Opportunity cost. The concept is so simple that a first-grader could understand it. I know, because I used to teach it to first-graders. Had you walked past my classroom at just the right time, you might have heard 20-something first graders chanting, “Opportunity cost is the opportunity lost.” The students understood that our decisions have consequences. It was a lesson they learned every time they went out to recess. If they chose to play kickball, they couldn’t play basketball. This basic life lesson bears some repeating for the adults who set policy in our state.

Though the term opportunity cost was not coined until 1914, French economist and writer Frédéric Bastiat provided one of the most salient examples of the concept in his 1850 work, “What Is Seen and What Is Not Seen.” Using the parable of the broken window, Bastiat explained how money being spent on one activity is money that cannot be put to more productive use elsewhere. Imagine that a pane of glass is broken at a baker’s shop. Obviously, the money that the baker must pay to have it repaired becomes revenue for the window repair man. Anyone walking by can see the repair man doing work and recognize that he’ll be paid for his labor. But it makes no sense to look at the repair man’s good fortune in isolation. Doing so would lead to the harebrained conclusion that breaking windows leads to economic growth! Instead we need to remember that, had the window stayed intact, the baker could have done something else productive with the money. The problem is that we can’t see what the baker could have done with the money—only what he actually did with it.

Unfortunately, our board of aldermen and other policymakers regularly make decisions based on what they see without accounting for what they can’t see. Take for example the earnings tax in Saint Louis. Policymakers can see the revenue generated by the tax, but they can’t see the economic activity that has been lost. They can’t see the jobs that might have been created had those dollars been reinvested by the businesses. Nor can they see the economic activity that might have been generated if those dollars had remained in workers’ pockets.

Think about opportunity cost the next time you see a ribbon-cutting at some new development that has received tax breaks or some other form of support from the government. Whether it is a property that has been blighted and given property tax abatements for development in the Central West End or a big box store that receives tax-increment financing, we can see the product of those government actions. We cannot see the harm they do to other businesses through unfair economic competition.

I was reminded of these ideas when I read Lindenwood economist Howard Wall’s most recent paper for the Show-Me Institute, “Is Growth in Outstate Missouri Tied to Growth in the Saint Louis and Kansas City Metro Areas?” Wall uses an econometric model known as Granger-causality to estimate the impact of employment growth in Saint Louis and Kansas City on the rest of the state. He finds a statistically significant downstream relationship between Saint Louis and the rest of Missouri. That is, employment growth in Saint Louis leads to employment growth in the state. He estimates that a 1 percentage point increase in growth in Saint Louis would lead to an increase of 0.35 percentage points in outstate Missouri within two or three years. Why this connection exists (he doesn’t find a similar relationship in Kansas City) is a matter for some hypothesizing or future research. Nevertheless, the point is clear—Saint Louis is an economic driver for the state.

While Wall’s paper does not deal directly with the idea of opportunity cost, his findings make it all the more important for policymakers to understand the importance of their actions. When they support an earnings tax or other policies that harm the city’s economic growth, they are hurting the economic growth of the entire state.

Missourians, not just those who live in the city, benefit from a thriving Saint Louis economy. That’s why we need policymakers to put in place pro-growth policies that create the economic conditions for the market to thrive.

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Using household employment data, Wall, a professor of economics at Lindenwood University, tests whether employment growth in the two major cities appears to cause employment growth throughout the rest of the state.

Interestingly, the data show a statistically significant relationship between growth in Saint Louis and outstate Missouri. For example, a one percentage point gain in employment in Saint Louis would lead to a half percentage point gain in outstate Missouri the following year and then smaller gains in the years after that. Wall did not find as strong of a relationship in Kansas City, though the results were not far from being statistically significant.

Why these findings occur is a matter that can be explored further, but the point is clear. Saint Louis and, to a lesser extent, Kansas City are economic drivers for the state. Missourians have a vested interest in seeing sound policies put in place to help these cities flourish.

Click here to read the full report.

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One argument we have heard from skeptics of checkbook transparency is that small cities like Battlefield (population 5,590) cannot afford to provide spending records at a low cost. Certainly, different cities have various staffing levels and challenges, but responses like Battlefield’s should raise concerns. And while we do not expect small cites to have the same resources as the City of Saint Louis, several cities provided us their expenditure records free or at very little cost, and some of those cities are smaller than Battlefield.

Consider the example of Winfield (population 1,404), which stands out not only because it shared its expenditure records free of charge, but also because of its commitment to transparency. When I spoke with the mayor, he said that while he loved our Municipal Checkbook database, his city could not afford to host its checkbook on its own website.

But after I told him we planned to put the city’s records in our database, he said that he would provide a link to our website so citizens could see how Winfield is spending its money. And if you check out Winfield’s website today, you’ll see that link. He also said the city was in the process of updating its transparency portal on the city website—not bad for a city of fewer than 1,500 people.

