuts from its state Medicaid budget. The governor proposed a $120 million cut from the Medicaid budget, so assuming that proportion does not change, we can extrapolate that to be about $312 million total from the Medicaid budget. As of September 2009, MO HealthNet had 865,477 enrollees, and $312 million averages to around $360.49 in cuts per enrollee. This means that the cut amounts to approximately 8 percent of the 2006 amount per enrollee.

So, even without a close analysis of which services are being cut, it is clear that this amount is not as alarming as might be expected. (It would place Missouri 43rd in the country on per-capita expenditure, based on the numbers from 2006.)

Frankly, I believe the real issue is how these cuts are made. Medicaid and Medicare are large black holes for resources that have the potential to swallow the state and federal budgets. It is not sustainable for them to grow continuously, and would be better if they could be shifted into the private sector via vouchers or well-designed cuts. Spending large amounts of money on Medicaid, if not spent in the right manner, can be even more detrimental than a smaller amount because it can distort the market and incentive structures. A closer analysis of how these cuts are being done is necessary to come to any distinct conclusions, but the numbers by themselves are not as frightening as some may believe.

As ofSptember 2009, MO HealthNet had 865,477So,Sofdnkfnsjdk enrollees.

Advancing Saint Louis through Bad Economics

Posted on March 26, 2010May 5, 2026 by John Payne

This morning at the office, David Stokes brought in a mailer he received from Advance Saint Louis urging him to vote in favor of Proposition A, which would institute a half-cent tax in Saint Louis County dedicated to funding Metro. The top fact used to support the mailer’s headline, “Our Economy Depends on Metro,” reads “Transit generates JOBS. To date, $15 billion in new development has occurred within a 10 minute walk of MetroLink.” Strictly speaking, I don’t think this statement is false, but it definitely misleads by omission.

First — and this should be pointed out every time a politician talks about creating jobs — it should be pointed out that jobs are a cost, not a benefit. Goods and services are the benefits we get from the cost of working, and if we can create more goods and services with less work, we should. If Metro could transport the same number of people just as efficiently with half as many employees, that would be a clear benefit to the overall economy (Metro might even come close to breaking even if that happened). Furthermore, creating jobs by spending tax dollars ignores the unseen costs of the taxes. If that money had not been taxed away, taxpayers would have spent it on a multitude of goods and services, or saved it to be lent out to entrepreneurs, home buyers, and the like. With the tax in place, those goods, services, and loans (and the wages that depended on them) will never exist, so we will never know the true opportunity costs of spending more tax dollars on Metro.

With regards to the statement’s second sentence, the mailer never claims that the $15 billion in new development near the MetroLink was actually caused by the MetroLink. I take the absence of such a claim to be good evidence that Advance Saint Louis has no good evidence that MetroLink has substantially contributed to this new development. I’m sure MetroLink is at least a marginal factor in some of this development, but I’m sure a much bigger factor is that MetroLink runs through the most desired areas in the Saint Louis area: downtown, the Central West End, Washington University, Brentwood, Clayton, etc. MetroLink follows development, not the other way around.

Finally, the bottom of the mailer informs us that Metro “operates with one of the lowest costs per passenger to the taxpayer,” which ignores two important points: 1) relative comparisons tell us nothing about the absolute costs and benefits of the system and 2) a new tax to support Metro will obviously lower Metro’s ranking on that metric.

Lobbying Through the Census

Posted on March 26, 2010May 5, 2026 by Sarah Brodsky

This is from a Columbia Missourian article about a campaign to identify respondents’ sexual orientation on Census forms:

“The census is the basis of over $400 billion in federal funding,” she said. “The LGBT community is not able to effectively lobby to be recipients of any of that money.”

If advocates believe the Census questions are discriminatory or offensive to any group, they should certainly make that case. However, greater ease in lobbying is not a good reason to add to the list of questions. Census participation is required by law, and it would be an inappropriate invasion of respondents’ privacy to compel them to share their sexual orientation or other personal characteristics that some lobbyists would like statistics on. Similarly, while it would help advocates for funding of medical research if everyone had to reveal their medical histories on the Census, the Census does not gather this information.

Advocates can use other means, like petition drives and rallies, to show lawmakers how many people support their causes.

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