Kansas City and St. Louis are notably highlighted for their fiscal challenges. Kansas City is ranked 57th, while St. Louis is positioned at 59th. Both cities have been assigned “D” grades, indicating significant financial distress. This distress is quantified through the “Taxpayer Burden” metric, representing the amount each taxpayer would need to contribute to settle all municipal debts. In Kansas City, this burden amounts to $8,800 per taxpayer, whereas in St. Louis, it escalates to $9,800. ​

A primary factor contributing to these burdens is the underfunded pension liabilities in both cities. Unfunded pensions place taxpayers and city services at risk, leading to increased debt and financial instability. ​

The implications of such financial distress are profound. Residents may face reduced public services, increased taxes, or both, as cities strive to balance their budgets. Moreover, fiscal instability can deter business investments, stymie economic growth, and erode public trust in local governance.​ This is in addition to both cities’ struggles providing public safety.

Addressing these challenges necessitates a multifaceted approach. Cities must prioritize fiscal responsibility, ensure transparent accounting practices, and engage in proactive financial planning. Fostering economic development can help alleviate fiscal pressure, but it must be real development, not the sort we have seen for decades that merely transfers tax dollars to corporate cronies.

There is an urgent need for comprehensive fiscal reforms in both of Missouri’s largest cities. Without prompt and effective action, residents will bear the brunt of past financial mismanagement for years to come.

The post Can We Handle the Truth . . . of Our Cities’ Financial Status? appeared first on Show-Me Institute.

The reality is starkly different, and we shouldn’t be surprised. Historically, the economic benefits of hosting the Olympics have been dubious, and Paris is proving no exception. Despite the €7.5 billion investment, tourism has slumped, with travelers avoiding the city due to expected overcrowding. The author of the Telegraph piece writes:

Judging by the experience of other cities, many of those supposed benefits never materialise and the host is stuck with a series of expensive developments that no one can find a use for. To take just one example, the London Stadium, constructed for the 2012 games, makes a decent ground for West Ham, but it is hard to understand why taxpayer’s cash was needed to build it.

I share this in the hopes that seeing the failed promises of big sporting events overseas will make the argument at home more palatable. These investments just don’t pan out for taxpayers, be they for the Olympic Games, the Royals, Chiefs, or Cardinals. And yes, as my colleague David Stokes wrote 14 years ago, “there is a big difference between hosting an event for which you have to build facilities, like the Olympics, and hosting an event for which you already have the requisite facilities for other purposes.” But the impact, or rather the lack thereof, remains.

Given these challenges, the author suggests a permanent home for the games. Perhaps Greece. Establishing a permanent venue could drastically reduce costs, simplify organization, and minimize corruption.

That may be a viable solution for the Olympics, but for those of us stateside, the lesson needs to be learned. These events, be they Olympics or political conventions, don’t drive meaningful economic activity. They aren’t worth expending public funds on.

The post Sacre Bleu! Sporting Events and Stadia Don’t Drive Economic Development appeared first on Show-Me Institute.

A Missouri Times article explains what the expired economic development tax credits are:

The New Generation Cooperative Incentive Tax Credit, Meat Processing Facility Investment Tax Credit, and Agricultural Product Utilization Contributor Tax Credit programs offered by the Missouri Agriculture and Small Business Development Authority (MASBDA) that sunset in 2021.

What kind of effect do they have? Well, that depends on whom you listen to. According to the Missouri Farm Bureau, the effects would have a larger impact than discovering a giant oil field in rural Missouri and turning Cuba, Paris, and Lebanon (MO) into the next Kuwait (note: there is no Missouri city named Kuwait). From a Farm Bureau commentary in favor of the programs (emphasis added):

The largest of these programs is the New Generation Cooperative Incentive. This tax credit helps investors draw in private investment for value-added processing. To date, $63 million in tax incentives have generated over $501 million in private investment.

For those of you keeping score at home, that statement claims an economic impact eight times the government investment. Whether you call it an economic multiplier, a cost-benefit analysis, or whatever, the claim that it generated an eightfold impact is absurd.  Even the Missouri state economic development agency makes much lower economic impact claims for this credit (and their claims are also almost certainly way too high). If you are asking yourself if an obscure Missouri state agency funded with other people’s money is capable of creating an economic return eight times the cost of the program, the answer is no, it isn’t.

Government officials cannot predict the future (which often makes the credits useless), and are often influenced by political calculations (which is what can turn the credits from useless to harmful). Missouri should let these tax credits remain dead, and the same thing goes for the film tax credit (wasteful), the low-income housing tax credit (rampantly abused by developers), and just about every state and local tax credit program we have.

Investment in rural Missouri is absolutely needed. State tax credit programs are not the way to do it.

The post Let Expired Agricultural Tax Credits Stay That Way appeared first on Show-Me Institute.

Well, my friend, if you are, I have to admit: You had a couple of modest “wins” in 2018. Here in Missouri, free-market thinking took it on the chin in two ballot initiatives. On Aug. 7, by an overwhelming majority, Missourians voted to kill a right-to-work law passed by the Missouri Legislature in 2017. Then on Nov. 6, Missouri voters passed another ballot initiative boosting the state’s minimum wage from today’s $7.85 to $12 by 2023.