Cities, no matter their size, should provide easy access to information about how they’re spending our money, and modern accounting software used by most cities allows for quick generation of accurate reports. In Winfield’s case, the city saw in the Checkbook Project a tool to increase its own transparency. I applaud its commitment to promoting a culture of municipal accountability and good governance.

The post Why Can’t They All Be Like Winfield? appeared first on Show-Me Institute.

For a project to qualify for some subsidies, the city must declare a parcel of land “blighted,” but the standards for doing so are very low—developers can qualify for subsidies for undeveloped fields or for buildings that are merely vacant. Under the current definition even the governor’s mansion could be blighted!

THE SOLUTION: Economic development reform.

The legal definition of blight should be narrowed to ensure that only truly needy projects would qualify. Other reforms that would help rein in these giveaways include moving TIF decision-making to the county level, providing greater voices for other impacted taxing jurisdictions such as schools, and capping subsidies.

WHO ELSE DOES IT? Various TIF and economic development reform efforts are underway in other states. California, which pioneered TIF in 1952, ended the existing program in 2012 due to the cost.

THE OPPORTUNITY: Focusing state law on addressing actual blight and doing so in communities suffering from high unemployment and poverty will go a long way in making sure that public policy addresses real needs and doesn’t just reward the politically well connected.

KEY POINTS

• TIF projects active in Missouri have collected almost $2.5 billion since their inception and do not deliver their promised benefits.
• Many subsidies are not used in the economically depressed areas they were designed to assist. In Saint Louis, less than 25% of TIF spending occurs in the poorer half of the city.

SHOW-ME INSTITUTE RESOURCES

Policy Study: Does Tax-Increment Financing Pass the But-For Test in Missouri?

Policy Study: Tax-Increment Financing and Missouri: an Overview

For a printable version of this article, click on the link below. You can also view the entire 2018 Missouri Blueprint online.

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A story in the St. Louis Post Dispatch reports on Audit STL’s concerns:

“Taxpayers have a right to know how their money is being managed, the group [Audit STL] argues, especially because city leaders have asked them to approve half-cent sales tax increases twice in a six-month period.” St. Louis mayor Lyda Krewson added that “This audit will clarify the cost of all city operations so that city leadership can make informed choices. Just like at home, the city can’t afford everything we want, so we must make the hard and difficult choices to fund our priorities.”

Taxpayers certainly have the right to know how their money is being spent. That’s why we have started a checkbook project. Thus far, we have issued over 150 sunshine requests to municipalities all across Missouri for records of their spending. We are currently processing these records and building a searchable database that will be available on our website. Once completed, this checkbook will be a useful tool for concerned citizens across Missouri. 

Residents of Saint Louis have every right to know the details of their city’s finances, and if that requires a state audit, then so be it. Governmental bodies must be accountable to the people they serve, and any serious level of accountability can only be achieved through transparency. 

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Reservation Number 4: School choice does not solve the larger problem of concentrated poverty.

The parents in my focus groups recognized that some schools are not doing well. That’s why many of them refused to enroll their children in their local public schools. Yet many wouldn’t support a state-supported private school choice program. To them, that was just a Band-Aid to cover over a problem rather than actually solving it. Instead, the concerned parents thought more needed to be done to address the root cause that led to the poor educational opportunities: poverty.

This line of argument suffers from two shortcomings. First, it sets an almost impossible expectation of school choice programs—that they solve a problem that traditional public schools have failed to solve for centuries. Rarely do we expect public policies to solve this kind of massive societal problem. Even when considering issues related to poverty, we often hope an intervention will move the needle in the right direction by a matter of degrees. When it does, we consider it a success.

Second, this argument absolves public schools of blame for the role that they have played in exacerbating the problems of poverty. Not only have traditional public schools failed to solve the problems of poverty, in some places, they have actually made it worse. Look at the patchwork of school districts in the areas surrounding Kansas City and Saint Louis. Homes in the higher-performing districts cost more because the schools are better; wealthier families segregate themselves from lower-income families by moving to these better districts. This creates virtuous cycles within these districts, where wealthier students attend better schools, get better jobs, move to places with even better schools, and then send their children to them. But it also creates a vicious cycle in poorer-performing districts, where families that are not able to break into the housing market of better districts are shut out of higher-performing schools, are prevented from accessing better opportunities, and stay trapped in poverty.

There is nothing nefarious about a family wanting to be in a good neighborhood with great schools. There is, however, something wrong with a school system that only allows families with financial means to access great educational options.   

Vouchers and charter schools have done nothing to create this situation. But they can help stop it by breaking the connection between where children live to where they go to school.

It is true that school choice does not solve issues of poverty. School choice programs also do not cure cancer, reduce tensions in North Korea, or solve male pattern baldness. In other words, school choice does not solve complicated, thorny issues that are incredibly complex. It does, however, reduce the barriers that stand between low-income families and educational opportunities for their children.    

The post School Choice for Me, but Not for Thee: Part 5 appeared first on Show-Me Institute.

