Judge Suggests That Missouri Should Be Run Like a Business

Posted on by Alyssa Curran

Last week, Judge William Price, the chief justice of the Missouri Supreme Court, delivered the State of the Judiciary address. He made one thing clear: The judiciary is tasked to protect the people of the state, but they cannot carry out this commitment successfully without sufficient resources. Missouri’s essential government services must be carried out even in the worst of economic times. The Missouri judiciary is doing its part to be fiscally responsible, returning millions of dollars of appropriated funds even though their own budgets are tight. They feel the same economic pressure that other government agencies are experiencing, but they are making an attempt to keep the interest of the public at the forefront.

We have all undoubtedly felt overworked and underpaid, and during a recession, the proportion of the labor force feeling this way has surely increased. As Judge Price pointed out, those who make some of the most important decisions throughout the entire criminal justice system — state prosecutors — are being spread thin. This is a worrying state of affairs if we want prosecutors to make well-considered decisions. People work better when they are happier — it’s as simple as that.

One of the most pressing issues mentioned in Judge Price’s address is the state’s overspending on the incarceration of nonviolent criminals, something that Show-Me Institute research assistant John Payne mentioned in an earlier blog post. This is a situation resulting from too many restrictive laws that have resulted in the criminalization of nonviolent offenses, such as transactions involving drugs, alcohol, and even prostitution. 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.

Too many people are being arrested and tried for crimes that have no complaining victim. As Reason editor Radley Balko has observed, “Because there is almost never a complaining victim in vice crimes, law enforcement officers must go to extraordinary lengths to investigate and prosecute these crimes. This leads to all sorts of other problems, including invasions of privacy, entrapment, and police corruption.” The situation has also led to inconsistency in prosecution throughout Missouri. The toughest counties are prosecuting five times as many offenders as the most lenient counties.

Judge Price has has offered a rather convincing reason to change these policies, and to decrease the rate of prosecution and incarceration of nonviolent criminals — because we can’t pay for it. What’s even more convincing is that we cannot afford to pay for the proper treatment and rehabilitation for these offenders. Price outlines how poorly the system treats people who haven’t directly harmed anybody else, by tearing them from their lives, throwing them in a “concrete box with very expensive guards, feeding them, providing them with expensive medical care, surrounding them with hardened criminals for long periods of time, and separating them from their families who need them and could otherwise help them[.]” What’s worse, while in prison, some of them are being trained by full-fledged violent criminals on how to further divide themselves from mainstream society. These people are also citizens, and deserve to be given a chance to reintegrate into society.

Price provides some sobering numbers:

In 1994, shortly after I came to the Court, the number of nonviolent offenders in Missouri prisons was 7,461. Today it’s 14,204. That’s almost double. In 1994, the number of new commitments for nonviolent offenses was 4,857. Last year, it was 7,220 — again, almost double. At a rate of $16,432 per offender, we currently are spending $233.4 million a year to incarcerate nonviolent offenders … not counting the investment in the 10 prisons it takes to hold these individuals at $100 million per prison. In 1994, appropriations to the Department of Corrections totaled $216,753,472. Today, it’s $670,079,452. The amount has tripled. And the recidivism rate for these individuals, who are returned to prison within just two years, is 41.6 percent.

Price observes that if the state government were run like a business, these wasteful practices would have been done away with years ago. “Business” may not be the most convincing metaphor to use, because one of the classic economic justifications of government action, particularly the justice system, is that public goods are not optimally provided by markets. Some economists, however, have suggested that many aspects of government action that are commonly justified in terms of their status as public goods, including some within the justice system, can’t correctly be considered public goods:

The standard economics approach to delineating the optimal set of the state’s functions is unsatisfactory.2 In particular, when economists such as Joseph Stiglitz (1988: 24) indicate that “a primary role of government” is to provide the legal framework “within which all economic transactions occur,” not much is said about the desired content of the laws, and how it might affect the desirability or efficiency of their enforcement. Besides, there is typically no mention of nonstate enforcement mechanisms and their relationship to those of the state. The impression is created that all conflict resolution in economic life is in the unavoidable domain of the state. That impression is in contrast with the empirical evidence (see, e.g., Greif 1997, Gow and Swinnen 2001, and Waldmeir 2001).

This confusion is related to the use that is made of the concept of public goods as being nonrival in consumption and nonexclusive (Samuelson 1954: 387–89). If these goods are to be provided at all, taxes and the related state’s coercion are necessary. However, which goods are truly public? Is the justice system the domain of the state because the relevant services are a public good? Clearly, that cannot be said of all such services. Then, which “justice services” constitute a public good? Is the lighthouse, the favorite textbook example of a public good, a public good? Ronald Coase (1974) has shown that lighthouses in 19th century Britain were operated and financed privately. This finding, however, has not prevented the lighthouse to continue serving as the primary example of a public good in many textbooks (e.g., Stiglitz 1988: 75).