Compared with other news, however, those victories by deep-pocketed trade union groups and their co-dependent, big-government allies were small beer. The year’s big story was the striking success at the national level of free-market policies in driving faster growth and widely shared prosperity for all groups of people. For two years, the federal government has been lifting the burden of regulations and taxes on businesses and consumers alike. The dynamism of American capitalism has done the rest.

Recent GDP growth has been close to 4 percent – or about double the rate sustained over the eight years of the prior administration. Suddenly, there are more job openings than people seeking work. That, in turn, has led to higher pay for people at all income levels.

On Oct 2, Amazon CEO Jeff Bezos announced that he was raising his company’s internal minimum wage for warehouse and other unskilled workers to $15 an hour. This led to mutual back-slapping between Bernie Sanders and Bezos. The self-declared socialist complimented the world’s richest man on “doing the right thing,” and Bezos responded with self-congratulations, saying he hoped that other companies would follow his lead.

But guess what? He wasn’t leading. The U.S. Labor Department recently reported that wages for nonsupervisory warehouse employees had risen 4.6 percent from a year earlier, to $17.87 an hour. That’s almost $3 an hour more than the wage set by Amazon’s act of supposed enlightenment. Faced with the demands of an expanding economy and a tight labor market, companies did what they had to do – they raised wages to poach workers or keep the ones they have. So it wasn’t Mr. Bezos who deserved the compliment, but the unimpeded operation of the free market.

If you look around the country and the world, you see people everywhere who are fed up with the cluelessness of wealthy and long-established political elites who continue to pursue highly questionable policy objectives regardless of the cost in higher taxes, reduced paychecks, and lost economic growth. We are witnessing what the Wall Street Journal calls a “Global Carbon Tax Revolt,” with ordinary people rising up in protest against fuel-tax hikes and costly climate-change initiatives aimed at boosting unreliable renewable power. That has happened with the violent “Yellow Vest” protests in Paris and many rural areas that have rocked the presidency of France’s Emmanuel Macron. Other hot spots in the same revolt by taxpayers opposed to sacrificing growth on the altar of environmental piety include Germany and Canada, along with the states of Arizona, California, and Washington.

In sum, 2018 was a bad year for government-failure deniers. It was a much better year for those who believe in the unrivaled power of free markets to create and spread wealth and to promote greater individual freedom, responsibility, and creativity. But 2018 wasn’t all roses either, with rising fears of a global trade war sparked by retaliatory tariffs.

Tariffs are another tax – a tax on commerce. Of course, the more you tax something, the less you get of it. Missouri is a soybean basket to the world. Our state can ill afford a major disruption in world commerce. Neither can the nation. Looking ahead to 2019, let us hope that the substantial economic gains made in 2018 are not jeopardized or lost through the folly of managed (or mismanaged) trade policy.

The post 2018: A Bad Year for Government-failure Deniers appeared first on Show-Me Institute.

Well, my friend, if you are, I have to admit: You had a couple of modest “wins” in 2018. Here in Missouri, free-market thinking took it on the chin in two ballot initiatives. On Aug. 7, by an overwhelming majority, Missourians voted to kill a right-to-work law passed by the Missouri Legislature in 2017. Then on Nov. 6, Missouri voters passed another ballot initiative boosting the state’s minimum wage from today’s $7.85 to $12 by 2023.

Compared with other news, however, those victories by deep-pocketed trade union groups and their co-dependent, big-government allies were small beer. The year’s big story was the striking success at the national level of free-market policies in driving faster growth and widely shared prosperity for all groups of people. For two years, the federal government has been lifting the burden of regulations and taxes on businesses and consumers alike. The dynamism of American capitalism has done the rest.

Recent GDP growth has been close to 4 percent – or about double the rate sustained over the eight years of the prior administration. Suddenly, there are more job openings than people seeking work. That, in turn, has led to higher pay for people at all income levels.

On Oct 2, Amazon CEO Jeff Bezos announced that he was raising his company’s internal minimum wage for warehouse and other unskilled workers to $15 an hour. This led to mutual back-slapping between Bernie Sanders and Bezos. The self-declared socialist complimented the world’s richest man on “doing the right thing,” and Bezos responded with self-congratulations, saying he hoped that other companies would follow his lead.

But guess what? He wasn’t leading. The U.S. Labor Department recently reported that wages for nonsupervisory warehouse employees had risen 4.6 percent from a year earlier, to $17.87 an hour. That’s almost $3 an hour more than the wage set by Amazon’s act of supposed enlightenment. Faced with the demands of an expanding economy and a tight labor market, companies did what they had to do – they raised wages to poach workers or keep the ones they have. So it wasn’t Mr. Bezos who deserved the compliment, but the unimpeded operation of the free market.

If you look around the country and the world, you see people everywhere who are fed up with the cluelessness of wealthy and long-established political elites who continue to pursue highly questionable policy objectives regardless of the cost in higher taxes, reduced paychecks, and lost economic growth. We are witnessing what the Wall Street Journal calls a “Global Carbon Tax Revolt,” with ordinary people rising up in protest against fuel-tax hikes and costly climate-change initiatives aimed at boosting unreliable renewable power. That has happened with the violent “Yellow Vest” protests in Paris and many rural areas that have rocked the presidency of France’s Emmanuel Macron. Other hot spots in the same revolt by taxpayers opposed to sacrificing growth on the altar of environmental piety include Germany and Canada, along with the states of Arizona, California, and Washington.