• Internships are open to current undergraduate and graduate students, as well as recent graduates. 
• Spring internships will last approximately four months. The exact starting and ending dates are flexible, but each intern is expected to work at least 10 weeks.  No internship shall start prior to January 15. Spring internships will end on or before May 4, 2018.
• Spring interns can work a full-time schedule (9 a.m. to 5 p.m., with one hour for lunch), or arrange for a part-time schedule to accommodate class schedules. 
• Interns will be involved in virtually all aspects of the Institute’s operations. Interns will work closely with senior staff on a wide variety of projects. They can expect greater responsibility and personal attention than they would receive at larger organizations.
• Interns will assist staff members with a variety of tasks. These may include researching public policy topics, assisting with social media, organizing events, and writing and editing op-eds, newsletter articles, studies, and other documents. Some administrative and clerical tasks will also be required.
• A Show-Me Institute internship is an excellent opportunity to improve your research and writing skills. Each intern will produce regular blog posts and an op-ed on a public policy topic of interest. Each intern will receive feedback and assistance from SMI staff members throughout the process.
• Communication and development internships are also available. If interested, please state this in your application.
• Internships are offered in both the Saint Louis and Kansas City offices.
• Interns will be paid on an hourly basis.

Those wishing to be considered for an internship should submit an application (link below) and the requested supporting materials no later than December 8, 2017. Applications will be accepted on a rolling basis. We will begin conducting interviews as applications are received. Applicants can expect a decision no later than Monday, January 8, 2018.

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Let’s walk through this. The project will add about $20 million to the productive capital in Columbia. Between 2001 and 2016, each dollar of capital added, on average, 17 cents to the value of output—that is, goods and services—produced in Columbia. Based on this historical average, Columbia would produce an additional $3.5 million in output when the project is completed in a couple of years. One more piece of information: Columbia collects about one cent of revenue for every dollar of output produced. Consequently, city coffers would increase by about $35,000 in the first year that the expansion was operating. However, even allowing for this additional output to increase at Columbia’s average annual growth rate, which is 1.8 percent, there is not enough revenue for the city. After discounting future revenues to their present value and summing over the 23-year period, the value of the stream of city revenues comes to about $650 thousand. In other words, the city gives the developer $2 million to get back $650 thousand. Not a good return.

Proponents of the deal contend that without TIF, the expansion (and accompanying economic growth) won’t happen at all—that without an infusion of taxpayer money, development won’t be profitable enough to attract investment. However, data from cities like Chicago, Saint Louis, and Kansas City say otherwise. Comparing employment or income, the evidence indicates that economic outcomes are no better in areas that award TIF than in areas that do not.

The Broadway expansion proposal offers the appearance of certainty. At the very least, we have a good idea of what a new hotel tower will look like, so it’s easy to imagine that it will lead to an increase in economic activity. It can certainly seem riskier to turn down the proposal and wait to see what (if any) productive use the land next to the current hotel is put to. But there is no guarantee that the expanded hotel will be successful, either.

Fundamentally, economies grow when people put labor and machines and capital together in a way that yields more valuable stuff. Growth is the product of creative and innovative people who are trying to earn a profit. The law permits people to ask the city government for a subsidy to make a profit. But city officials must determine if granting the request is the best use of resources collected from citizens. Looking at the numbers, one is hard pressed to show that the Broadway expansion is the best use of city funds.

The post Broadway Economics appeared first on Show-Me Institute.

Reservation Number 3: School choice may lower the quality of private schools

The argument goes something like this: the children who can’t afford to attend private school would bring the “problems of poverty” with them into whatever school they attend. The schools would get worse as a result. Tuition-paying families would leave. And on and on and on…

There are several problems with this argument. First, we should acknowledge that this response sounds really tone-deaf to the single mother living in poverty who wants a great education for her child. How many amazing figures from American history were born into poverty only to excel in school; Ben Carson and Supreme Court Justice Clarence Thomas are two that quickly come to mind. One of the first lessons we learn in Kindergarten is to never judge a book by its cover. We should give the benefit of the doubt to families who are working hard to find better schooling options for their kids.

Second, we have to recognize that this belief betrays a low opinion of private schools. It suggests that the schools are not good because of the effectiveness of the staff, the value of the school’s mission, or the innovativeness of the school’s curriculum. Rather, this line of thinking suggests a private school is only as good as the students who go there. In other words, the school would be no better than the surrounding public schools if they were forced to take all students. Is that what private-school parents really think about their schools? If so, they may want to reconsider their schooling decision.

Third, and in contrast to that argument, many private schools have a long and proud tradition of educating low-income and minority students. Moreover, they have been quite successful at it. Indeed, research suggests urban minorities are among the greatest beneficiaries of Catholic schooling.

To summarize, it is understandable for parents with kids in high-performing private schools to be concerned about the impact of a private school choice program. Yet, concerns about “dumbing down” private schools are often overblown. Moreover, we mustn’t forget that they get to choose whether they will accept any students at all! They don’t have to participate.

