David Stokes, Elias Tsapelas, and Patrick Tuohey join Zach Lawhorn to discuss:
– Key takeaways from Governor Parson’s State of the State address
– Does Missouri have a budget surplus?
– A “source of income” ordinance passes in KC
– What’s moving in Jefferson City, and more
LINKS:
Patrick Tuohey’s blog: showmeinstitute.org/blog/budget-and…budget-surplus/
David Stokes Testimony on Source of Income Rules: showmeinstitute.org/publication/mun…es-for-rentals/
Produced by Show-Me Opportunity
Versions of the following commentary appeared in the Southeast Missourian, the Columbia Missourian, and the Springfield News-Leader.
There is probably no better opportunity for counties and municipalities to share services and save tax money than in emergency 911 dispatching services. As vital as the service is, if the technology is effective and the operator is properly trained, it makes no difference if the emergency call is answered down the block in New Madrid, Missouri, or across the ocean in old Madrid, Spain.
In southeastern Missouri, Perry County and the City of Perryville reviewed numerous options for upgrading their 911 system. In late 2023, they determined that the best option from a service and cost perspective was to contract with neighboring St. Francois County, which has already implemented the improved technology a modern 911 system requires. Perplexingly, some residents of Perry County have objected to this.
According to news reports, the main objection is the loss of a few 911 system jobs, as if the main role of local government is to keep as many people on the payroll as possible. That’s how political machines function, not quality local government. The objectors have succeeded in putting the consolidation question on the upcoming April election ballot. Hopefully, the voters will value tax savings and improved public safety over government job protections.
Many counties and cities around Missouri share emergency operations dispatching. County sheriff’s departments can do more than simply share service with other county sheriffs; they can operate together with city police departments, fire districts, university police departments, ambulance districts, and more. The economies of scale here allow for implementation of better technology in larger 911 systems, saving taxpayer money. The city of Flint, Michigan, saved over a million dollars a year and was able to eliminate 23 positions by joining the Genesee County 911 system.
To give a Missouri example of savings for taxpayers, Lake Ozark recently contracted with Miller County to handle its 911 system. Lake Ozark will save around $200,000 per year in direct costs while avoiding spending even more to upgrade its own soon-to-be obsolete 911 system.
Closer to Perry County, the Cape Girardeau County sheriff’s 911 dispatch system handles calls not only for the sheriff but also for eight other fire and ambulance districts and police, fire, and ambulance calls for Jackson. Does anyone seriously think the public would be better served with 10 different 911 systems in the county, each one struggling to hire and train employees and regularly upgrade expensive technology?
For one final example, in 2016 the City of New Madrid and New Madrid County partnered to consolidate their 911 systems and upgrade their technology. I hope the citizens of Perry County realize how common and beneficial these types of partnership are in Southeast Missouri.
Saving money by sharing the costs of technological improvements is more important than ever since salaries for 911 dispatchers are increasing substantially in an effort to recruit more people to the job. Currently, staffing shortages are the major problem facing dispatching systems all over the country, and have been partially responsible for recent 911 system problems in Kansas City and St. Louis. Maintaining multiple systems requiring more employees using lesser technology isn’t going to help the people of Perry County.
These are just a few good examples of 911 consolidation around Missouri. While there are many success stories in both urban and rural parts of our state, numerous opportunities for change still exist. Wherever you are in Missouri, enhanced public safety technology and more efficient use of tax dollars through 911 consolidation are two things we can all support. Hopefully, the voters of Perry County will recognize these benefits in April.
Governor Parson, in his final State of the State address, said, “Actually, with the budget we outline today . . . we will leave office with over $1.5 billion dollars on the bottom line, which has never been done before in our state’s history.” He never said the word surplus, but that is how it was reported in one news service.
Earlier in the year, Rudi Keller wrote in the Missouri Independent:
Missouri will enter the new fiscal year Saturday in its best financial shape ever. But there are unmistakable signs that the massive surplus, now approaching $8 billion, has likely peaked.
Really? Is Missouri actually running a huge surplus? Are we taking in more than we owe?
No, no we are not.