In sum, 2018 was a bad year for government-failure deniers. It was a much better year for those who believe in the unrivaled power of free markets to create and spread wealth and to promote greater individual freedom, responsibility, and creativity. But 2018 wasn’t all roses either, with rising fears of a global trade war sparked by retaliatory tariffs.

Tariffs are another tax – a tax on commerce. Of course, the more you tax something, the less you get of it. Missouri is a soybean basket to the world. Our state can ill afford a major disruption in world commerce. Neither can the nation. Looking ahead to 2019, let us hope that the substantial economic gains made in 2018 are not jeopardized or lost through the folly of managed (or mismanaged) trade policy.

The post 2018: A Bad Year for Government-failure Deniers appeared first on Show-Me Institute.

Will Saint Louis (or Kansas City) surprise the business world in winning the Amazon Prize? I speak, of course, of the bidding war to decide what city, suburb, or close-in town – out of 238 contestants – will be selected as the site of Amazon’s second headquarters. In every important way, “HQ2” is supposed to equal its existing headquarters in Seattle. Amazon will announce its choice in the spring of next year. Both of our two biggest metro areas are in the bidding – with enthusiastic support from Gov. Eric Greitens and his team.

The potential payout dwarfs the Orteig prize, but so too do the costs to the cities and states doing the bidding. Amazon says it is prepared to invest about $5 billion of its own money at its new site and create up 50,000 jobs with an average annual compensation of more than $100,000 per job.

In Lindbergh’s case, Saint Louis businessmen put up $15,000 (to his $2,000) to underwrite the cost of building his airplane. As for HQ2, it seems clear that the costs to local and state taxpayers over a period of 15 to 20 years will run into the billions of dollars.

It’s a big and potentially wildly uneven trade-off, beginning with the fact that Amazon cannot guarantee 50,000 sustainable jobs – or even 5,000 jobs or 1,000 jobs. Who is to say Amazon will continue to grow at the same phenomenal pace that it has maintained over the past two decades? In the tech world, many once-hot companies have either fallen into bankruptcy (think Wang Laboratories and Digital Equipment Corporation) or stopped growing and faded into insignificance (think AOL and Yahoo).

Remember that the initial build-out of HQ2 is supposed to take 15 years. That is a long time, and it makes this competition a very different proposition than the Lindbergh flight. Less than three months after getting his final go-ahead from Major Albert B. Lambert (after whom Saint Louis’s airport is named) and other backers, Lindbergh had designed and built his Spirit of St. Louis monoplane and completed his historic flight from New York to Paris.

It is disturbing that city and state officials in Missouri have responded with such rapturous glee to the Amazon bidding – while maintaining that they must, in deference to Amazon’s wishes, remain mum about what they have offered in the way of tax breaks and other subsidies.

Nobody knows what Amazon will look like in 15 or 20 years. In that sense, HQ2 is a multi-billion-dollar pig in a poke. Whatever city wins the Amazon Prize, you may be sure that local and state taxpayers will, for a long time, be deeply in hock to trying to make a go of it.

The post “Lucky Lindy” vs. Jeff Bezos: Who Is the Better Bet for Missouri? appeared first on Show-Me Institute.

Nixa Public Schools outsourced maintenance to Sodexo, based out of Paris, France. St. Louis Public Schools contract with First Student, “the largest bus company in North America,” for transportation services. More than 100 public school districts contract with Chesterfield, Mo.-based Opaa! to provide food service for public school students.

I was reminded of this piece last week when I read an interesting story by Dale Singer of St. Louis Public Radio, “Outsourcing substitute teachers deemed a success.” Singer shares how several Saint Louis area school districts, including Parkway, Normandy, and Maplewood Richmond Heights, now use Kelly Educational Staffing to find substitutes. 

This arrangement of privatized substitute services has been beneficial for everyone. In Normandy, for example, a district that has had its fair share of trouble over the past few years, the district has struggled to fill classrooms when the teacher is absent. According to Singer, “the rate of filling classrooms with substitutes had been in the 55-60 percent range; that figure rose to around 90 percent” with Kelly Educational Staffing.  The arrangement also means school districts can cut down on administrative costs in the central office.

The system is even great for retired public school teachers who wish to teach. In Missouri, a retired teacher can only work 550 hours for a school district while collecting their pension benefits. When substitute teachers are outsourced to Kelly, they no longer work for the school district. They work for Kelly Educational Staffing. This means they can work more and still draw their pension.

This is just another example of how privatization can be a good thing. As I wrote in my piece two years ago,

Opponents of school choice like to throw out the word privatization as if it was a bad thing. Yet, public schools contract with private providers in nearly every aspect of our K-12 education system.

If the goal is to provide a world-class education to students, policymakers need to avoid the knee-jerk reaction against school choice and recognize that the private sector can help deliver on the promise that every child should have access to great schools.

The post Privatization: Still a Good Thing in Education appeared first on Show-Me Institute.