For policymakers, it is important to understand this dynamic when designing programs and when speaking with constituents. It is also important to remember public policies should not be designed to protect the privileged. Good public policy should attempt to enhance freedom, encourage individual responsibility, and improve outcomes for citizens. School choice accomplishes all of these goals.

The post School Choice for Me, But Not for Thee: Part 4 appeared first on Show-Me Institute.

Reservation number 1: School choice may hurt traditional public schools.

As I wrote in the paper, “Some worried that school choice programs may drain intellectual and financial resources from the low-performing schools. It is possible, they argued, that only families with the wherewithal to take advantage of the program would be able to access the choice schools. This would leave traditional district schools with the most difficult students to educate.”

This argument has been popular among opponents of school choice for a long time, so it was not surprising that it was also mentioned by parents. There was, however, some nuance to this reservation. Some parents worried about finances, others about students left behind, and still others about the impact on the local community. I’ll briefly deal with each of these issues.

Does school choice hurt school districts financially?

Let me tell you a little secret. Any time a student leaves a district, the district receives less money.

When a student moves to another public school district, the home district receives less money. When a student leaves to attend a charter school, the home district loses money. When a student uses a voucher to attend a private school, the home district loses money.

But it is also true that when a student leaves a district, that district has one fewer student to educate.  What’s more, because most school choice programs actually allow fewer dollars to follow the student than would otherwise be spent on him or her, most school choice programs leave money behind in the district. As a result, per-pupil spending in the district goes up. 

School choice doesn’t hurt school districts any more than families moving does, and we wouldn’t dream of banning people from moving.  Why should we prevent them from finding a better schooling option for their child?

Does school choice hurt students who are left behind?

A substantial amount of research has been conducted to answer this question. As EdChoice states:

Thirty-one empirical studies (including all methods) have examined private school choice’s impact on academic outcomes in public schools. Within that body of research, 29 studies find that choice improved the performance of nearby public schools…To date, no empirical study has found that school choice harms students in public schools.

It is perfectly reasonable to be concerned about disadvantaged students who may not participate in choice programs. We should look for every opportunity to help and support those students. The evidence, however, tells us that these students are not worse off; they are typically better off in a school-choice environment.

Does school choice hurt the community?

One thing is clear: Bad schools hurt a community. When students are forced to attend a low-performing school, more advantaged peers tend to leave. The quality of the school drops lower and housing values are depressed. School choice changes this. It makes it possible for families to stay in their communities and send their children to schools that meet their needs.

So what do we make of this reservation? As it turns out, we can put our minds at ease. Rather than harm academic, school, and community outcomes, school choice programs can have a positive impact on each. 

The post School Choice for Me, but Not for Thee: Part 2 appeared first on Show-Me Institute.

 In a recently published paper in the Journal of School Choice: International Research and Reform, “School Choice: The Personal and the Political,” I explore the question of whether parents who support school choice for their children would be willing to support programs that extend the same opportunities to other families. To find out, I convened five focus groups with parents in Kansas City and Saint Louis. A total of 35 parents of school-aged children attended these discussions. My findings were interesting, but not that surprising.

 The parents I spoke with strongly supported choice for their own children. In fact, most of their children attended schools of choice. More than 75 percent of the parents in the study either homeschooled or sent their kids to a school outside their traditional public school district. Of the remaining quarter, several sent their children to magnet schools within the traditional school district.

 Would they be willing to extend options to other children by supporting a private school choice program? As I write in the paper, “the responses were decidedly mixed.” Many parents who themselves expressed choice—including some who even sent their children to private schools—were not thrilled at the prospect of the government providing financial support for other children to attend those same schools.

 The parents in my focus groups expressed four main concerns when it came to private school choice programs. Over the next few days, I’ll take a look at each of these reservations and offer suggestions as to how school choice supporters might bridge the gap with parents like these.

 You can find the journal article here (paywall) or an earlier working version here. 

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In Kansas City, the effort to spend $1.2 billion on a new single terminal has been limping along for years. Beset from the beginning by self-inflicted wounds from Aviation Department leadership and an aversion to open discussion (Mayor James recently tried to require elected officials to sign non-disclosure agreements about competing bids), the effort now appears to be racing toward a November election. Voter support is in no way assured.

In Saint Louis, a consortium of business interests and former city officials are moving forward with a privatization effort that has yet to be the subject of much public discussion. While free-market solutions are a worthwhile consideration for many public services, market decisions are only as good as the information available.

Why the secrecy over matters that are obviously of great public interest? If Kansas City and Saint Louis are developing good plans for managing, developing, or privatizing their airports, their leaders should be confident that they can defend the plans in the marketplace of ideas. If the plans are flawed, isn’t it better to expose the problems while there is still time to make adjustments?

One thing is certain. The longer deliberations are kept secret, the more the inference will grow that the officials leading the efforts have something to hide. It makes for an inauspicious start for what will, eventually and inevitably, become campaigns for public approval.

