Instructional Reform Isn’t Failproof Either

Posted on by Sarah Brodsky

Sol Stern responds to Richard Rothstein over at Cato Unbound. He’s titled the essay "A Tale of Two Rothsteins," although he could have called it "A Tale of Two Sterns." Stern used to be a strong supporter of parental choice, until he recently decided that choice programs have been too prone to setbacks and haven’t spread quickly enough. Now, he backs "instructional" reform, like the top-down standards that have succeeded (sort of) in one particularly wealthy place: Massachusetts. In "A Tale of Two Rothsteins," he admits that the strategy in Massachusetts is suffering the same fate he fears for the much-maligned choice programs:

But I doubt that Rothstein is much interested in these real on-the-ground gains for both white and black students. He certainly hasn’t spoken out to protect the gains against the attempts of Massachusetts’ new Democratic Governor Deval Patrick to turn back the reform agenda.

If instructional reform is such a robust course of action, compared with those frail choice programs, why does Rothstein need to speak out about it? And why can’t it build on its own success?

This is a key difference between instructional reforms imposed from above and choice reforms driven by what parents want. If parents can choose between private schools, charter schools, and traditional public schools, then the best schools will attract lots of applications and hold on to satisfied families. But if the state mandates a new curriculum, that reform is forever at the whim of the political process, no matter how successful an outside observer judges it to be.

Autism and Tuition Costs

Posted on by Sarah Brodsky

The Post-Dispatch reports on the challenges that parents of autistic kids face:

Symptoms typically begin before age 3, and experts including those at the National Institutes of Health, say early intervention is critical. This is where the costs begin to mount.

Autism treatment falls under four broad categories: behavioral, speech and language, neurosensory such as music therapy, and biochemical such as medication and dietary changes.

Unfortunately, the article doesn’t mention tuition tax credits for autistic kids — instead, the focus is on insurance companies that don’t cover all the treatments. Some parents are lobbying for state mandates to force the insurance companies to pay.

Insurance mandates are a bad idea in general, and in this case they clearly don’t make sense. If a kid has a learning disability that affects his reading skills, no one would expect a health insurance company to pay for extra help. That’s an educational issue, not a medical one.  Likewise, when autistic kids need 30 hours a week of music therapy, help with learning communication and social skills, and personal attention, that means they need a special school environment. Now, no one would expect a public school to be able to do all those things for one or two autistic children. That’s why there are private schools that specialize in treating autism. We should focus on giving autistic kids access to those schools.

How can we do that? Insurance companies aren’t set up to be tuition scholarship organizations. And leaving the problem for school districts to deal with on a case-by-case basis leaves many kids without help; right now, only a few of the most affluent suburban districts help send kids to private autism centers like Judevine. A tuition tax credit program would benefit autistic kids throughout the state, without overwhelming individual districts. But in the absence of such a program, people are demanding that insurance take up the slack.

I hope legislators will take responsibility for gaps in the state’s education system without getting the insurance sector involved.

Pre-Grave Robbing

Posted on by Nicholas Loyal

I suppose that this is what I get for having free time and watching local news, but last night this report caught my eye. However, my attention was dragged toward the closure of the Ted Foster & Sons funeral home — not because of the story’s touching emotional appeal or the horrendous nature of the actions taken by all those involved, but because of this one last bit:

Authorities say, by law, money collected for pre-arranged funeral plans has to go into a trust. […] Other homes should gladly accept the business.

A trust, you say? By law? Because of my infatuation with a certain HBO series (with the best ending you’ll ever see on television) I was already vaguely familiar with the concept of pre-need funerals, and was sure that the law cited in the report probably had some form of corruption that would make the lives of Mr. Foster’s customer’s worse.

And guess what? There is!

According to RSMO section 436-021, funds accepted from the sale of a pre-need funeral service must be placed into a trust, which (in the event of the closure of the original establishment of sale) can be transferred elsewhere, as stated in the report.

What wasn’t mentioned, though, was that funeral directors in Missouri, according to section 436-027, can retain up to 20 percent of the initial payment for the ceremony, regardless of circumstances. Thus, for every $5,000 funeral that Mr. Foster sold before he went out of business, he can legally keep $1,000 — no questions asked. This provision was likely included in order to assist funeral homes in maintaining facilities for a rush of business that they cannot  reasonably plan for, but it also allows the proprietors of failed businesses to run away to Mexico with the funds that families set aside to make a terrible time less difficult for their loved ones.

Surprisingly enough, the General Assembly has a pair of bills that have already been proposed this session, attempting to correct this problem. However, as described quite well in this analysis, certain consumer advocates feel that the bills themselves are still not doing enough to protect the final wishes of many funeral home customers.