In Truth in Accounting’s (TIA) “Financial State of the States 2023,” Missouri ranked 25th. TIA gave Missouri a “C” grade and concluded: “Missouri would need $700 from each of its taxpayers to pay all of its outstanding bills.” Of particular concern to TIA was Missouri’s highest-ever unfunded debt to the Missouri State Employees’ Plan.
The reason for the disparity is due to how states account for debt. In cash-basis accounting, states merely account for the money they have on hand without considering their debts. If you and I were to budget like this, we’d count loans as income, ignore debt, and put off expenses until next year in order to claim a huge surplus now.
If you think that sounds criminal, you’re not alone. The IRS does not permit businesses with gross receipts exceeding $29 million for three years to use cash-basis accounting—but city and state governments may do so. As a result, according to the International Monetary Fund, “Governments have been tempted to exploit this weakness by deferring cash disbursements or bringing forward cash receipts as a means of artificially inflating their financial balance.” This is exactly what is happening in Missouri.
Governor Parson isn’t alone, sadly. Mayors and governors of both parties and all ideological stripes do the same thing. And journalists on deadline often repeat the claim without checking it. If such claims seem too good to be true, they probably are.
The St. Louis Business Journal had an excellent article last week on the present state of the St. Louis City earnings tax. I encourage you to read it all.
My purpose here is simply to respond to one statement in the article by St. Louis’s Mayor Jones:
“I urge those who want to eliminate the earnings tax to show me their plan to replace it, their pro forma on these so-called ‘fiscal cliffs,’ and why cities with much higher earnings tax rates continue to grow,” Jones said in a statement.
I would like to remind people that, as for a plan to replace the earnings tax, the PFM Group out of Philadelphia has provided St. Louis with multiple, enormous reports on fiscal options for the city. Having read these studies, I assure you they go into great detail on these topics. If the city and its leaders aren’t serious about considering and incorporating these recommendations, among others, that’s on the city.
Do some cities with earnings taxes continue to grow? Of course they can. Some cities, like, say, New York City, have qualities and advantages that help them overcome the harms of local income taxes and continue to grow nevertheless. That shouldn’t surprise anyone, but it doesn’t mean local earnings (also known as income or wage) taxes don’t harm cities. Nobody is saying that a city can’t grow if it has an earnings tax. The claim—backed up by evidence—is that they would grow faster without one.
You don’t have to take our word for it (but you should). In Triumph of the City, Harvard economist Ed Glaeser states: “The indirect effect of a local income tax is to encourage richer citizens and businesses to leave.” He cited this study, in which the authors determined that, among other findings, “We estimate that between 1971 and 2001 Philadelphia lost 172,889 jobs because of the increase in city wage tax rates.” (Similar effects were found for New York City.)
It’s one thing to say the city is not in a position to immediately drop the earnings tax in one fell swoop. That’s a defensible position. It’s another to deny that it harms economic growth. That’s not defensible. The worst part, though, is watching the city enact legislation and pass constant tax subsidies that make it more dependent on the earnings tax, instead of trying to be less dependent on it over time. The city has chosen to put itself in this position, and that is regrettable.
Trying to lure Hollywood productions to Missouri with tax incentives was always a fool’s errand, but a new report from Georgia reminds us just how foolish it truly is.
For those who don’t remember, last year, Missouri’s general assembly made the unfortunate decision to revive the state’s film tax credit program. After the program sat dormant for a decade due to prior poor performance, and despite the wealth of evidence from across the country showing that the program is a bad investment, our elected officials were somehow convinced that the program would work better this time.
While it’s still too early to evaluate the performance of Missouri’s revived film credit, a recently completed audit in the state of Georgia can offer some insight into what Missouri should expect. Unsurprisingly, the results show that the return on investment (ROI) for Georgia taxpayers is less than $0.20. This means that for each tax dollar devoted toward the program, at least 80 cents are lost.