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Unfortunately, there is a terrible myth going around about teachers. This myth is pervasive and has been around for decades. It is the belief that teachers are badly underpaid.

Jay Greene, Distinguished Professor of Education Policy at the University of Arkansas, wrote about it in his influential 2005 book, “Education Myths: What Special-Interest Groups Want You to Believe about Our Schools and Why It Isn’t So.” Greene argued that when we compare a teacher’s hourly rate to those of other professionals, the pay is quite comparable. He also noted that we must consider other employment benefits, such as health care and retirement, which are typically more generous in education than the private sector.

Despite these arguments, the myth of grossly underpaid teachers has persisted. Recently, an Education Next poll asked respondents if they thought teacher pay should increase, decrease, or stay the same. Overwhelmingly, respondents said we should “increase” (47%) or “greatly increase” (14%) teacher pay. That in and of itself isn’t telling; if it were feasible, most of us would happily pay teachers more. The telling part is what happens when survey participants are given actual teacher salaries. When people are told how much teachers are paid, support for pay raises drops.

Most people greatly underestimate how much teaches actually paid. In the survey, the average guess for the national average teacher salary was $40,587. That is $17,672 less than the actual average of $58,258. It is also less than the average here in Missouri, where the average total teacher salary in 2016 was $49,060. In Saint Louis City and County, the average climbs to $58,701 (author calculations).

 About two years ago I had to battle this teacher pay myth in my own home. My son came home from school saying teachers didn’t make very much money, at least that’s what his teacher said. I said, “I bet she makes more than me.” So, we looked it up (both of our salaries are public information). As it turns out, his teacher made several thousand more than I do.

The problem with the teacher pay myth is that it undermines a very noble and valuable profession. As Harvard education professor, Marty West suggests, “To the extent that the public has a falsely low impression of [how] much teachers earn, that only makes it harder for us to attract talented individuals into the teaching profession.”

 If we keep perpetuating the notion that teaching is a thankless job and teachers are underpaid, we shouldn’t be surprised when we have teacher shortages. Instead, let’s be honest—teaching is a great profession and the pay isn’t bad!

The post Teachers Are Great, and the Pay Isn’t Bad! appeared first on Show-Me Institute.

Logic tells us that when people receive benefits that far exceed the value of their contributions and interest, the funds must come from somewhere . . . and they do. They come from teachers who work for fewer years, from teachers with relatively low pay, and from future generations of teachers. The same characteristics of Missouri’s teacher pension system that enable some teachers to enjoy a comfortable retirement also create several forms of inequity that could undermine these plans.

Currently, teachers in Missouri (except in Kansas City and Saint Louis City) contribute 14.5 percent of their salary to the pension system. The district matches that amount, for a total equal to 29 percent of the teacher’s salary. A teacher who leaves before the five-year vesting period ends forfeits the district’s match. But even vesting doesn’t guarantee a teacher will receive full value for their contributions, let alone the district’s match. Because the benefits accrue slowly at the start of a teacher’s career and then rapidly as they approach retirement, a teacher must work more than 20 years just to recoup their own contributions. The teacher who works 15 years and moves because of a spouse’s job in another state, for example, will be leaving money behind that helps fund the generous benefits of others. This is known as intra-generational inequity—within a cohort of teachers, some benefit and others lose.

Another form of intra-generational inequity is the cross-subsidization that occurs between workers with different earnings trajectories. Some teachers (generally in wealthier districts) get very large raises over the course of their careers, but others do not. Teachers who become administrators make even more money. Since pension payouts are based on salary earned in just the final three years of employment, these individuals receive retirement benefits that exceed the amount of their own contributions to the system over the course of their careers.

Others have to make up the difference. These “others” come, in part, from poorer districts and districts with relatively flatter salary schedules. Teachers in these districts pay more into the system than they will get out. Their “excess” contributions go to fund the pensions of the former superintendent making $150,000 a year in retirement.

Even though the pension system shortchanges many teachers, it still does not have enough funds to cover all its expected obligations. Therefore, the system must rely on new teachers to fund the benefits of retired teachers. This is the third type of inequity—inter-generational inequity. As generations of teachers contribute less than they receive in benefits, unfunded liabilities grow. In turn, future generations are asked to contribute more to the system. We have already seen individual contributions to PSRS grow from 10 percent in 1995 to 14.5 percent today.

Defenders of Missouri’s teacher retirement system will be quick to tell us that the system is well-funded, over 80%. (We can quibble about this calculation another time.) They will reiterate that the system is well-liked by teachers and claim that retirees are doing well in this system. To make that argument is to miss the point of this entire article: unless we tie benefits to contributions, the pension system will continue to favor some at the expense of others.

The post Pension System’s Generous Benefits Come from the Pockets of Others appeared first on Show-Me Institute.

We’re told early in life that nothing is truly free. If you’ve had to learn this lesson first-hand, you know that some “free” things are actually quite costly.

The Saint Louis Zoo, one of our region’s most beloved institutions, is one of those expensive free things. And soon it could get a whole lot more expensive.