On Tuesday, April 5, Saint Louis voters will decide whether to extend the city’s 1 percent earnings tax for five more years.

Without a doubt, this is a hugely important decision.

In inviting me to talk to you, Ron Zager (co-chairman of the Missouri Progressive Action Group), asked that I begin by presenting both sides of the argument—for and against the earnings tax .

I am happy to do so. It makes for an interesting—and even a startling—contrast.

Supporters cite three principal reasons for extending the earnings tax:

1. It is simple, fair, and easy to collect. Businesses withhold $1 out of every $100 from the paychecks of all of their employees and pay it directly to the city. They also pay a 1 percent tax on their net profits.
2. It brings in a lot of revenue—almost as much as the combined receipts from the city’s property, sales, and utility taxes. It provides a third of the city’s General Revenue Fund, used to support fire, police, courts, streets, parks, recreation, and other day-to-day city services.
3. A large portion of this revenue is like manna from heaven. People who commute into Saint Louis from the surrounding suburbs account for more than half of the city’s annual earnings tax receipts of about $160 million. And why not? The high-earning commuters are significant consumers of city services, swelling the daytime population of the city by about 35 percent.

To sum up the case in favor of retention: The earnings tax is critical to the continued functioning of city and the continued provision of police and other services to a population that includes a high proportion of low-income residents. It is a real lifeline. The city would be in danger of going bankrupt without it.

Opponents have three main reasons of their own for eliminating or phasing out the earnings tax:

1. It encourages people and businesses to move out of the city.
2. It also encourages an ongoing merry-go-round of tax carve-outs and special favors for large and well-known firms. The city does not extend the same benefits to thousands of smaller businesses, which take care of most of the daily needs of people who live in the city, such as the neighborhood grocer, cleaners, pharmacist, or auto repair shop.
3. Though not a regressive tax (applying the same 1 percent to people at all income levels), it is a cruel one. Unlike federal and state income taxes, there is no exemption from the city earning tax for working people at or below the poverty line. The tax hits the first dollar of income even from the lowest-paying jobs. A still greater problem is the narrowing of job opportunities in parts of the city experiencing a rapid out-migration of people and the closure of many small businesses.

The minuses are really the flip side of the pluses I have just mentioned.

Yes, the earning tax is easy to collect, but it is also easy to avoid. As a business owner, you can avoid the tax on your net profits simply by moving your business to the suburbs—anywhere outside the city. There is no earnings tax in Clayton, here in Frontenac, or anywhere else in Saint Louis County and other surrounding counties and municipalities. If you did move your business, many or even most of your employees who already live in the county would, out of their own self-interest, applaud your decision. And others who live in the city would be given a reason to move to the county.

Yes, the earnings tax pays many big bills for the city. By the same token, it provides a strong incentive for individuals and businesses—who have bills of their own to pay—to relocate in order to avoid the tax.

By collecting more than half of earning tax revenue from commuters, the city is (inadvertently) making a powerful argument for downtown-based law firms and other businesses with a large number of highly paid employees to take flight—for both economic and personal reasons. At one stroke a firm can give many of its officers and employees an instant 1 percent raise while sparing them the bother of a long commute. So what can the city do to prevent such businesses from moving?

If you are the sitting mayor or other high-ranking city official, here’s the answer: Offer big potential flight risks all kinds of tax breaks and other incentives to stay downtown. Find ways to abate property taxes to keep prestigious firms from leaving downtown. Waive the half-percent payroll tax (separate from the earnings tax) for large employers such as Anthem and Wells Fargo. And lobby the state for more handouts.

But of course, given your obsession with preserving earning tax receipts, you do that only for the big guys and you forget all about the little guys who are so numerous (even in decline) that you know little or nothing about them.

A classic example of how this works can be taken from 2011, when Stifel Financial Corp., which has had its corporate headquarters in downtown Saint Louis since 1890, announced plans to buy its downtown office building and expand its workforce in the city by a couple hundred people. Mayor Francis Slay called it “tremendous news for the future of downtown.” He also helped Stifel get some $17 million in public financing for the purchase and renovation of the building.

Why would a large and successful financial firm need help in feathering its own nest? Ron Kruszewski, Stifel’s CEO, said it all: “There’s very little investment going on right now without some incentives.”

That prompted Bill McClellan of the St. Louis Post-Dispatch to comment in one of his columns: “When liberals like me argue for comprehensive health care, critics call us socialists. But when businesspeople demand public money to underwrite their projects, hardly anyone says anything.”

(I’ll take issue with McClellan on one point here: There is at least one institution that has fiercely and consistently opposed all forms of corporate welfare and crony capitalism, whether it is providing public funds for new corporate headquarters, public funds for professional sports stadiums, or any other kind of commercial development. That is the Show-Me Institute.)

To sum up the minuses: the earnings tax is a tax on work and enterprise, and when you tax something, you get less of it. In this case that means fewer jobs and less growth. The earnings tax has also encouraged unfair and unwise favoritism in tax practices—decisions made up on the fly to keep big-name businesses from bolting to the county. It’s time for a long look at Saint Louis city government—how it is financed and, more fundamentally, how it thinks.