The pre-need funeral is an aberration in the marketplace, as it is the one product that you know you’ll need, but also (presumably) the one that you can in no way predict the timing of. As such, it differs from insurance and other preventative investments not only because of the associated emotional weight, but also because of its unusual economic certainty. Because pre-need funerals are so unique, they require a unique amount of consumer protection to be provided by the state government itself.

While we advocate free-market solutions here at the Show-Me Institute that shy away from extensive government interference, I don’t think anyone can reasonably claim that a market with a definite and defined end is truly free, and I hope stronger legislation can be put in place to protect consumers of these unique services.

Politicking Revisited

Posted on by Justin Hauke

A legislator responds to the addendum(s) added to his teacher pay bill (see my previous post) in today’s Kansas City Star.

“What was substituted out is a plan that requires us to rank teachers and only the top 20 percent are eligible for a bonus. That fosters competition and an every-man-for-themselves atmosphere. You would have teachers trying to get ahead of one another.”

Oh my goodness! Perish the thought that quality should be rewarded!

Why has capitalism been so successful in this country? Because it encourages competition, which fosters an environment of innovation and an incentive structure that aligns supply and demand. Rewarding good teachers ensures that those teachers are driven to constantly improve quality, adopting lesson plans that work and abandoning those that don’t. Under the current system, teachers have little incentive to invest time and effort in improving their curriculum, or tweaking it from year to year to meet student needs, because they won’t be recognized for their efforts.

This is about helping good teachers to earn the higher pay that they deserve. This is about bringing the public school system up to speed with every other facet of the American economy, and aligning incentives with positive results.

Big Brother Is Watching You

Posted on by Justin Hauke

Here’s an example of one of those hot-button “libertarian” issues.

In 2005, Congress passed the “Real ID Act” as an addendum to an appropriations bill, for the Iraq war and tsunami relief. The “Real ID” Act set national standards for the data that is included on state driver’s licenses, and required states to build and share databases containing licensees’ personal information.

Libertarians find such identifying requirements to be a blatant violation of privacy rights, and a very dangerous precedent (not to mention a fiscal burden to the states).

Rep. Jim Guest (R-Kingwood) has succeeded in suspending the Missouri provision — at least temporarily. It prohibits the state Department of Revenue from amending its procedures to comply with the Real ID Act. It further prohibits the department from collecting, storing, or sharing additional personal data mandated by the act.

I, for one, would like to be free to move around the country without a constant border check and ID scan. If I wanted those, I would have moved to Russia back in the mid-80s … when I was like two years old.

Politicking

Posted on by Justin Hauke

How’s this for politics? I recently blogged about merit pay legislation under consideration in the General Assembly. Somebody had the great idea of attaching the Special Needs Tax Credit bill to the teacher pay bill — which is a pretty brilliant idea, in my opinion. If the teachers’ unions support increased teacher pay (with no merit pay, of course … that would just be too crazy for us to pay good teachers what they deserve), and the school choice advocates support tax credits for autistic children, why not combine both provisions?

It turns out, though, that that was the deal-breaker.

From the Post-Dispatch’s coverage:

When the scholarship program was inserted into the teacher pay bill last week, two large teacher groups dropped their support for it. A lobbyist for the Missouri National Education Association said his group was "passionately opposed."

What a shock.

Who are the teachers’ unions looking out for? The teachers, the students, or their own institutional power? The unions decided that they would rather prevent teachers — the people they reportedly represent — from earning pay raises so that they could ensure that no infinitesimal limit to their power could take root in a tax credit bill designed to help autistic children who aren’t being served by the public schools.

I’m sorry, students and teachers of Missouri, that there are people out there working so hard to prevent improvements in the state’s education system.

On Tax Credits and Economic Development, or: What SB 1234 Does Poorly

Posted on by Joseph Haslag

Senate Bill 1234 is currently rolling through the Senate. It expands the enterprise enhancement zone, and by identifying “mega-projects” that consist of capital investment of at least $300 million over an eight-year span, it is intended to create more than 1,000 jobs that pay higher-than-county-average wages. Under the new law, mega-projects would receive tax credits applied to the project’s wage bill over 22 years. Proponents tout the bill as a tool to spur economic development.

In a March 25 article, the Kansas City Star reported that Bombardier Aerospace is considering land near Kansas City International Airport for a possible $375 million aircraft assembly plant that would eventually employ 2,100 people. According to Missouri’s Department of Economic Development (DED), up to 5,200 additional related jobs would be attracted. (More on the DED estimate of spillover jobs later.)

These two events are related. Bombardier’s qualification as a mega-project would make it eligible for a tax credit applied to its workers’ wages for the next 22 years — not exceeding 80 percent of the wages for the first three years and up to 25 percent for years nine through 22 after the project is initiated.

