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Susan Pendergrass, David Stokes, and Avery Frank join Zach Lawhorn to discuss the end of the 2024 Missouri Legislative Session.

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David Stokes, Elias Tsapelas, and Avery Frank join Zach Lawhorn to discuss:

– The state budget

– The final week of the legislative session

– The latest plan in the City of St. Louis to deal with the prevalence of temporary tags, and more

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But even the best-laid plans can go awry, so how optimistic are legislators that items important to taxpayers will get across the finish line this year? As an article in the Missouri Independent emphasizes, it depends on who you ask:

“I mean, I think we’ll get things done,” said Senate Majority Leader Cindy O’Laughlin, a Shelbina Republican. “Will we get everything done that we want to do? No, we never do. But I’m an optimist.”

Democrats and Republicans share many of the same goals, O’Laughlin said, and progress can be made if people are willing to sit down and talk about how to reach those goals.

The Missouri House has generally been effective in advancing good legislation in the last few years, often only to be stifled in the Senate. The real question for whether 2024 will be “successful” hinges on how the Missouri Senate, now in an election year, handles its business. Will the majority party see itself often split, with leadership joining with the minority party to pass or stop legislation as it did in 2023? Will the majority party use Previous Question motions to scuttle filibusters from all quarters to pass its priorities? Will we see a mix of the two? Or will the chamber mostly be mired in dysfunction and nothing really gets done (again)?

How the factions in the Senate align will play an enormous role in what actually gets done in 2024. With a handful of exceptions, the last few years have been littered with missed opportunities, primarily because the Senate has alternated between watering down important measures or not passing them at all. So 2024 is a Yoda moment of sorts, especially for Missouri’s outgoing senators; lawmakers have entered “do or do not, there is no try” territory if they want to build a legacy before they leave the legislature for good. Giving lip service to good legislation isn’t going to cut it this time around.

What’s ultimately done (or not) remains to be seen, and we at the Show-Me Institute will keep you posted as the session progresses. But I hope that all Missouri legislators will set aside their squabbling and make decisions that keep the good- and limited-government promises made to their constituents. If they do, 2024 could be a banner year for the state, but if they don’t, well, this year will look a lot like last year. And that would be unfortunate.

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But failure needn’t be permanent, as racecar driver Josef Newgarden showed this past weekend. While being a professional racer is an achievement in itself, Newgarden had been hounded by his inability to take the Indianapolis 500 checkered flag in his 11 attempts. But this year, on his 12th attempt, Newgarden found the winner’s circle. It was a relief compounded by years and years of frustration.

“It is mentally draining to be here for weeks and just to know that you really only have one opportunity, and it comes down to today, and that’s the day you’ve got to be perfect and great and everything has got to work out.

“So you spend all this time and effort, and it’s really just a mental grind to work through that. The more you’ve been here, the more it’s not worked out, the more that grind really starts to gnaw at you.

“I don’t necessarily subscribe to the fact that if you don’t win the 500 your career is a failure, but I think a lot of people really view this race and this championship with that lens, that the 500 stands alone – and that if you’re not able to capture one, then the career really is a failure in a lot of ways.

“I’ll be honest, it’s annoying. It’s been terrible,” said Newgarden, which also happens to describe the Missouri Legislature to a T. It has been terrible, despite the potential to do great things in the last couple years, getting close to the podium . . . but not quite to the winner’s circle.

In 2023, legislators crashed spectacularly and didn’t finish. Here’s to hoping their attempt in 2024 is, finally, victorious.

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Missouri passed universal licensing reciprocity in 2020, meaning licenses from all other states can be used in Missouri. For example, 37 states across the country require licensure to be a makeup artist. Licensing reciprocity means that anyone who has a license in one of the 37 states can have Missouri licensing requirements waived when they move to Missouri to be a makeup artist. This policy lowers barriers to entry for professionals and in turn, increases the supply of workers and services. With increased supply and competition, quality increases while prices decrease.