There may be fewer public goods in real life than typically assumed. As a result, the necessary (or desirable) scope of the state’s activity may be narrower, too. Some of the goods declared “public” may in fact be private goods, pushed into the state’s domain by public intervention that has eliminated or undercut the possibility of voluntary private financing of these goods. In other words, some uses of the theoretical concept of public goods may inadvertently constitute ex post justifications for the results of previous expansion of state activity.

Judge Price is not an economist, but by questioning whether the routine prosecution and incarceration of nonviolent offenders for committing consensual crimes actually provides more value than cost for the people of Missouri, this may well be the type of argument he was trying to make, using different terminology. Price is suggesting that it’s time for a more thorough analysis of which interests are truly being served by prosecuting many types of nonviolent offenders, and whether such prosecution actually provides results that could be considered a public good. His address doesn’t contain all the answers, but it’s the starting point for a worthy debate.

In times of fiscal crisis, it sometimes becomes necessary to embark upon a new policy path, and welcome changes that we might otherwise avoid. Whether Judge Price’s recommendations are inspired by a concern for justice or for more practical financial reasons, this would be a positive step for the government to take. The judiciary appears to be willing to do its part in order to withstand the jolts of the recession, but are the other branches of government also up to the task?

Is the Federal Stimulus Benefiting Missouri at the Expense of Wisconsin?

Posted on by Christine Harbin

The editorial board at my hometown newspaper, the La Crosse Tribune, is critical of the way that federal stimulus funds are being spent in Wisconsin. An editorial published yesterday, “They’re feeling the stimulus … in Missouri,” laments that public works projects in western Wisconsin are being awarded to out-of-state contractors instead of to local ones.

So here’s a scenario that’s a result of force-feeding the U.S. economy through the tube of federal agencies: While $12.5 million in stimulus money will fund projects on French Island and Brice Prairie, projects that local contractors say they could handle, only a handful of out-of-state firms are allowed to bid them.

In one case, a Kansas City, Mo., company got the nod to build a $6.1 million district office on French Island for the U.S. Fish and Wildlife Service. And only three firms, all out of state – one them a Missouri-based subsidiary of an Australian steel company – are in the running to handle two projects at the Upper Mississippi Environmental Sciences Center.

It’s rare that I read an article that interests me on a both a biographical and a public policy level. Initially, I feel compelled to pick sides — but which should I support: the state in which I lived for 20 years or the state in which I live presently? Ultimately, I must decide that my conflict of interest is false, because I disagree that the subject of the editorial is even an issue.

The purpose of the fiscal stimulus was to incite economic recovery on a national level, not for certain states on an individual level. Therefore, the La Crosse Tribune shouldn’t lament the fact that a project wasn’t awarded to a Wisconsin-based firm — instead, it should celebrate the fact it went to an American firm. Furthermore, federal money comes from taxpayers in all states, not just those who live in Wisconsin or in Missouri. State officials and residents shouldn’t feel that their companies are entitled to federal stimulus money simply because a project lies within its borders.

States win and lose business from each other all the time in response to supply and demand — this is the beauty of the interstate trade. Wisconsin lost at least one free-market research analyst to Missouri in the last year, along with other business, but the editorial board at the La Crosse Tribune didn’t write about that. Why, then, does it bring this particular project to light? There are probably many public works projects in Missouri that are bid on by out-of-state vendors, perhaps even from Wisconsin.

As some readers point out in the comment section, awarding the project to a Missouri-based firm may not result in as many lost jobs for Wisconsin individuals and families as suggested in the article. This is because the Missouri firm could use local laborers, including perhaps the employees of the Wisconsin-based firms that were outbid.

The practice of soliciting bids from many contractors, regardless of their origin, is very good because it encourages competition and its positive consequences. If many contractors bid for a single public works project, it drives down cost and taxpayers get more for their money.

A Tale of Two Courts

Posted on by John Payne

Barbara Geisman, an aide to Saint Louis Mayor Francis Slay has questioned whether the city needs a drug court and recommended cutting funding for the court by $325,000. Now, I’m all for cutting the budget of pretty much any government agency, but if this just shifts people that would be going to drug court into the more punitive side of our criminal justice system, it will likely wind up costing Missouri taxpayers more in the long run.

Geisman’s view has been challenged by William Ray Price Jr., Chief Justice of the Missouri Supreme Court, who last week called for increased drug court funding.

From the Post-Dispatch:

“We know drug courts work. We have more than 8,500 graduates,” said Price, who is seeking $2 million more a year for drug courts. “We know the tremendous savings that result from drug courts in Missouri.”