If you have been following this issue for a while, these findings aren’t surprising, as they are in line with much of the past research on the topic. Study after study shows film tax credits are a ridiculously bad investment of state taxpayer dollars. Prior to our state shuttering the program, the Missouri Department of Economic Development found the program’s ROI to be a paltry $0.15. Previous Peach State audits found the ROI to be even lower—around $0.10. Louisiana’s program wasn’t much better, with an ROI of $0.15. And Pennsylvania (Missouri’s entertainment industry tax credit is modeled on the Pennsylvania program) found its film subsidies produced an ROI of only $0.13.
Of course, these aren’t the only metrics where the tax credit program fails to perform. In state after state, the film tax credit falls short of the jobs and economic activity promised. According to a 2019 study that compared film tax credit data from across the country, the author found the incentives have no meaningful effect on employment or wages and suggested the “incentives are generally ineffective at creating industry clusters or inspiring economic development.” Nevertheless, the majority of states keep giving out these subsidies.
At this point, I’m not sure how many more audits or studies need to be published before policymakers will be convinced that a film tax credit program isn’t worth having. But if there’s one thing Missouri lawmakers ought to learn from Georgia (besides that our state’s program should be ended again), it’s that frequent audits of these costly tax incentives are a good thing. Further efforts to improve transparency on Missouri’s numerous tax credit programs should be encouraged.
Last week, I submitted testimony on House Bill (HB) 1511, which would protect St. Louis–area business owners from being forced to install, operate, and maintain electric vehicle (EV) charging stations on their own dime. The legislation would not prevent mandates for the installation of EV chargers. However, it would require St. Louis–area governments to pay for their mandates. You can read the full testimony here.
HB 1511 was filed because some St. Louis municipalities (the City of St. Louis and Brentwood, among others) are forcing business owners to install and operate EV chargers (on their own dime) following new construction or significant renovation. There are a few reasons why such mandates are a bad idea.
Remember when people thought MySpace was the future? It is possible (although I think not likely) that EVs could suffer a similar fate.
Fully electric vehicles are only 1% of the cars on the road.
Governments are assuming that the EVs of the present are also the vehicles of the future. A new type of electric vehicle could emerge (like when Facebook surpassed MySpace) and make premature government investment unnecessary. A whole new technology like hydrogen-fuel cells could emerge as the best way to power our transit in the future.
Additionally, EV chargers that are currently on the market are in their early stages. The typical public charger used in cities (also known as a Level 2 charger) takes 4–10 hours to charge an EV from empty to 80%. As charging technology improves, faster options will hopefully become available. Will there need to be a mandate for new construction each time the technology improves?
As EVs make up a bigger share of cars on the road, and as developers hopefully improve charging speeds, establishments such as apartments, hotels, and restaurants will likely seek to lure this growing consumer base with EV chargers. There is no need to force any business to build charging stations that cost $2,000–$5,000
As of right now, public chargers are rarely used. The market can grow at its own pace. I see gas stations everywhere, but I do not fill up all the time. I usually fill up when I am nearing empty and it is convenient for me. EV owners typically follow a similar pattern, as over 90% charge their car at home daily (55%) or weekly (38%).
According to a 2023 survey:
It’s possible that plug-in electric chargers will never be popular.
The current legislation is restricted only to the City of St. Louis and St. Louis County. But why is it so limited? Unfunded mandates for EV chargers are bad policy wherever they are in the state.
Early in the classic film The Blues Brothers, Elwood takes his recently paroled brother, Jake, back to his Chicago apartment. It’s a small room next to the “L” tracks, with kitchen and bathroom facilities shared with the other tenants. (I guess Elwood has his own toaster oven, but that’s hardly a kitchen.) Anyway, it’s the type of affordable room for rent that used to be common in American cities. Now, however, housing arrangements like that are illegal almost everywhere (with a few exceptions). St. Louis, Kansas City, and other Missouri towns should legalize them again. (Check out this example ordinance from the St. Louis County suburb of St. John which defines “rooming house,” or a “boarding house,” and clearly states no new ones are allowed in the city after 1963.)
This topic is in the news now because of a lawsuit against a St. Louis landlord illegally renting out very cheap homes to struggling people in St. Louis. This post is not a defense of that landlord. Many of the places she was renting were condemned, had no utilities, or had other problems. The court system will presumably deal with those issues.
