Page 760 – Show-Me Institute

Need for Wariness Regarding Eminent Domain Use

Posted on June 22, 2009May 5, 2026 by Abhi Sivasailam

Over at the News-Leader, Joseph Sugarman discusses the need for Missourians to be wary of the actions of their politicians in regard to eminent domain issues. Sugarman remembers that the pivotal court case of Kelo v. City of New London “did not happen in a vacuum,” reminding Missourians to heed the lessons of eminent domain victims in other states and to quickly petition for legislative action to protect property rights.

The Show-Me Institute has argued, since its inception, that Missouri needs strong and clearly articulated property rights that defend the state’s citizens from eminent domain. You can read a few of our studies and testimonies here, here, here, and here.

Local Tax: Ups and Downs

Posted on June 22, 2009May 5, 2026 by Josh Smith

There’s an article in the Columbia Daily Tribune today that discusses the latest flap in Jefferson City about a sales tax issue (link via Combest). The article deals with some general perverse incentives, and is an interesting study in public choice theory, but the precise issue at hand also touches on some interesting free-market ideas.

It seems that a lawyer has been suing some small towns in Missouri for charging what he claims is an illegal sales tax. State law is a bit ambiguous on this point. From the article:

State law allows cities to levy sales taxes for general purposes and capital improvements, subject to voter approval. The rates vary up to 1 percent for a general sales tax and one-half percent for a capital improvements tax. In 1999, the Department of Revenue issued a letter saying there was “no limit to the number of taxes” that could be adopted under the law.

The legality of such taxes is not as important to me as whether they should be illegal — that is, whether there is a compelling reason to allow or disallow local taxation of certain levels. I will refer once again to one of my favorite economic concepts: the Tiebout Model, which shows that under certain conditions, local government can do the best possible job at satisfying its constituents’ preferences.

In short, I am not entirely opposed to local sales taxes, because they are the most likely form of taxation to be approved by people who want them, and the least likely to subject unwilling people to taxation that they feel does not fund things they of which they approve. Moreover, local taxes tend to fund services that make the most sense for government provision, such as police and fire protection.

Here’s a glance at the current sales tax picture in St. Louis:

City of St. Louis Sales Tax Breakdown

4.225% State of Missouri
1.000% City – General Fund
0.375% City – General Fund
0.500% City – Transportation
0.500% City – Capital Improvements
0.250% Public Transit
0.100% Metro Parks/Recreation District*
0.666% Transitional School District
0.125% City-Parks and Recreation
0.500% Public Safety

8.241% Retail Sales Tax Rate
1.500% Sit Down Restaurants
9.741% Sit Down Restaurant Rate

This is a far cry from 1.5 percent, to be sure, but the Tiebout model indicates that these tax rates are by and large acceptable to and may accurately reflect the preferences of the residents of St. Louis, given the services they provide. On the other hand, here’s an article that discusses the possibility that residents of population centers are more willing to trade away economic freedom in exchange for the conveniences and efficiency gains of metropolitan living — an unsettling notion for the Tiebout model, and for those who love freedom.

Spring Training Deal Amended Behind Closed Doors

Posted on June 22, 2009May 5, 2026 by Caitlin Hartsell

Spring training for the Kansas City Chiefs will officially take place in Missouri for the next 10 years, the governor announced on Thursday.

The deal requires the Chiefs to spend $50.6 million to improve their stadium, as well as to give Missouri Western $10 million toward a new training facility. The team’s presence in Missouri — the first five years will be at Western, and the last five can be anywhere in the state — is expected to contribute significantly to the area economy.

The Chiefs and the Missouri Development Finance Board (MDFB) had each agreed on a deal last year to hold spring training at Missouri Western for 10 years, receiving $25 million in tax cuts from the state. After the vote passed by MDFP, state officials and the Chiefs reworked the deal privately, agreeing for the team to spend only five years in Missouri, with the option of renewing for five one-year periods. Essentially, the tax credits would remain the same as they were in the original agreement, but the Chiefs would only have to uphold half of its end of the deal.

Whether or not tax credits are beneficial (as has been previously discussed on this blog) is beside the point: Secret renegotiations of public contract agreements, particularly ones that halve benefits to the Missouri public, are never a good thing. If Missouri taxpayers are obligated to pay for such special deals, the process should be as transparent as possible.

“Race to the Top” in Education Meaningless for Missouri

Posted on June 22, 2009May 5, 2026 by Caitlin Hartsell

As Sarah Brodsky pointed out in her post on Friday, Missouri is one of four states so far that have opted not to join the “Race to the Top” education initiative that requires conforming to a national standard. While the governor may be only postponing the decision until a new commissioner of the state’s Department of Education can be consulted, Missouri would do well to avoid participating in this program entirely.