However, Missouri legislators have taken the DeLorean and gone back in time by sending two bills (Senate Bill (SB) 157 and SB 70) to the governor’s desk. The bills would create a new licensing compact and also have Missouri join two other existing compacts. Licensing compacts allow workers with licenses in one state to practice without additional licensing requirements in other states in the compact. These compacts are essentially a less inclusive version of licensing reciprocity. Former Show-Me Institute Analyst Corianna Baier explained the harm licensing compacts can cause:

[T]he current licensing reciprocity statute states that licensing reciprocity “shall not apply to an oversight body that has entered into a licensing compact with another state for the regulation of practice under the oversight body’s jurisdiction.” On its face, this language indicates that the license compact would overrule licensing reciprocity to the injury of Missouri consumers.

Essentially, a compact would partially cancel out licensing reciprocity. Missouri, like Mrs. McFly, is obsessing over the wrong thing. To use the makeup artist example: with reciprocity, anyone from any state (which has a license) can work in Missouri without having to get a new license; under a compact, only makeup artists from states included in the compact reap the benefits.

As Institute analysts have noted repeatedly, this glitch needs to be ironed out with a language change. If we remove the “compact exception” then Missouri can “restore the timeline” and Missouri will once again have full licensing reciprocity.

At this point you may be wondering: what is the benefit of compacts? The benefit of keeping compacts is that many other states don’t have reciprocity. For example, to practice telehealth in another state, one needs to be eligible in that state. While Missouri lets any license apply to our own state, suppose Arkansas does not have the same rules. Therefore, with the passage of the compact, a doctor in Cape Girardeau could now practice telehealth in Little Rock if Arkansas became a member of the same compact.

State regulatory boards are certainly satisfied with the expansion of compacts in our state, but our policymakers need to look out for the interests of Missouri consumers. Fixing the language that puts compacts and reciprocity in conflict would be a win for everyone in Missouri. Hopefully we will not need two more sequels to solve our issues.

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Education reform was never a top priority—it was barely mentioned in the governor’s State of the State address. The lack of commitment to educational progress foreshadowed how the rest of the session would unfold. Other states managed to accomplish what Missouri could not. Let’s take a look at three states (there were many more) that made major strides this year in education policy.

Florida, already one of the leading states in educational performance and choice, continued to build on past success. Governor DeSantis, in his State of the State, emphasized:

We must continue our momentum with K-12 education by increasing teacher salaries, enacting a teacher’s bill of rights, providing paycheck protection for teachers, expanding school choice and fortifying parents’ rights.

Every single one of these objectives became law in Florida this year, with the highlight being a law that made the Florida education savings account (ESA) program universal throughout the state.

Two of our neighbors, Indiana and Arkansas, also made education a priority.

Arkansas’s Governor Huckabee Sanders was committed to expanding education choice and personally pushed for reform. The LEARNS Act (Arkansas’ new education bill) creates an ESA program (starting with only “at-risk” families and expanding to all families by 2025), removes the limit on charter schools in the state, eliminates the 3% transfer cap on the existing open enrollment program, raises teacher starting salaries, and creates a required literacy screening for K-3 students.

Indiana waived textbook fees for K-12 families and expanded the state school voucher program to be near universal (77% eligible to 96% eligible).

Missouri’s failure to advance education reform was bad enough on its own, but it is even worse when compared to the progress of other states. Missouri remains stuck with an extremely limited ESA program (only 1% of students are eligible), no open enrollment program, and charter schools being inaccessible for a vast majority of students in the state. After this year’s inexplicable failure, it will be difficult to trust politicians when they say they want to improve education in our state. Action is what counts at this point—our families and students are counting on it.

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Then as the summer began, rumors percolated that a special session would be called to reduce income taxes, and in July, Governor Parson declared his intention to bring the legislature back for that purpose. Show-Me Institute experts supported that move. The special session gaveled in September, and the governor signed that tax cut bill—SBs 3 & 5—into law yesterday.