Let us take a moment to consider decade-to-decade changes in the relative importance of Saint Louis among major cities in the United States over a long period of time—both before and after the introduction of the earnings tax in 1954.

According to census data, the last time Saint Louis moved upward in the ranks of U.S. cities was in the 1890s. The population grew from 452,000 people at the beginning of the decade to 575,000 in 1900, and Saint Louis moved from being the 5th largest city in the country to the 4th (behind New York, Chicago, and Philadelphia).

Of course, that was just prior to the Saint Louis World’s Fair. In that same amazing year of 1904, Saint Louis also hosted the world’s third modern Olympics—following the 1900 Olympics in Paris and the 1896 Olympics in Athens.

Saint Louis held onto 4th place until the 1920 census, when it was overtaken by Detroit and Cleveland, dropping to 6th. It was passed by Los Angeles in 1930 and Baltimore in 1940, falling to 8th. It remained in that spot in the 1950 census—when the city’s population hit an all-time peak of 857,000.

At that point the city’s population went into a steep decline that continues to this day. Since 1950, its population has dropped from close to 900,000 to a little more than 300,000—discarding almost two-thirds of its human body weight—and Saint Louis has gone from being the 8th-largest city in the country down to the 60th, behind such places as Tulsa, Oklahoma, and Wichita, Kansas.

It would be absurd to place all or even most the blame for this decline on the earnings tax. It would be equally absurd to deny that the earnings tax has made a significant contribution to the depopulation of the city and the growth of surrounding areas.

For one thing, we know that downtown Saint Louis no longer rules the roost as the unchallenged commercial center of the Saint Louis region. Clayton has become a strong second center, and other places around the county are also filled with offices and business enterprises. It is only in Saint Louis City that you find acres and acres of abandoned houses, deserted storefronts, and boarded-up factories.

Here’s a statistic that may surprise you: There are now more people who commute into Saint Louis County . . . both from the city and from Saint Charles and other counties . . . than there are people who commute into the city from the county or other jurisdictions. There are 236,000 people commuting into the county versus 172,000 commuting into the city, according to recent census data.

Somehow, Clayton and other municipalities receiving this great daily influx of commuters have been able to handle it . . . without instituting an earnings tax or having everything from the streets to public safety fall to pieces. Why is it any different for the city of Saint Louis? Why is the city unable to cope without taxing the earnings of people who come there to work?

Let’s turn then to the question of whether it is possible to phase out the earnings tax without throwing the city into bankruptcy and fulfilling the worst predictions.

Bear in mind that the proposal on Tuesday’s ballot in the city calls for phasing out the earnings tax over 10 years—whittling away at a $160 million funding gap that would occur in the year 2026 through spending cuts or revenue enhancements averaging $16 million a year between now and then.

Is $16 million a year too tall a mountain to climb? Somehow, in the city’s desperate efforts in recent months to persuade the Rams and the NFL to keep the team in Saint Louis, the city funneled $16 million through the Saint Louis Convention & Visitors Center Commission to pay legal fees and other expenses in what turned out to be a losing effort.

Before that, Mayor Slay and Missouri Gov. Jay Nixon were prepared to raise about $400 million to pay for a large portion of the cost of building a new downtown stadium for the Rams. That alone would have equaled the revenues from the earnings tax over a two-and-a-half-year period.

If almost any large business you can imagine were to lose customers year after year—eventually losing more than half of its business base—you would expect it to downsize drastically, if not go out of business.

Why is it—despite the steady, continuing loss in population—that the city’s budget continues to grow, if only slowly, from one year to the next, with few if any large reductions in its workforce?

Faced with such questions, city officials typically shift the focus to public safety, saying they need more rather than fewer police and firemen. Public safety accounts for a little over half of general funds expenditures. Why, then, is it so hard to trim the other expenditures that make up about 45 percent of the budget?

There are other ways that the city can either cut expenditures or raise revenues besides the shock of instituting sudden and drastic increases in property or sales taxes. It could raise hefty sums of money by privatizing assets such as the airport or the water system.

It could also make a serious effort to raise some revenue from its large nonprofit institutions. As Post-Dispatch business columnist David Nicklaus pointed out in a recent article:

These universities and hospitals depend on city service but don’t pay property taxes. Boston and other cities have negotiated payments from their big nonprofits; Saint Louis could try to do the same. Eliminating the 1 percent earnings tax should make it easier for these institutions to attract and retain employees; wouldn’t they pay something to make the tax go away?

But none of those things is going to happen without a fundamental change in thinking on the part of city officials who have come to look upon the earnings tax as the sine qua non of Saint Louis city governance.

Following the last election, when voters re-approved the earnings tax, city officials heaved a sigh of relief, agreed that the tax did indeed put the city at a competitive disadvantage, and promised to study alternatives. That was five years ago. And since then they have done nothing.

Maybe if the vote is closer this time, they will begin to think differently. But maybe not. Maybe they will just go on hoping for miracles while continuing to pursue policies that have contributed the city’s decline and fall from the heights it once occupied as a great American city.

The post The Saint Louis City Earnings Tax: Lifeline or Noose? appeared first on Show-Me Institute.