Bombardier Aerospace is a welcome addition to Missouri. But because tax credits — reductions to taxes collected by the Department of Revenue — are involved, it is worth asking two questions: Is this a good deal for Missouri taxpayers? Is this the best deal for Missouri taxpayers? I analyze the impact on Missouri’s revenue two ways: In one case, I accept DED’s measure of spillover jobs, and in the other case focus on just the additions from Bombardier alone. In both cases, I find that Missouri tax receipts will suffer a shortfall.

I will start by examining the question on the deal for Missouri and its taxpayers. Assuming the plant is fully operational in 2014, I have computed the present value of the tax credits that would be received by Bombardier Aerospace, assuming that it used the maximum eligible value of credits and found that the tax credits total $377 million. In other words, Missouri would see $377 million fewer dollars collected by its Department of Revenue if Bombardier took advantage of the enhanced enterprise zone tax credit.

Obviously, Missouri economy — its tax base — would expand. Suppose that the Department of Economic Development is right and that 7,300 jobs would be added, in the form of Bombardier Aerospace workers and other jobs, also taking into account the additional Gross Domestic Product within Missouri’s borders from the plant and equipment income — so-called “capital income.” I use the state historical average for Missouri — that is, 3.8 cents of each dollar of state GDP becomes Net General Revenue collected by Missouri’s Department of Revenue. As such, I have considered individual income, sales taxes, liquor taxes, etc. Given the expanded state GDP, the present value of taxes collected would be $355 million. Thus, even granting the Department of Economic Development’s opaque measure of related job creation, the Bombardier Aerospace project would cost Missouri taxpayers about $22 million.

One big problem with this analysis is that the DED’s measure of related job creation is the output of a discredited economic model. Typically, this model exhibits a multiplier of between 2 and 2.5, meaning that every job attracted into the state generates an additional 2 to 2.5 spillover jobs. Note that in the absence of these unidentified spillover jobs, the cost to Missouri taxpayers rises from $22 million to $110 million. The multiplier approach, if correct, would support widespread government hiring; the Missouri economy could magically expand with each new government hire at least with the range of several thousand workers. Markets do not work this way, however, and the DED unfortunately does not have the resources to update its economic model. Missouri taxpayers should not have to pay for such backward thinking.

There is an escape clause, though. The enhanced enterprise zone law permits the mega-project to make commission payments to the state. The idea is that these payments would offset the state’s “excess” tax credits, so that the costs to Missouri taxpayers would be, on balance, zero. The commission payment feature is a little worrisome insofar as the payment plan is not very specific.

Now, for the second question: Is this the best deal for Missouri taxpayers? We have no way of knowing. The value of the tax credits was not offered to every possible business venture. Instead, lawmakers and unelected officials in the DED are choosing recipients for us. In the marketplaces for ideas and business projects, people operating in their own best interest vet lots of options, and eventually buyers and sellers of the projects pass economic judgment. In this case, though, taxpayer money is being spent on a single project, vetted only by elected officials and bureaucrats.

Perhaps our elected officials can do just as well as those whose livelihood depends on careful analysis. I would prefer for officials and bureaucrats to stay out of the vetting process, despite their good intentions. I appreciate their effort to do something for the Missouri economy, but I urge them to stay out of the business of trying to pick winners and instead consider policies aimed at leveling the playing field for all Missourians. If they want to hand out tax breaks, they should give them to all of us — not just a mega-project.

Joseph Haslag is a professor in the EcoSenate Bill 1234 is currently rolling through the Senate. It expands the enterprise enhancement zone, and by identifying “mega-projects” that consist of capital investment of at least $300 million over an eight-year span, it is intended to create more than 1,000 jobs that pay higher-than-county-average wages. Under the new law, mega-projects would receive tax credits applied to the project’s wage bill over 22 years. Proponents tout the bill as a tool to spur economic development.

In a March 25 article, the Kansas City Star reported that Bombardier Aerospace is considering land near Kansas City International Airport for a possible $375 million aircraft assembly plant that would eventually employ 2,100 people. According to Missouri’s Department of Economic Development (DED), up to 5,200 additional related jobs would be attracted. (More on the DED estimate of spillover jobs later.)

These two events are related. Bombardier’s qualification as a mega-project would make it eligible for a tax credit applied to its workers’ wages for the next 22 years — not exceeding 80 percent of the wages for the first three years and up to 25 percent for years nine through 22 after the project is initiated.

Bombardier Aerospace is a welcome addition to Missouri. But because tax credits — reductions to taxes collected by the Department of Revenue — are involved, it is worth asking two questions: Is this a good deal for Missouri taxpayers? Is this the best deal for Missouri taxpayers? I analyze the impact on Missouri’s revenue two ways: In one case, I accept DED’s measure of spillover jobs, and in the other case focus on just the additions from Bombardier alone. In both cases, I find that Missouri tax receipts will suffer a shortfall.