The details of the tax cut bill accord with the original recommendations for reform from Institute analysts in July, so you may be unsurprised that I’m keen on the final product. Starting next year, the income tax will drop below 5% for the first time, to 4.95%, and then (subject to revenue triggers) will migrate toward 4.5% over a period of years. The bill also modestly cuts taxes from the bottom alongside these top-rate cuts, exempting the first $1,000 of a taxpayer’s income from taxation. All in all, a good strategy.

That said, I sure hope future legislators plan on accelerating the process sometime in the next few legislative sessions. At the current tax cut pace, the income tax would be due to be eliminated in roughly 50 years . . . assuming tenth-of-a-point cuts continue to be scheduled in the future and happen on time from the 4.5% rate. Knowing the way the legislature operates, the issue of income tax cuts may not be broached much in 2023, but the legislature should consider shortening the timeline for such cuts considerably, and soon.

That said, congratulations to the governor, the Senate, and the House for getting this across the finish line. While we look askance the agricultural tax credits that were passed alongside the tax cuts, the income tax cuts were needed and at least partially saved this year’s legislating cycle. Hopefully next year another special session won’t be required because the regular session ends up being very productive. Fingers crossed.

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Senators are not inherently wiser, or more patient, or more knowledgeable than their House counterparts. In a tweet Friday, state Sen. Lauren Arthur of Kansas City, a Democrat, defended the institution. “The Senate was designed to make it difficult to pass legislation,” she said.

Yet Arthur and her colleagues were unable to prevent the grotesque violation of Kansas Citians’ rights when the General Assembly imposed a 25% floor on police spending in its final day.

If your only goal is to prevent bad stuff, rather than pursue good stuff, failure can resemble success. But it’s still failure. [Emphasis mine]

Nebraska has a one-house state legislature. Perhaps the people skilled at gathering petition signatures can pursue a smaller Missouri General Assembly in 2023.

The Star is right about the philosophical importance of pursuing, and following through on “good stuff,” though I might disagree about what that “good stuff” would be. But for example, high among the alleged priorities of the state Senate leadership was passing a Parents’ Bill of Rights, and that priority was decidedly and bizarrely ignored throughout the session.

The Senate’s bias against its own priorities—debating key legislation last rather than first, and thus always risking its failure—isn’t new. Missouri voters have sent supermajorities to the House and Senate for a reason; it is not reasonable for the legislature to fail so emphatically and so often in enacting the reforms their constituents demand. In that, I agree with the Star.

Now, I’m not prepared to agree with the Star that Missouri should abolish the Senate entirely and adopt Nebraska’s unicameral legislature. But get back to me next year; maybe another year of failure will persuade me.

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Perhaps the thing that makes bad legislation into terrible legislation is when legislators try to implement programs that have clearly proven to be failures elsewhere (or previously). This is exactly the case for a few bills I have been following closely that seem close to passing this year.

There are many poorly designed tax credit and subsidy plans. Out of all of them, film tax credit programs are among the most studied, probably because of their more high-profile nature. People find films to be more interesting than soybeans, I guess. Those studies are clear in their conclusions: film tax credits do not succeed in growing the economy and do not generate the tax revenues to justify the subsidies. Missouri used to have a film tax credit program and we removed it—how often does that happen?—because it was clear it was not working. Yet, once more, there is legislation moving to reinstate a failed program. Why in heaven should Missourians pay millions of dollars to watch Ben Affleck drink coffee on Main Street for a few days? Missouri is better off without film tax credits. If the people of Georgia or California want to subsidize the shows and movies we watch, go ahead and let them. (Related bills are SB 961 & SB 732, primarily SB 961 at this point.)