As for studies about drug courts, Price had this to say in his speech to the state House and Senate:

At one fourth to one fifth the cost of incarceration, more than one half of drug court participants graduate, and recidivism is only in the 10 percent range. The last five meta studies on drug courts, from all across the United States, have shown that drug courts reduce crime from 8 to 26 percent.

As the editorial board of the Post-Dispatch noted, this is the low-hanging fruit in our justice system. I will reiterate that the cheapest of all alternatives here is to not to criminalize the behavior of nonviolent drug offenders at all, but since that is not currently on the table, drug courts are an improvement over prison — even if you think people who consume politically incorrect substances should be forced by the state to change their behavior.

Know Your Farmer, Know Your Chicken

Posted on by Sarah Brodsky

An op-ed in the Daily Iowan refutes some arguments against urban chickens, including one I hadn’t heard before:

Bailey was quoted suggesting that urban chickens undermine local economies, saying, “We have a lot of small farmers around here making chickens and eggs available for sale. My fundamental question is: Why aren’t we supporting the regional economy?”

Here is the op-ed’s excellent response:

I would argue that urban chickens would in fact strengthen Iowa’s economy, especially when we consider unique and important businesses such as the McMurry Hatchery in Webster City, known nationally for its collection of rare chicken breeds. Likewise, I highly doubt Bailey would make such an argument when considering whether citizens ought to be allowed to have vegetable gardens.

City residents are also part of the economy, and they shouldn’t have to pass up opportunities to create value for themselves in order to protect people who are already farming. Transactions in which money changes hands aren’t the only economic activity that matters.

In fact, the freedom to raise your own chickens is an important check on the farmers’ power. When customers can build their own chicken coops, farmers aren’t able to overcharge them for eggs or sell lower-quality eggs than what the market demands. If farmers don’t offer acceptable price and quality, customers will walk away and raise chickens themselves.

Clarification in the Fair Tax Proposal Debate

Posted on by Christine Harbin

Today, the Missouri Budget Project published a piece that attempts to address the Show-Me Institute study about the “Fair Tax” by Dr. Joseph Haslag and Abhi Sivasailam. There are a number of points of contention that I will identify here.

  • The Missouri Budget Project misattributes numbers to the Show-Me Institute.

    The Missouri Budget Project claims that the Show-Me Institute revised its number to from 5.11 to 6.25 percent. This second estimated percentage belongs to former state Rep. Ed Robb, not to a Show-Me Institute publication. Furthermore, Robb’s calculations were his independent evaluation of a specific piece of legislation, not a reference to the Show-Me Institute study written by Dr. Haslag and Abhi Sivasailam.

  • The Missouri Budget Project takes the exemptions out of the tax base, but they do not take them out of the rebate amount. Also, they don’t communicate why these products and services are inappropriate to tax and should therefore be exempted.

  • The Missouri Budget Project ignores the issue of growth rate in its calculations.

    Assuming a rate of growth is standard procedure, and the Show-Me Institute study includes one, but Missouri Budget Project does not. Are they assuming a zero percent growth rate?

    Dr. Haslag elaborated on this point of contention in his comment responding to “Matt” on a recent blog post by David Stokes:

    The strongest case for PCE, in my view, is that reducing the tax rate on income results in faster growth. Neither MBP nor you have offered an alternative that increases the economy’s growth rate. No doubt, the tax on PCE is distortionary. To do the right experiment, we need a model of economic growth that accounts for facts observed in the world. The Ak model does so. Moreover, the economy’s equilibrium growth rate is a function of the income tax rate. By my calculations, reducing the income tax rate adds more than one-half percentage point to the state’s annual growth rate. This growth more than offsets the excess burden associated with the tax on consumer spending.

  • After taking exemptions out of the tax base, the Missouri Budget Project applies the the amount of the rebate to a broad base. This is a very big difference.

    Dr. Haslag responds to this in the same blog comment:

    Along those lines, every time something is exempted, the rebate must shrink since the rebate is based on the concept of a refund on things that people buy that are subject to the tax. If you want to talk about accuracy, you should be aware that MBP and others have fixed the rebate while shrinking the tax base. In other words, they change the definition of the tax base and apply that definition while keeping the old definition of the tax base when they compute the rebate. There are two equations in two unknowns and the definitions must be the same across the two equations. MBP, citing ITEP, violate this definition across the two equations.

  • The debate between the Missouri Budget Project and the Show-Me Institute concerns the size of the tax base and the size of the rebate, not the arithmetic.

