I have previously blogged about the nefarious — but unintended — consequences of disaster relief. This seed has germinated into a longer piece about flood relief, which Missourinet has covered (link via Combest).
The idea is simple. By bailing out the victims of flood relief, the government unintentionally encourages people to move into flood-prone areas, leading to more flood damage in the long term.
I saw my fair share of floods while growing up. During the flood of 1993, I watched the Meramec River slowly creep toward my house and into my basement. A few years earlier, my family and I had to evacuate our home near George Winter Park because of excessive flooding. The severe damage that floods can cause makes living in the flood plain risky. When flood damage occurs, state and federal governments typically subsidize reconstruction through government grants and loans offered at subsidized rates, a practice that unintentionally sets the stage for worse devastation later on.
Government aid to flooded areas isn’t necessarily bad. Sending in the National Guard to help people evacuate, for example, fulfills an essential role of the government: protecting the public from real, physical harm. Subsidizing the cleanup and reconstruction, on the other hand, has nefarious long-term consequences.
The intention to help people is never misguided. However, the means used to help people may be ill-advised. So, it’s worth asking: Will this sort of flood relief actually relieve the pain that floods cause? In the short term, the answer is simple and obvious: yes. We can all see a farmer rebuilding his barn. Even more concretely, we’ve seen Chesterfield sprout back up after the 1993 disaster. This isn’t the entire story, though. What isn’t as obvious is that subsidizing reconstruction actually causes more flood damage over time, undermining the intended goal of relief.
It’s not difficult to figure out that lowland areas near rivers have a tendency to flood — or that this can be very costly for home and business owners. To varying degrees, people tend to take these extra costs into account when deciding where to move or set up a new business. But by providing aid to rebuild flood-prone areas, federal and state governments reduce the potential costs of a flood, and thereby the risk associated with living and doing business there. This essentially becomes a subsidy for areas that are likely to be flooded.
Any astute student of economics knows what will happen next. Somewhere in the state, there are people who enjoy the many benefits of living next to a large river like the Mississippi — the boating and fishing opportunities, for instance. But, all things considered, many of these people would ordinarily consider it just a bit too risky to live in such an area. Economists characterize these people as being “on the margin.” When the costs associated with flooding are mitigated by the expectation of disaster assistance, some of the people on the safe side of the margin cross to the risky side — they now see living by the river as an attractive option. Flood relief spurs some marginal home buyers to move into flood-prone areas.
This happens not only with potential residents, but potential business owners, as well. The decreased risk brought by relief efforts means that businesses on the margin build new facilities in the flood plain rather than somewhere else, while businesses already in the area purchase new equipment and improve their buildings rather than limit possible losses.
As a result, these areas contain not only more potential victims, but also a much greater potential for damage. So, while government assistance for flood reconstruction can certainly help people who have been hurt by flooding, it also encourages some people to set themselves up for disaster. When the next flood comes, the damage will likely be much worse than if there had been no flood relief at all — in terms of both dollars and human suffering.
To answer my original question: Does subsidizing reconstruction actually help ease the pain caused by floods? In the long run, the answer is a most emphatic no. Although this sort of relief does some immediate good, it will only cause a great deal more harm down the road.
Matt Simpson is an intern at the Show-Me Institute, a Missouri-based think tank. He is currently pursuing undergraduate degrees in philosophy and math at Lindenwood University.
In 2004, the Plato R-V School District held financial elections in April, August, and November. Two years later, the bond that district officials hoped to pass showed up again on the November ballot.
“We were trying to pass a bond issue two or three years in a row,” said Superintendent Victor Slape. “Trying to pass it whenever we could, really. … More people vote in November, and we wanted to make sure people got the opportunity to vote.”
Turns out that Cynthia’s suspicion, that school districts will sometimes continue to put a financial issue up for vote until it passes, is true. And that’s a primary reason school districts occasionally add elections to the November ballot, despite the higher cost.
Superintendent of the Albany School District Ted Spessard said the costs of any school election in his district are “in the thousands.” He estimated that the district pays about two to three thousand dollars in order to put an issue on the ballot.
It would be wonderful if everyone took into account the full social consequences of their actions before making a decision to act. Almost every action you take has some effect on someone other than yourself. And you probably don’t completely take that into account. Consider, for example, your decision to take Eager to Hanley to cross over highway 40. This imposes costs on everyone who must line up behind you in traffic. And, as the Post-Dispatch notes, the traffic is terrible … and confusing:
On most days, getting from Eager to Hanley is a guessing game for drivers unfamiliar with the intersection. Figuring out which lane leads where causes some drivers to cut over at the last minute, triggering road rage.
Hanley Road is one of the most traveled streets in the county, with more than 50,000 vehicles using the stretch near Highway 40 daily, according to the county.
An ideal solution would force drivers to take into account the costs they impose on each other when they drive through congested areas, while also providing an incentive for firms to provide alternatives or improvements to the route. Tolls are about as close to that ideal as you can get. If drivers were forced to pay a small fee to cross the highway at Eager and Hanley when it is congested, many of them would find alternate routes or perhaps try to cross when there is less congestion. This would relieve the congestion and provide a quicker route for those who were willing to pay for it.