The study highlights several recent cases where a union executive got caught using the union’s coffers as a personal slush fund. In one case, a Service Employees International Union executive used the local he ran to procure lucrative contracts for family businesses. He also spent hundreds of thousands of dollars of union dues each year to maintain a posh Los Angeles lifestyle: using union funds to attend a Four Seasons Resort golf tournament, spend big at a Beverly Hills cigar club, and have expensive meals at steakhouses. According to the article exposing this abuse, the average employee represented by this union earns about nine dollars per hour.

In another case, a reporter for the Kansas City Star uncovered a culture of excess at the top echelons of the International Brotherhood of Boilermakers. The executives at this union, often family members of one another, typically made six-figure salaries, enjoyed first-class travel on private jets, flew to destinations like Paris, Marco Island, and Alaska, and had an executive suite at the Kansas Speedway. All on the worker’s dime.

In the cases highlighted in the study, the abuse of union funds was discovered after journalists reviewed a union’s financial disclosures. Financial transparency allowed union members to find out something was wrong and make the appropriate changes to leadership.

Government workers deserve the same protections as members of private-sector unions. Right now state and federal law allows government union spending to remain hidden. If a union executive representing government employees—like firefighters, teachers, or state employees—is using union funds for personal gain, there is little we can do to uncover it.

The post New Study Shows Benefits of Union Transparency appeared first on Show-Me Institute.

In a classic episode of The Three Stooges, the phrase “Niagara Falls” triggered a visceral reaction from Moe and Larry, which ended with Curly getting punched, slapped, and thrown to the ground. I am often reminded of that episode when I talk to policymakers and public school officials about school choice. Like Moe and Larry, they seem to have their own trigger word—privatization.

Many reject outright the idea of allowing public dollars to follow a student to the school of his or her choice—including a private school. Never mind that there is a long history of individuals using public dollars at privately operated pre-schools and universities. When faced with this proposition for K-12 education, Missouri Gov. Jay Nixon (D) said that is where he draws the line. Missouri Rep. Jeff Grisamore (R–Lee’s Summit) echoed his sentiment: “Public schools should be publicly funded and private schools should be privately funded, period.” Like the reaction to Niagara Falls, these responses are almost comical.

They are laughable because public dollars already flow to private institutions. Examples abound. Nixa Public Schools outsourced maintenance to Sodexo based out of Paris, France. St. Louis Public Schools contract with First Student, “the largest bus company in North America,” for transportation services. More than 100 public school districts contract with Chesterfield, Mo.-based Opaa! to provide food service for public school students.

Every day, school districts rely on private, for-profit providers to deliver services and supplies. Some even contract with private schools to serve their most at-risk students. Yet, for some reason there is strenuous objection to private school choice programs that allow individuals to direct their education dollars to the school of their choice.

Opponents of school choice claim that private schools are unaccountable. That is, they do not have to teach the state’s academic standards, administer state standardized exams, or comply with a host of burdensome regulations.

This argument assumes that the only way to have accountability is through government regulations. That is not the case. Accountability simply looks different in a school choice system.

When parents choose a school for their child, they essentially are entering into a contract with the school for the education of their child. In the traditional system, parents have little recourse if the school fails to meet that obligation. They can meet with teachers, principals, and central office staff. They can even take their plight to the school board. At the end of the day, however, they have very little ability to hold the school accountable for meeting their needs. They are dependent upon the school for change.

In a school choice system, however, the dynamic is very different. In fact, the arrangement between parents and schools in a school choice system closely resembles the contracts between public schools and private service providers. If Opaa! fails to provide nutritious meals, they can be fired. Similarly, if a school fails to keep a child safe or does not live up to the expectations of the parents, the school can be fired.

Choice is a powerful accountability tool.

Opponents of school choice like to throw out the word privatization as if it was a bad thing. Yet, public schools contract with private providers in nearly every aspect of our K-12 education system.

If the goal is to provide a world-class education to students, policymakers need to avoid the knee-jerk reaction against school choice and recognize that the private sector can help deliver on the promise that every child should have access to great schools.

James V. Shuls, Ph.D., is the director of education policy at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Privatization in Education-Not as Scary as Some Think appeared first on Show-Me Institute.

First, the consultant criticized the airlines’ statement that the airline industry has experienced considerable stress since 2001 and would attempt to use their limited resources where they make the most profit. The consultant claimed that, “In fact, the airlines are now experiencing record profits.” This point is shortsighted. Airlines have managed profitability in the last couple of years. However, in the last two decades, the airlines lost so much money that Warren Buffett joked, “If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright.” The airlines only reached this profitability after massive consolidation, keeping just the most profitable flights, and closing airport hubs. Airlines, especially MCI’s largest carrier, Southwest, have learned their lesson and will likely remain cost-conscious in the future.

Second, the consultant objected to the airlines’ view that terminals do not create demand. They stated:

…a new or expanded terminal can address certain deficiencies and open up new air service opportunities…For example, the lack of international gate capacity…

This point is strange, as the consultant admits that growth in international travel at MCI is essentially flat (0.7 percent growth) and will remain so. But, according to the consultant, Kansas City can be like Pittsburgh, which has a flight to Paris. Unfortunately, Pittsburgh had to pay $9 million in subsidies for that honor, so maybe Kansas City does not want be like Pittsburgh. As Southwest officials stated, MCI has adequate capacity and its price competitiveness means more service. Compared to non-hub peer airports, MCI has more non-stop destinations.