    Dr. Haslag again:

    Since my calculations are made as transparent as possible, you can check my math. No one is questioning the accuracy of my arithmetic. Indeed, you are asserting my assumptions are wrong. Under your premises, my assumptions are wrong. I do not accept your premises. I digress, but I want things to be as transparent as possible.

It’s laudable that Missouri Budget Project is increasing its effort at making its analysis more transparent. At least its newest piece provides more detail about how the organization arrived at its estimate.

The Necessity of Art

Posted on by John Payne

Even in the midst of a huge budgetary crisis, it’s nice to see that Missouri taxpayers will continue to support the finer things in life:

In the budget proposed by Gov. Jay Nixon last month, the Missouri Arts Council, part of the Missouri Department of Economic Development, would not receive a direct appropriation from the state to fund nonprofit arts organizations, including the Allied Arts Council of St. Joseph.

However, Mr. Nixon has recommended that the agency be given the ability to spend $9.7 million in the next fiscal year, the same spending authority it was given during the current fiscal year. The agency is provided federal dollars and money it receives from a trust fund that collects tax revenues from out-of-state professional athletes and entertainers who perform in Missouri.

Supporters of this spending might point out that the money comes from the federal government, but I’m sure that money could be spent on more essential services and help bring Missouri at least somewhat out of its fiscal black hole.

Art is undoubtedly a wonderful thing, but it does not require government funding.  People who enjoy art — myself included — can continue to spend their own money on it. If artists and artistic institutions cannot attract such patronage on their own merits, then people clearly do not value it, and the government should not be funding it.

One Way to Get Rid of the Jennings School District’s Handheld Computers

Posted on by Sarah Brodsky

A school district in Florida found itself on the Drudge Report after it used stimulus funds to buy iPods. The iPods, which the district will give to parents in exchange for completing a survey, cost $350,000.

That’s a small sum compared to the $1.25 million the Jennings School District spent on hand-held computers for students. Most of those computers ended up in storage. Jennings is now selling some of the devices for a fraction of what it paid, and it plans to distribute others to graduating students over the course of a few years.

It would be wiser for Jennings to emulate the Florida district and give away whatever computers it can’t sell, as soon as possible. If the district gives them all out at once, recipients may be able to find some use for them. If it waits to hand them out to graduates in a couple of years, they’ll be completely obsolete. By then, graduates won’t want to do anything with the computers — except maybe to display them with their caps and gowns as mementos.

There’s no need to attach a survey; just get rid of the devices. But if Jennings does give them to survey participants, I can imagine what a common response will be: “Stop wasting money on gadgets that students don’t use!”

Serving Local Food Is a Daunting Task for School Districts

Posted on by Sarah Brodsky

As we saw in Columbia, Missouri school districts that search in vain for local food to serve are getting a lesson on “where their food comes from.” I’ll give you a hint: It’s not from the Midwest. Indiana is now running into the same problem:

Indiana school districts are lagging behind the rest of the country in procuring locally grown fruits and vegetables for students.

It turns out that buying local food just isn’t practical for Indiana districts:

“I don’t know what local farmers could grow that could last through a school year, but it would be nice if they could,” said Joanne Baierwalter, food service director for Muncie schools. “Potatoes, maybe, but where would you store them? Who would deliver them?”

Some local food advocates would respond that districts should buy up every local produce item when it’s harvested, then carefully preserve it to serve when school is in session. I’m left wondering: When did districts get out of the business of educating kids in order to become canneries?

Negative Consequences of Reviewing Tax Credit Applications in the Missouri Legislature

Posted on by Christine Harbin

As Ben Wieder reported yesterday in the Columbia Missourian:

Senators who would be responsible for reviewing tax credit applications under a proposed bill are mixed on whether they should have the authority to do so.

I hope that the Missouri legislature ultimately decides that it shouldn’t have the authority, because this policy would have several negative consequences.

First, the legislature would be committed to a time-consuming review process. If the legislature spends this much time determining whether it should even have the authority to review tax credit applications, it would spend at least as much time arriving at a conclusion when actually reviewing the applications.

Second, subjecting tax credits to the appropriations process would discourage businesses from relocating to Missouri. Wieder introduces this idea in the article. Businesses would locate themselves in other states out of fear that the Missouri legislature would ultimately deny their application, or because they are not recipients of targeted tax credits in Missouri.

“What businesses need is certainty,” [State Economic Development Director David] Kerr said. “If it’s not certain, they will go to a state where they know what they’re getting.”

Third, if the legislature has the authority to decide which specific applications receive tax credits and which don’t, then there is an increased incentive for applicants to seek the favor of elected officials. This would aggravate the already-uneven playing field and encourage special interests.

Instead of providing tax credits that are targeted to specific businesses or industries, it should work to create an environment that affects all parties equally, such as reducing corporate income taxes or eliminating the earnings tax.

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