I will start by examining the question on the deal for Missouri and its taxpayers. Assuming the plant is fully operational in 2014, I have computed the present value of the tax credits that would be received by Bombardier Aerospace, assuming that it used the maximum eligible value of credits and found that the tax credits total $377 million. In other words, Missouri would see $377 million fewer dollars collected by its Department of Revenue if Bombardier took advantage of the enhanced enterprise zone tax credit.

Obviously, Missouri economy — its tax base — would expand. Suppose that the Department of Economic Development is right and that 7,300 jobs would be added, in the form of Bombardier Aerospace workers and other jobs, also taking into account the additional Gross Domestic Product within Missouri’s borders from the plant and equipment income — so-called “capital income.” I use the state historical average for Missouri — that is, 3.8 cents of each dollar of state GDP becomes Net General Revenue collected by Missouri’s Department of Revenue. As such, I have considered individual income, sales taxes, liquor taxes, etc. Given the expanded state GDP, the present value of taxes collected would be $355 million. Thus, even granting the Department of Economic Development’s opaque measure of related job creation, the Bombardier Aerospace project would cost Missouri taxpayers about $22 million.

One big problem with this analysis is that the DED’s measure of related job creation is the output of a discredited economic model. Typically, this model exhibits a multiplier of between 2 and 2.5, meaning that every job attracted into the state generates an additional 2 to 2.5 spillover jobs. Note that in the absence of these unidentified spillover jobs, the cost to Missouri taxpayers rises from $22 million to $110 million. The multiplier approach, if correct, would support widespread government hiring; the Missouri economy could magically expand with each new government hire at least with the range of several thousand workers. Markets do not work this way, however, and the DED unfortunately does not have the resources to update its economic model. Missouri taxpayers should not have to pay for such backward thinking.

There is an escape clause, though. The enhanced enterprise zone law permits the mega-project to make commission payments to the state. The idea is that these payments would offset the state’s “excess” tax credits, so that the costs to Missouri taxpayers would be, on balance, zero. The commission payment feature is a little worrisome insofar as the payment plan is not very specific.

Now, for the second question: Is this the best deal for Missouri taxpayers? We have no way of knowing. The value of the tax credits was not offered to every possible business venture. Instead, lawmakers and unelected officials in the DED are choosing recipients for us. In the marketplaces for ideas and business projects, people operating in their own best interest vet lots of options, and eventually buyers and sellers of the projects pass economic judgment. In this case, though, taxpayer money is being spent on a single project, vetted only by elected officials and bureaucrats.

Perhaps our elected officials can do just as well as those whose livelihood depends on careful analysis. I would prefer for officials and bureaucrats to stay out of the vetting process, despite their good intentions. I appreciate their effort to do something for the Missouri economy, but I urge them to stay out of the business of trying to pick winners and instead consider policies aimed at leveling the playing field for all Missourians. If they want to hand out tax breaks, they should give them to all of us — not just a mega-project.

Joseph Haslag is a professor in the Economics Department at the University of Missouri-Columbia, and executive vice president of the Show-Me Institute.

 

Sick Day Payouts Are Sickening

Posted on by David Stokes

Last weekend, the St. Louis Post-Dispatch had a terrific, in-depth article about the practice of paying employees of the city of St. Louis for unused sick time upon retirement. I highly recommend the entire piece, by Jake Wagman and Kevin Crowe. This issue has been news before — I remember Charlie Brennan discussing it in depth when Marie Jeffries got an $81,000 payout for her unused sick time when she retired in 2003. The Post sums up the issue nicely near the opening:

Under a system virtually extinct in corporate America — and increasingly harder to find in government — St. Louis city employees can bank all sick days they don’t take and exchange them for lump sum payments and a higher pension upon retirement.

Sick days are not vacation days. You use them if you’re sick, and you should not be rewarded for merely not being ill. I realize that people have been using sick days as vacation days since the practice of time-off work was first instituted during the reign of Charlemagne, but that’s not the point. It is actually preferable to use them inappropriately, in my opinion, than to get paid extra for them when you retire. Let’s not delude ourselves that government workers (which I used to be — and this really applies to officials at every level, not just St. Louis city) work so hard that a co-worker can’t rather easily cover for them when they are out. Not to mention that giving incentives for sick people to come to work is not good for the overall health of a community or workplace, as this report discusses. So a city employee with the flu comes to work anyway in order to preserve their sick days for later payout, and ends up giving the flu to healthy people and screwing the taxpayers at the same time. Priceless. Or, more accurately, quite expensive.

P.S. — There is no actual evidence that Charlemagne invented sick leave.

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