Senate Bill 49 (SB 49), if signed into law, could mean voters in Saint Louis County and City will be asked to hike their sales taxes by one-eighth of one percent (0.125%) to help fund infrastructure, conservation projects, and other zoological activities at the Saint Louis Zoo. By all accounts, the needs at the zoo are genuine—many of its pipes, sewers, etc., are original. But the zoo already receives $21 million—about one-third of its budget—from county and city taxpayers through a property tax. Is ratcheting up the region’s already-high sales taxes the best way to raise additional funds?

Here are some reasons to think not.

Sales taxes in both the county and city just went up. The city’s sales tax rate will soon be 9.179%, higher than New York City’s or San Francisco’s—and another half-percent hike is on the horizon. Things don’t look much better in the county. With the passage of Prop P, Clayton will soon have a rate of 9.113%, as will places like Olivette, Webster Groves, and Ballwin. In Ferguson, sales taxes will sit even higher, at 9.613%. Add in the extra 2% levied by numerous, overlapping special taxing districts, and in some places you’ll be paying more than 11%! A new zoo tax will only make your shopping more expensive, and it will hurt the region’s poor the most.

Considering that policymakers have a seemingly never-ending list of “transformative” or “essential” projects that require tax hikes, is a zoo tax the best use of limited public resources? There is no formula to determine the optimal sales tax rate, nor is there a documented sales tax ceiling, but taxpayers will only stomach so much. If the sky isn’t the limit for tax rates, could a zoo tax help exhaust the region’s sales tax capacity?

And then there’s a basic math issue. The proposed tax could raise roughly $20 million per year if passed in both the county and city, and zoo officials have claimed there is a backlog of needed infrastructure projects that will require approximately $100 million. Accordingly, by conservative estimates, a mere six years of the tax could take care of all the zoo’s infrastructure needs, and an extra year or two could raise tens of millions for conservation efforts. But there is no language in the bill that states the tax would be temporary. So while zoo officials talk of specific needs that justify the tax, they fail to mention that, in addition to taking care of these needs, the tax would increase their annual budget by a third—and, apparently, permanently so.

Finally, a sales tax hike wouldn’t fix the underlying funding problems. Since the zoo does not charge admission, it has what economists call a free-rider problem. Not all of the visitors who enjoy the zoo pay for its operation. The result is a zoo with piling bills and no way to pay for them. But rather than address this problem, a zoo tax would simply exacerbate it. City and county taxpayers who currently subsidize the zoo for everyone would be forced to doubly subsidize the zoo for everyone. And while it’s convenient to say Saint Charles, Franklin, and Jefferson counties should impose a zoo tax too, residents from these counties comprise only 13% of the zoo’s visitors, and taxing them would likewise fail to address the free-rider problem.

There are alternatives to hiking sales taxes, and one in particular deserves greater consideration: charging a reasonable admissions fee. If other top zoos charge more than $50 for admission, visitors can pay a fraction of that to keep ours one of the best in the county. A small admissions fee—for those not currently paying property taxes for the zoo—could raise millions annually, and help avoid hiking an unnecessary, regressive tax.

It’d be great if some things in life were truly free, but they’re not. And nothing is wrong with that. The user-fee system works—it’s both fair and financially sustainable. Let’s hope policymakers and zoo officials keep that in mind in the coming months.

The post To Keep the Zoo Great, Keep It Out of Taxpayers’ Pockets appeared first on Show-Me Institute.

The version of the bill in front of the Governor has changed since it was first introduced. Previous drafts would have allowed for similar sales tax hikes in Saint Charles, Franklin, and Jefferson counties. The narrower focus of the bill means distant shoppers won’t have to subsidize the zoo (which is fair), but it also means a smaller portion of the public will shoulder the burden of supporting a “free” zoo. It also means city and county taxpayers could be taxed twice for the zoo. 

Currently, the zoo is supported by visitor spending, donations, and a property tax levied in Saint Louis City and County. So if a sales tax is passed, city and county voters will pay two taxes for the zoo. And while taxpayers would get an improved zoo for that extra money, the new funding wouldn’t fix the underlying problem with the zoo’s funding structure: free riders.

Since no admission is charged at the zoo, city and county taxpayers support the zoo for everyone, from Saint Charles residents to visitors from Hawaii. Predictably, the issue of fairness arises: why should just city and county residents pay for the zoo? While some propose a regional taxing structure to remedy the free-riding problem, in reality it would convert only a portion of the free riders into supporters. A fairer solution would be to charge admission for those not paying zoo property taxes. (For perspective, a $2 admission fee for residents outside the city and county, assuming a 10% reduction in visitors, could raise more than $3.5 million a year.)

A zoo sales tax would worsen the ever-growing sales tax burden for city residents. With the passage of the MetroLink sales tax hike in April, the city’s sales tax rate jumped to 9.179%, the 13th highest of major US cities (and higher than in New York City, Los Angeles, and San Francisco). If a zoo tax were to be approved, the city’s base rate would top 9.3%, and in some areas littered with special taxing districts, be as high as 11.3%. For many city families, these tax increases mean hundreds of dollars a year they cannot spend on food, school supplies, and other goods and services.