Closely related to the zombie-like film tax credit program is the proposed Entertainment Industry Jobs Tax Credit that will provide tax subsidies for businesses that provide rehearsal and touring studios in Missouri. This entire program is aimed at one new company opening in Chesterfield, one that has already received other state and county tax subsidies. Apparently, that is not enough, as this proposal would have taxpayers further fund this new studio and entertainment center. It is simply awful policy for the state to decide that this particular type of business deserves a subsidy as opposed to a thousand other types of businesses. Taxes should pay for public goods such as parks, police, and transportation. There are other public goods, too, but however you define it, a private recording studio doesn’t make the cut. A new business coming to Missouri and, first and foremost, investing in a massive lobbying effort to get taxpayers to fund its operations represents everything that is wrong with our current system. (Related bills are SB 961 & SB 733, primarily SB 961 at this point.)

Another program that has consistently failed in Missouri is land banks. Show-Me Institute researchers produced significant work years ago on how the St. Louis land bank succeeded in accumulating property, not disposing of it (as was the plan), and empowered local politicians further by politicizing the land bank decisions. When Kansas City wanted to institute a land bank, Institute analysts warned those failures would be repeated there. According to investigative reports by the Kansas City Star, that is precisely what happened. The Kansas City land bank has favored local politicians at the expense of local communities, among many other problems. Despite that record, there are bills to now allow any city or county in the state to institute a land bank. This bill would empower local governments to proactively seize or purchase private property under the guise of assisting development. This would be highly troubling even if land banks had a successful track record, but the track record is terrible in St. Louis and Kansas City. (Related bills are HB 2177, SB 1089, and SB 724, primarily HB 2177 and SB 724 at this point.)

In government, nothing succeeds like failure. There is nothing quite as frustrating as watching legislators—many of whom would consider themselves supporters of limited government—trying to pass bills that propose policies with a proven record of failure.

I like a nice vineyard and a good glass of wine as much as anyone, but for these spoiled grapes, I’m hoping they all die on the vine in the last week of the session.

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What’s the cost of this legislative inaction been so far? From failing to establish a parents’ bill of rights to making no progress on reforming taxes, priorities of all sorts are increasingly in peril as the end of the session draws ever nearer with each passing fruitless legislative day.

Congressional maps are only part of the problem, of course. The main problem is that the Senate supermajority, bizarrely, cannot agree among themselves on what major legislative priorities to pass and when to test the commitment of the minority to a filibuster of the majority’s plans. Bills are filibustered. Resolutions are filibustered. The journal (!) is filibustered. And economic freedom and school choice and transparency and tax reform go by the wayside.

The result is that instead of fending off just one faction of filibusterers, the Senate now has two sizable filibustering factions: the liberal minority and, now, the conservative caucus.

It’s easy to dust off the old saw that this is just how the Missouri Legislature operates, but years of rewarding filibusters in the Senate has invited more of them and made filibusters the norm rather than the exception to managing legislative business. You’d be forgiven if you thought the legislative priorities of Missouri’s conservative supermajority were a bit unclear, especially in contrast to states like Arizona and Florida that committed to transparency in curricula and acted at the first opportunity. If not getting things done in 2022 is the intent of representatives and senators, well, mission accomplished. But I don’t think that was the deal taxpayers thought they were making with their elected officials when they put them in office.

Whatever the majority’s objectives might be for 2022, the clock is winding down on them. Missourians deserve far more than has been delivered by the legislature, and so far, the session has been a giant disappointment.

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My colleagues and I submitted testimony for the public hearing for these bills, and our testimony echoes what Show-Me Institute researchers have said for years: Tax credits are often a bad deal for Missouri taxpayers.

Tax credit programs rarely generate enough economic activity to justify their use. Over the past few decades, Missouri has foregone billions in state tax revenue due to a host of narrow incentive programs that have consistently yielded poor results. Targeted economic development programs are just another way for lawmakers to pick winners and losers, a job that is better left to consumers in the market. When tax breaks are given to some, other taxpayers must make up for the lost revenue.

The tax credit programs that would be created through these bills would be bad deals for Missouri taxpayers. Hopefully lawmakers will do right by businesses and taxpayers and stop providing tax benefits to their favored few.

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