Third, consultants disagreed with the airlines about the importance of landing costs for airlines. They stated:

In general, airport costs (i.e., terminal rents and landing fees) comprise roughly 3 to 6 percent of an airline’s total costs.

The consultants claim that fuel is most important to airlines and operation costs can decrease at a more efficient, new site. However, this is irrelevant. If a new terminal is built that makes MCI more expensive to operate out of, the airport could certainly lose flights. Perhaps the consultants at Frasca & Associates should call Southwest officials and tell them that 3-6 percent of their costs don’t matter and they should not have refused to sign a lease agreement with Sacramento International Airport after that airport’s costs increased.

The consultants make several other points that are equally not insightful. Perhaps it need only be pointed out that airlines understand the aviation industry. The airlines also decide where their airplanes actually go, making their viewpoint on why they choose specific airports especially important.

The post On The Airline Industry, Don’t Trust The Airlines, Just Listen To A Consultant appeared first on Show-Me Institute.

Do you think that pumping hundreds of millions of taxpayer dollars to one developer is the key to successful North Side revitalization? I would love to be wrong on this, but can someone please give me evidence (economic, historic, etc.) where this type of huge subsidy to one developer working hand-in-hand with government planners has managed to successfully revitalize a community? Some say that McKee’s dream is worth a shot despite a high uncertainty that it will work; I obviously do not agree in this case. But who knows, maybe McKee will be to Saint Louis what Baron Haussmann was to the rebuilding of Paris.

If you are not familiar with the NorthSide project saga, I recommend reading this short article in St. Louis Magazine to get the Cliff’s Notes version.

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“You should do everything, including underwriting flights, to get as many highways in the sky as you can,” said John D. Kasarda, director of the University of North Carolina’s Kenan Institute of Private Enterprise and author of “Aerotropolis: The Way We’ll Live Next.”

Sounds a lot like Saint Louis so far. But (emphasis added):

There doesn’t appear to be support for the idea if it involves public money.

“I don’t agree with subsidizing flights or subsidizing certain airlines. We should work to lower the costs of all of the airlines at the airport,” said Allegheny County Executive Dan Onorato. He said the county doesn’t have money to provide such backing.

Pennsylvania and the Allegheny Conference on Community Development agreed to provide up to $9 million if Delta Air Lines’ flight between Pittsburgh and Paris missed revenue targets. They paid the maximum $5 million after the first year of service, but it’s unknown whether they will owe money for the second, which ended June 1.

Onorato appears to be taking the principled stance of not letting the government pick winners and losers at the airport. As to the airport, at least, Allegheny County taxpayers can be proud of its executive’s fiscal prudence.

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What is the most efficient means of getting people from the place they are to the place they want to be? Here, the term “efficient” encompasses a broad set of issues, including travel time, future flexibility, resources used, and external costs to society. One answer to this fundamental question, at least in part, is on the Nov. 4 ballot in Saint Louis County, and is referred to as Proposition M. Specifically, voters will choose whether to add a half-cent sales tax to fund MetroLink expansion and operations.

In a pair of op-eds posted on the Show-Me Institute’s website, authors Wendell Cox and Keith Womer offer arguments for and against Proposition M, respectively. To briefly recap, Cox provides a political economic history of sales tax increases, citing the difference between the promised expansion in light rail lines in St. Louis, Los Angeles, and Paris, and the actual outcomes. His lesson is clear: Expanding costs have historically meant that voters do not get what they were promised when tax initiatives were proposed. Correspondingly, Cox suggests that Proposition M would not be a wise use of tax funding.

Womer cites the myriad costs, both observable and unobservable, associated with different modes of travel. He contends that current conditions — including high gas prices and partial shutdown of the 64/40 artery — combined with the large external costs that exist for each additional mile of highway traffic, are sufficient reasons to favor the goals that Proposition M might further.

While I agree with the framework developed by Keith Womer, I find his conclusions to be more like a leap of faith than the logical result of compelling argument. I start with the premise that we do want a transportation system for our children and grandchildren. The difficulty, however, lies in assessing whether the transportation system we want is worth it. The notion of worth has two components: One entails how much society would enjoy the transportation system being proposed. The other involves accounting for the costs of building, operating, and maintaining it.

What can we say about the value of the MetroLink system? Womer cites a figure from a previous Show-Me Institute commentary, indicating that 2 million people rode Metro to special events. One problem with this evidence is that it measures demand only for the existing line, not the proposed future lines. In other words, ridership figures for existing lines cannot be used to measure the demand for new lines being developed. More importantly, this data measures only one side of the equation that voters will inevitably use in deciding whether to vote for or against Proposition M.

The other side of the equation is quantified by a variety of authors — most recently, Randal O’Toole. In studying the proposed development of the first light-rail lines in Kansas City, O’Toole measures the cost of this transportation infrastructure investment. He demonstrates that building light-rail lines is expensive. He measures costs broadly, including efforts to measure reduced pollution, savings to drivers from reduced congestion, and relative costs as compared to other mass transportation methods (such as bus service). He concludes that other types of infrastructure, including building new highways, offer higher returns to society than building light-rail lines.