But it is worth noting that these cheap homes—some of which did have utilities and were suitable for habitation, even if just barely—were being used for inexpensive shelter by previously homeless people. That’s a good thing. Have you noticed how cold it has been lately?
Yes, landlords should keep their buildings up to code, and things such as working utilities and sanitation systems are all properly part of various building codes. However, zoning laws almost everywhere (including in much of the City of St. Louis) require apartments to be rented out whole, meaning every unit must have its own kitchen, bathroom, etc. Obviously, that is how most people want to live. But we made it illegal in much of the country to have a cheaper option, like Elwood Blues had, to live in a large building where you rent by the room and share other facilities with the other tenants. The elimination of the housing market option for these types of facilities is one of the reasons for the increased homeless population in our country.
Nobody is saying rooming houses like these are nice (I also saw Taxi Driver). But they are an affordable option that some people will choose that is far better than being homeless. I am not suggesting that boarding house–type facilities should be allowed everywhere. But blanket zoning prohibitions against them in Missouri cities are harmful and should be repealed.
As the 2024 legislative session gets underway, we will undoubtedly hear more about teacher pay in Missouri. A key question we should be asking is this—where does all the money go?
Using data from the National Center for Education Statistics (Table 211.50 and Table 236.55), I calculated how many students it took to pay for the average teacher’s salary. I calculated this by dividing the average salary by per–pupil operating expenditures. In 1960, it took 13.3 students to generate the equivalent amount of money as a teacher’s salary. That number dropped steadily over time. By 2000, it was 5.7, and in 2020 it was just 4.4 students.
You read that right: fewer than five students in a class is enough to cover a teacher’s salary today.
So where does all that money go? Ben Scafidi, an economist at Kennesaw State University, has some ideas. He noted that from 1950 to 2015, the number of administrators and other staff has increased by 709% nationally. In that same time period, the number of students went up 100% and the number of teachers went up 243%.
In more recent years, the number of students in Missouri has been declining. Yet the number of teachers is going up.
There is a very simple way to increase teacher pay, and it does not require any legislation. School districts can make different staffing decisions—hire fewer administrators and free up dollars to pay teachers more.
Almost exactly four years ago, I wrote in this space that the move in Kansas City to reduce bus fare to zero was a bad idea—or at the very least ill-considered and not supported by substantive research. I argued the same in a guest commentary to The Kansas City Star:
Good policies go beyond good intentions. They serve a public need with as few negative consequences as is possible. Our national experience with large-scale, fare-free transit has been a bumpy ride. Kansas City needs to consider all the options and trade-offs before adopting such a significant policy change.
Unfortunately, those concerns were not heeded. At the time, the Kansas City Area Transit Authority (KCATA) CEO Robbie Makinen argued weakly, “Just because nobody else is doing it, that’s not a reason for us not to do it. What’s wrong with trying it? What’s the worst thing that happens? It doesn’t work, and Robbie gets fired.”
Now in 2024, after years of offering free bus service, the KCATA is wrestling with a $10 million gap in its operating budget. The service used COVID relief money to cover its operating losses, but those funds will run out by 2025.
As a result of the budget shortfalls, the new CEO has asked the transit authority’s board for permission to study reinstating fares to cover the shortfall. (The previous CEO cited above did seemingly get fired in July 2022.) One of the current KCATA board members, Michael Shaw, is at least asking the right questions, according to the Star:
“Have we done the homework and figured out what we need to do, what other resources and strategies are in place, before we say this is the policy decision that needs to be made?” Shaw said. “I don’t think we should look at solutions in silos. They have to be looked at collectively and I don’t think we’ve done that homework at this juncture.”
The chairwoman of the board, Melissa Bynum, pointed out what we already know: “Zero fare is not free – period. Somebody pays for it.”
The CEO of the KCATA should be congratulated for seeking such a study. Board members Shaw and Bynum are right to urge diligence and to point out that the money must come from somewhere.
Had the previous KCATA leadership wrestled with these questions a few years ago, the organization may not be in this mess now.