Missouri has higher education standards than do many other states as it is; adopting national standards would simply entail an increased use of standardized tests, resulting in more wasted classroom time. Getting the program started would also require a great deal of additional funding: Texas estimates that it will cost $3 billion to implement.

Adopting a federal standard would be the first step toward relinquishing the state’s constitutionally granted control of its public education system.

Missourians already know what their students should be learning, and have thus far created a fairly rigorous set of statewide standards. And, as it is, fewer than half of Missouri’s students are meeting or exceeding the MAP standards Adopting lower national standards instead would only provide a misleading inflation of achievement metrics.

Why should Missouri surrender its authority to meeet the educational needs of its children simply in order to conform to a national standard that would provide no measurable benefit?

A Nonexistent Benefit of Uniform Standards

Posted on June 19, 2009May 5, 2026 by Sarah Brodsky

From an editorial in the Kansas City Star:

Charter schools and lab schools would have a framework within which to experiment.

This is put forward as an argument in favor of uniform education standards across states — that a national standard will help charter schools experiment better!

I can’t imagine how any government standards would do that. But even if I’m wrong, and standards are an important ingredient in innovation, charters already have the state standards to work from. Currently, charters can choose from 50 different standards and pick whichever ones would help them innovate best.

(How does that work? They look at the traditional district standards and say, “This is what we need to not follow if we want to experiment?”)

Besides a benevolent desire to help charters experiment, which assistance no charter I know of has requested, standards enthusiasts are motivated by cold, hard cash. I call it “Race to the Tax Dollars;” Arne Duncan calls it “Race to the Top.” A Post-Dispatch editorial describes the matter with customary candor:

More than $4 billion in federal stimulus funds are being devoted to a national “Race to the Top Fund” to support innovation and leadership in the nation’s public K-12 schools. Some $350 million of that will go to states that have signed onto the new standards.

Notice that bribing all states to do the same thing is called “innovation.” I think this is the kind of innovation standards supporters have in mind for charter schools.

Competition in Health Care, Not More of the Same

Posted on June 19, 2009May 5, 2026 by Caitlin Hartsell

About 11 percent of Missourians are without health insurance, according to the numbers from Families USA. To combat this and other problems in health care, Rep. Roy Blunt and some of his congressional colleagues have proposed their own health care plan (link via Combest) as a cheaper and more effective alternative to the one being proposed by the presidential administration.

Blunt’s proposed plan (details are available on his website) seeks to limit government involvement in health care and instead extend control to patients and doctors. The crux of the plan is to create health savings accounts (HSAs), an issue that the Show-Me Institute has delved into previously. These allow employees and employers to save money to use for future health care expenses, at pre-tax rates. Tax credits and HSAs allow people to keep their health insurance intact, regardless of employment status — a factor that is especially important during our current transient job market. The plan seeks to bring down medical costs through market competition, as well as to institute reforms of malpractice law, which can drive up health care prices unnecessarily.

The president’s plan aims to do the opposite, by creating a large government insurance plan to “compete” with private insurance. Government “competition” in the private market is not the solution, as we have witnessed with Medicaid and Medicare — these plans are guaranteed to receive the lowest rates, but they still drain money. An effective plan would instead actually seek to address the issues facing the health care industry by encouraging market competition and efficiency, rather than just creating Medicaid part II.

Who’s Afraid of the Defined Contribution Plan?

Posted on June 19, 2009May 5, 2026 by Joseph Haslag

The city of Springfield can’t keep going with the police and fire pension system it has in place. The unfunded liability has reached at least $197 million, and discussions are under way about filling that gap. But those efforts don’t address an equally critical question: Should Springfield continue to offer the same pension plan, switch to a plan in which both the city and employees contribute to a retirement savings account, or provide some combination of the two?

Change is always a little frightening. For decades, police and firefighters have been able to put in service time and leave with a pension. It has become so commonplace that it is treated as an entitlement. The problem is the defined benefit plan, which provides monthly retiree payments that are not related to employee contributions. But there is opportunity for change. Indeed, it is necessary for Springfield and other cities to put everything on the table.

As a starting point, Springfield officials should consider a defined contribution plan, in which employees are responsible for funding and managing their retirement accounts.

Defined contribution plans frequently attract two criticisms:

First, people live for varying lengths of time. Some die right after retirement, while others survive much longer, which means they could outlive their retirement funds. This criticism is a red herring. After retiring, it is easy to convert your retirement savings account to an annuity that makes monthly payments for life.