We all love the zoo, and there’s no denying it could use some cash for infrastructure and other projects. But taxpayers should think hard about whether sales taxes are a fair way to fund this famous Saint Louis institution.

The post Double Taxation: Saint Louis Zoo Edition appeared first on Show-Me Institute.

Certificate of Need: Missouri’s Certificate of Need (CON) law restricts health care competition by requiring health care providers to get state approval before entering new markets or expanding services offered in existing facilities. This restriction hampers innovative start-ups and market newcomers that would provide Missourians care and puts upward pressure on healthcare prices. Read more about certificate of need.

Charter Schools: Demand for charter schools in Missouri is at an all-time high. Unfortunately, charter schools are functionally limited to the Kansas City and Saint Louis School Districts. Tens of thousands of students are denied the opportunity for a better education. Read more about charter schools.

Course Access: All across Missouri, students do not have access to higher-level coursework such as AP courses, calculus, or physics. Read more about expanding course access.

Earned Income Tax Credit: State spending is on the rise in Missouri, led by a growth in public welfare dollars. Public welfare spending now accounts for more than 26% of total spending and 34% of spending growth. The growth in public welfare shares of total spending has eclipsed the growth of all other general expenditure functions. Read more about earned income tax credits.

Economic Development: Excessive use of economic development subsidies has hollowed out municipal tax bases and diverted tax revenue to specific developers. In the past 15 years, Saint Louis City alone has allocated $709 million away from municipal services through tax increment financing (TIF) and tax abatement. Studies from across the country indicate that these subsidies fail to generate promised jobs and growth. Read more about reforming economic development.

Education Savings Accounts (ESAs): Missouri students are underperforming. On the 2015 NAEP exam, only 31 percent of Missouri 8th-graders were found proficient in Math and only 36 percent were found proficient in English. For the Class of 2016, only 22 percent of Missouri ACT test-takers scored “college-ready” in all four tested subjects. Many students are trapped in failing schools via residential assignment and have no opportunity to pursue a better education. Read about introducing ESAs in Missouri.

Higher Education: The University of Missouri system, and higher education in the United States in general, are at a crossroads. Tuition is rising, resulting in over $1 trillion in student loan debt nationwide. At the same time, students who fail to secure a high-income job face serious financial consequences. As schools struggle with this, a rising tide of anti–free speech policy is sweeping across the higher education landscape. Read about reforming higher education.

Individual Income Tax Reform: Missouri’s economy has been stalled for almost two decades, as startup growth has slowed and entrepreneurs and taxpayers are leaving the state. Missouri is shrinking relative to other states and economies, ranking 48th out of 50 states in real GDP growth between 1997 and 2015. Individual income taxes are destructive to the state’s economic growth, productivity, and income, encouraging taxpayers to move their work or investments out of Missouri. This not only lowers economic output for the state, but also destabilizes revenue for state and local governments. Read more about reforming the individual income tax.

Open Collective Bargaining: Under current Sunshine Law in Missouri, government bodies may close meetings, records, and votes relating to contract negotiations until the contract is executed or rejected. This lack of transparency in negotiations between government unions and government officials can lead to contractual agreements that aren’t in the public’s best interest. Read more about open collective bargaining.

Prevailing Wage and Project Labor Agreements: State law governs what many government contractors must pay workers to get a government project, and it can also govern what kinds of workers contractors can use on that job. These restrictions often mean that large union contractors from big cities get jobs, to the detriment of smaller companies, local laborers, minority laborers, and taxpayers. Read more about prevailing wage and project labor agreements.

Public Pension Reform: Defined benefit (DB) pension plans promise employees annual payments for life upon retirement, but if a public plan does not have enough money to make these payments, taxpayers are legally bound to fund the difference. Pension plans can come up short if they fail to make sufficient contributions or overestimate their investment returns. Nationwide, state and local public pension funds are underfunded by more than $1 trillion dollars. Read about public pension reform.

Public Union Recertification: Once a government union comes to power, it can stay in power indefinitely. No further elections are scheduled and no term limits are imposed. This means workers can do little to ensure their union truly represents their interests and is held accountable. Read about public union recertification.

Right to Work: Many workers in Missouri can be forced to join unions. That is unfair not only to the employees disempowered by the law, but also to employers who have to operate under it. Read more about introducing right to work in Missouri. Governor Eric Greitens signed right to work legislation into law on February 6, 2017.

Tax Credit Reform: The state of Missouri uses public money to subsidize the private projects of special interests, often in the name of “economic development.” Practically, that means less money for public needs and greater difficulty in later reducing taxes for all taxpayers. Read about reforming tax credits.

Transportation: The Missouri Department of Transportation (MoDOT) will likely face funding shortfalls in the near future. The state will need to generate new revenue in fair and economically sound ways. Read more about Missouri’s transportation infrastructure.