The fundamental question, again, is this: Is the MetroLink expansion worth it? Only voters can ultimately decide. It is important to recognize that there are other transportation systems that would require lower costs to produce, thus getting people from where they are to where they want to be a lower cost, even when costs are measured broadly.

That said, there is one open rationale: If voters really like light-rail systems, they may justify voting yes on Proposition M regardless of the costs. It is important to understand that what they claim to like is actually a socially inefficient mechanism for transporting people. The Proposition M tax would result in every county taxpayer subsidizing the small percentage of people who regularly ride the MetroLink. And, finally, my own belief is that hovercrafts are more modern than light rail. Could the tax pay for a few hovercrafts instead?

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

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Voters in Saint Louis County are being asked to approve yet another sales tax to fund transit on the November ballot. However, Metro’s string of broken promises and its profligate spending suggest that the revenue from this tax increase would not be wisely spent.

The broken promises go back to even before construction of the first MetroLink line. In 1988, officials told the public that no tax increase would be necessary to operate light rail, but by 1994, the Bi-State Development Agency (Metro’s former name) threatened to close it down unless a new tax was provided.

Voters in both Saint Louis County and city were told in 1994 that five rail lines would be built with a new tax, which they approved under threat of light rail closure. The result: one new line, rather than five, and building it required borrowing more money — which was not a part of the original plan. Metro had promised an absurdly high federal funding share, which never materialized, leaving local taxpayers to fund the entire project. It didn’t help that the new cross-county line cost far more than planned — a pervasive hazard for such projects, as the international evidence indicates.

These kinds of broken promises are an all-too-familiar refrain in public transit. In 1977, I was appointed to the Los Angeles County Transportation Commission (LACTC) by Mayor Tom Bradley, and was subsequently appointed to two more terms. In 1980, we asked the voters to approve a one-half-cent sales tax to build 11 rail lines. Then the trouble began. Costs for the first light-rail line escalated rapidly, while transit operations took more money than planned. So, in 1990, LACTC went back to the voters for another one-half-cent sales tax, to construct what had been promised in 1980.

Even after the 1990 tax increase, though, Los Angeles officials have had to drastically scale back rail construction plans. Nearly 30 years later, the two taxes and additional funding have produced only four of the 11 promised rail lines. Voters there will consider a November ballot asking for a third tax increase that would presumably get the area a bit closer to the 11 lines that officials promised in exchange for the original 1980 tax. Meanwhile, Los Angeles ridership figures remain approximately the same as they were in 1985, before any of the rail lines opened — despite increasing population and high gas prices.

Saint Louis faces a similar trend. Metro’s present promises are as unlikely to be fulfilled as those it has made before. Agency officials claim they face a huge budget deficit, and yet, somehow, plan to use this new tax to provide new bus services and more light-rail lines. History suggests that this will not likely add up.

One of the reasons that the agency’s 1994 MetroLink promises could not be kept is that Metro could not keep its costs under control. By 2006, the agency was spending at least $40 million more on bus service annually than would have been the case if it had pegged cost increases to the rate of inflation. Giving a blank check to Metro, as the new tax would do, is an invitation for more out-of-control spending and more broken promises.

Finally, even with light rail, transit is barely “treading water” in Saint Louis. Cars carry virtually the same percentage of metropolitan area travel as before MetroLink was built. Why has there been so little impact? It is simply a matter of access. Transit systems are good at providing access to high-density employment areas, but not elsewhere. There are only a few such areas in Saint Louis — such as downtown and Clayton.

This is no different than in the rest of the United States, or even Western Europe. In Paris, for example, the western world’s best transit system provides good access to the high-density core. However, the 80 percent of people who live in the suburbs — or the 70 percent of people who work in the suburbs — use transit only for travel to the core. For the overwhelming majority of trips in the Paris metropolitan area, cars are the only solution, because transit service is either unavailable or takes too long. In Saint Louis, the implied promise that spending more money on transit will provide an alternative to car usage is simply delusionary. It would be more appropriate to think of Proposition M as a subsidy to central business districts.

Finally, however, I must admit that it would be a mistake to suggest that Metro breaks all of its promises. If the new tax is passed, it will keep its promise requiring you to pay. And, as promised, Metro will spend all the money. But the other promises will be broken, just as they have been in the past.

Wendell Cox is principal of Demographia, a Belleville-based demographics and public policy firm. He serves as a visiting professor at the Conservatoire National des Arts et Metiers in Paris, served on the Los Angeles County Transportation Commission, and was a congressional appointee to the Amtrak Reform Council.

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Finnish teachers pick books and customize lessons as they shape students to national standards. "In most countries, education feels like a car factory. In Finland, the teachers are the entrepreneurs," says Mr. Schleicher, of the Paris-based OECD, which began the international student test in 2000.

Finnish teachers are encouraged to improve the curriculum and try new things; contrast that with the SLPS’ ambivalent reaction to a math teacher who brought up his students’ MAP scores with a creative approach.

That’s not to say we should adopt all aspects of the Finnish system. I don’t think cheerleading, school bands, and competition to get into colleges are necessarily bad. But it wouldn’t hurt the U.S. public schools to give teachers a little more leeway.

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