Second, in a defined benefit plan, city government bears the risk when financial markets realize price declines. When asset prices fall, the city’s obligation to retirees is unchanged: The assets backing the pension have fallen. Put another way, when asset prices fall, the pension payment stream stays the same, but the asset value isn’t large enough to support that stream. That’s when the city government’s unfunded liability balloons. In contrast, retirees own their savings accounts under a defined contribution plan. Retirees bear the risk when asset prices fall. So, pensions provide income security to future retirees while defined contribution plans offer no such guarantees.

But risk-bearing differences are not the end of the story. Labor markets work much better than that. Higher wages can offset the additional risk associated with defined contribution plans. There is a wage level that will compensate future police and firefighters enough for them to bear the additional risk associated with a defined contribution plan.

It would take a more detailed analysis to quantify a wage increase adequate to hire the necessary number of police and firefighters. Such quantitative evidence is essential for comparing defined benefit plans and defined contribution plans. It may be cheaper, in expected value terms, for the city to bear the risk, but the work should be done.

One additional risk has been ignored, and arguably is the most costly. When governments offer pensions to workers, there is a disconnect between workers’ contributions to their retirement benefits and the size of the benefits. Elected officials find it politically easy — and a boon to their reelection efforts — to raise retirement benefits. Because the post-retirement benefits are deferred, policymakers get an immediate political gain without facing the cost. Of course, this simply widens the gap between workers’ contributions and their post-retirement benefits. Think of the problems associated with Social Security. Worried about upsetting voters, policymakers are loath to impose the costs necessary to make the national pension plan solvent.

Finally, some point out that employees are more likely to switch jobs under defined contribution plans. This poses a problem for cities that spend a lot of money training firefighters and police officers. Just when those employees learn their jobs, they move on to greener pastures. But job mobility is part of a free society. I understand the desire to ensure a stable, well-trained force that protects people and their property. However, it is critical to note that market forces are always operating. If there is a shortage of experienced people, basic economics tells us that higher wage offers are available to deal with such a shortage. A defined benefit package is not an essential feature for cities trying to operate an effective fire department and a professional police force.

I am a big fan of defined contribution plans. I like them precisely because they are portable. In addition, there is a sense of personal responsibility for my retirement standard of living that I like; with tongue planted firmly in cheek, there is no federal bailout for university professors who do not provide for their old-age spending.

More seriously, the political realities are such that a defined-contribution-only plan is off the table. If so, I think it is best to try some kind of hybrid approach for future hires. Some defined contribution combined with a defined benefit program would provide some risk sharing, and would give the city the best chance to achieve predictable expenses. I also would suggest adding Social Security to the city’s defined benefit program.

The existing approach got Springfield into this situation. Some reform is needed to avoid the same problems in the future.

Joseph Haslag is executive vice president of the Show-Me Institute, a Missouri-based think tank, and a professor in economics at the University of Missouri–Columbia.

How to Bring Down the C-Section Rate Without a Government Mandate

Posted on June 18, 2009May 5, 2026 by Sarah Brodsky

This article is specifically about Florida, but the issues it raises come up in health care debates everywhere:

Some doctors say too many C-sections are performed in this country. […]

“I personally think that the rate has gotten to be higher than it needs to be,” said Dr. Roger Freeman, a retired ob-gyn from California, who chaired a 2000 task force that examined the soaring C-section rate.

But others say it should be solely up to doctors and parents to decide how a baby is born — mirroring the overall health care reform debate.

I’m in favor of leaving the decision up to doctors and patients. However, there are things concerned groups could do, in and out of the realm of policy, to bring down the incidence of c-sections without infringing on anyone’s personal choices.

For example, the shift towards health savings accounts (HSAs) could lead more patients to choose vaginal deliveries. C-sections are considerably more expensive, so patients who cover the cost with a savings account will probably think twice if their only reason to have a c-section is convenience. Advancing the cause of HSAs will discourage costly procedures when they aren’t medically necessary.

Another way to influence patients without resorting to rationing care is to advertise. Although often maligned, adverisements can be a useful means of spreading medical information. Infomercials about the risks of c-sections could change behavior, as could advertisements promoting hospitals’ delivery rooms. “Vaginal delivery” doesn’t mean the same thing everywhere; some hospitals allow women to walk around during labor, while others keep patients flat on their backs and moniter labor intensively. Letting patients know about the options that are out there will help them make better decisions.

More Criticism of Smoking Ban

Posted on June 18, 2009May 5, 2026 by Abhi Sivasailam

We’d like to highlight a recent letter written by Jim Winkelmann to the editor of the Post-Dispatch, discussing the smoking ban in Clayton. Winkelmann writes against what he sees as an erosion of civil liberties, and suggests that non-smokers have other avenues for recourse available to them beyond just legislation.

These arguments parallel ones made by our own policy analyst Dave Roland, on our blog, in testimony before the Clayton City Council, and to local media outlets.

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