The post 2017 Blueprint: Moving Missouri Forward appeared first on Show-Me Institute.

Certificate of Need: Missouri’s Certificate of Need (CON) law restricts health care competition by requiring health care providers to get state approval before entering new markets or expanding services offered in existing facilities. This restriction hampers innovative start-ups and market newcomers that would provide Missourians care and puts upward pressure on healthcare prices. Read our policy recommendations for certificate of need.

Charter Schools: Demand for charter schools in Missouri is at an all-time high. Unfortunately, charter schools are functionally limited to the Kansas City and Saint Louis School Districts. Tens of thousands of students are denied the opportunity for a better education. Read our policy recommendations for charter schools.

Course Access: All across Missouri, students do not have access to higher-level coursework such as AP courses, calculus, or physics. Read our policy recommendations to expand course access.

Earned Income Tax Credit: State spending is on the rise in Missouri, led by a growth in public welfare dollars. Public welfare spending now accounts for more than 26% of total spending and 34% of spending growth. The growth in public welfare shares of total spending has eclipsed the growth of all other general expenditure functions. Read our policy recommendations to reign in the costs of earned income tax credits.

Economic Development: Excessive use of economic development subsidies has hollowed out municipal tax bases and diverted tax revenue to specific developers. In the past 15 years, Saint Louis City alone has allocated $709 million away from municipal services through tax increment financing (TIF) and tax abatement. Studies from across the country indicate that these subsidies fail to generate promised jobs and growth. Read our policy recommendations to reform economic development.

Education Savings Accounts (ESAs): Missouri students are underperforming. On the 2015 NAEP exam, only 31 percent of Missouri 8th-graders were found proficient in Math and only 36 percent were found proficient in English. For the Class of 2016, only 22 percent of Missouri ACT test-takers scored “college-ready” in all four tested subjects. Many students are trapped in failing schools via residential assignment and have no opportunity to pursue a better education. Read our policy recommendations for ESAs in Missouri.

Higher Education: The University of Missouri system, and higher education in the United States in general, are at a crossroads. Tuition is rising, resulting in over $1 trillion in student loan debt nationwide. At the same time, students who fail to secure a high-income job face serious financial consequences. As schools struggle with this, a rising tide of anti–free speech policy is sweeping across the higher education landscape. Read our policy recommendations to reform higher education.

Individual Income Tax Reform: Missouri’s economy has been stalled for almost two decades, as startup growth has slowed and entrepreneurs and taxpayers are leaving the state. Missouri is shrinking relative to other states and economies, ranking 48th out of 50 states in real GDP growth between 1997 2015. Individual income taxes are destructive to the state’s economic growth, productivity, and income, encouraging taxpayers to move their work or investments out of Missouri. This not only lowers economic output for the state, but also destabilizes revenue for state and local governments. Read our policy reforms for the individual income tax.

Open Collective Bargaining: Under current Sunshine Law in Missouri, government bodies may close meetings, records, and votes relating to contract negotiations until the contract is executed or rejected. This lack of transparency in negotiations between government unions and government officials can lead to contractual agreements that aren’t in the public’s best interest. Read our policy recommendations for open collective bargaining.

Prevailing Wage and Project Labor Agreements: Construction contracts dictate what potential contractors must pay workers to get the job, and what kinds of workers the contractors can employ. That often means that large union contractors from big cities get jobs, to the detriment of smaller companies, local laborers, minority laborers, and taxpayers.

Public Pension Reform: Defined benefit (DB) pension plans promise employees annual payments for life upon retirement, but if a public plan does not have enough money to make these payments, taxpayers are legally bound to fund the difference. Pension plans can come up short if they fail to make sufficient contributions or overestimate their investment returns. Nationwide, state and local public pension funds are underfunded by more than $1 trillion dollars. Read our recommendations to reform public pension reform.

Public Union Recertification: Once a government union comes to power, it can stay in power indefinitely. No further elections are scheduled and no term limits are imposed. This means workers can do little to ensure their union truly represents their interests and is held accountable. Read our policy recommendations for public union recertification.

Right to Work: Many workers in Missouri can be forced to join unions. That is unfair not only to the employees disempowered by the law, but also to employers who have to operate under it. Read our recommendations for introducing right to work in Missouri.

Tax Credit Reform: The state of Missouri uses public money to subsidize the private projects of special interests, often in the name of “economic development.” Practically, that means less money for public needs and greater difficulty in later reducing taxes for all taxpayers. Read our recommended reforms for tax credits.

Transportation: The Missouri Department of Transportation (MoDOT) will likely face funding shortfalls in the near future. The state will need to generate new revenue in fair and economically sound ways. Read our recommendations for Missouri's transportation infrastructure.

The post 2017 Blueprint: Moving Missouri Forward appeared first on Show-Me Institute.

The post Deathblow to St. Louis Charter Schools? appeared first on Show-Me Institute.