The tolls would also send a clear signal to anyone who provides transportation services, both governments and firms: If you can provide an alternate route or means of crossing the highway, or improve the intersection, you can make a tidy profit.
It looks like it’s a bit too late for tolls at Hanley and 40, though:
St. Louis County and Missouri transportation officials announced Monday an agreement to add the intersection to the $535 million Highway 40 (Interstate 64) rebuild. The intersection that leads to dozens of stores and restaurants will be rebuilt as a “jug handle” intersection, eliminating left turns to and from Eager.
Perhaps next time, transportation officials will keep our work in mind when deciding how to fund their next project.
November elections garner higher turnout. But they cost more, too. So, if a school district puts a finanical issue on the ballot in November, they’ll get more voters to the polls than they would in April — but boosting the voter count will cost them. It’s not a question of just typing a few more lines on the ballot.
How much does the cost increase?
“It varies,” said Darryl Kempf, Cooper County’s clerk. “There is no magic number.”
Political subdivisions — school, fire, and hospital districts, to name a few — help split the election tab.
“Missouri law requires that election costs be shared proportionally,” Betsy Byers, elections outreach and education coordinator for the Missouri Secretary of State, said. When determining how much each subdivision pays, the county charges based on the number of registered voters.
Those of you who read this blog for in-depth analysis and riveting commentary, I’m sure you haven’t noticed my absence, but for everyone else: I HAVE RETURNED! After a wonderful week in San Diego, I have returned to my cubicle and have resumed normal intern duties. St. Louis is just as I remember — hot, humid, and no beaches.
The past week was an awesome experience. For those of you who don’t know, my fellow intern Dan Grana and I were Bastiat scholars at Cato University, which is a weeklong seminar organized by the Cato Institute that focuses on enhancing freedom and liberty through lectures and discussions. It is a great experience, and I recommend it to any libertarian — or anyone who is just generally interested in promoting freedom. Although the days were somewhat long (9 a.m. to 9 p.m.), it was completely worth it. The days were filled with incredible speakers, ranging from Tom G. Palmer of the Cato Institute to Rejoice Ngwenya, who is a leader against Zimbabwe’s corrupt president, Robert Mugabe. Even after the daily lectures were finished, the conversation continued. We spent most nights at the Veranda Grill discussing liberty and other issues with like-minded individuals.
The entire week was a first-class experience. The food and hotel were awesome, and the speakers were even better. Before I arrived in San Diego, I was a little apprehensive about the trip. I was worried that the speakers would not be entertaining, or the days would be too long, but it turned out that my notions were unwarranted. Again, if anyone ever has the opportunity to go to Cato University, I highly recommend it. I’m even thinking about going again next year.
The Contrarian has a great article over at MSN.com about the loathsome taxpayer bailouts that occur every time something fails in modern America. I recommend it without hesitation.
I will be a guest on The McGraw Show, with Mr. Millhaven himself, this Monday morning on KTRS — The Big 550 AM. I will be talking about whatever McGraw wants to talk about, be it ethanol, tax incentives, or earnings taxes. I am excited to be appearing on the show — please listen in, if you can!
In 1982, the state of Missouri decided to give more money to schools, and to lower each school district’s property tax levy.
The first part, giving more money to schools, is working well enough. For the 2005–06 school year, the state handed out about $839.5 million from the designated-for-schools one-cent sales tax. That’s up from the $634 million it gave to schools in 1983–84 (both figures adjusted for inflation to 2008 dollars).
But school districts have, through local elections, bypassed the state’s effort to keep property taxes down. While local property taxes are lower than they were before 1982, they have crept up from a little more than $2 to about $4.
To give schools more money, the state levied a one-cent sales tax, in legislation known as Propsition C. Each year, revenues from that tax are collected and divvied up among each public school student.* Very roughly, that comes to about $845 per student, according to Roger Dorson, director of finance for the Missouri Department of Elementary and Secondary Education.
The money is then sent out to schools, but it comes with strings. Half of the Prop. C money is new money for schools — a gift, if you will. But the other half is more complicated.
When a school district takes the second half of the Prop. C money, it must “roll back” the local school property tax levy. By how much? Well, enough to lower its tax revenues by the amount that the state gave it. For example, if a school district were given $1 million from the state, it would have to lower its levy so that it took in $500,000 less in property tax revenues.
Effectively, the state was trying to move some of the burden of funding schools from property owners to the people who spend more.
But school districts have gone to the ballot box to get more money, on top of what the state began to give them in 1982. Since Prop. C took effect, school districts have been asking voters give up the state-mandated reduction in local property taxes.
Voters have said yes. As of this year, 430 school districts (of 524) have full waivers, according to Dorson. That means those districts do not — and, unless their voters asked for it, will never — have to reduce their property taxes because of Prop. C revenues.
I won’t say that Prop. C rollbacks are unfair. After all, district voters are the ones who approve them (though which voters vote is something to watch out for). But it is apparent that the state’s goal to keep local property taxes low is slowly eroding. And that a statewide sales tax now helps foot the ever-growing cost for schools.
* In determining state aid, each school calculates its average daily attendance. Students are weighted differently if they come from low-income families, are not native English speakers, or are special needs students. After those factors are taken into account, the state awards aid based on each school district’s “Weighted Average Daily Attendance.”
