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Listen to the podcast: Susan Pendergrass, James Shuls, Elias Tsapelas, Aaron Hedlund, David Stokes, Patrick Tuohey, and Avery Frank join Zach Lawhorn to discuss The 2025 Blueprint

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On December 7, 2023, Brenda Talent joined Mike Ferguson in the Morning on NewsTalkSTL to discuss the 2024 Blueprint: Moving Missouri Forward.

Download the 2024 Blueprint here.

The 2024 Blueprint: Moving Missouri Forward explores 16 policy areas in which common-sense reform could immediately and positively impact everyday life for Missourians. Issues covered range from education and health care to unemployment insurance and budget reform. Each article identifies a problem that affects the citizens of our state, provides background information and analysis, proposes one or more solutions, and then boils the solutions down into actionable recommendations. We believe that the proposals our policy team has assembled can put Missouri on the path to a healthier economy, a better public education system, and a more vibrant and flourishing civil society.

The post Brenda Talent: How to Move Missouri Forward in 2024 appeared first on Show-Me Institute.

Download the 2024 Blueprint for Missouri here

On Wednesday, December 6, 2023, the Show-Me Institute hosted a Virtual Town Hall outlining the 2024 Blueprint for Missouri. Watch a recording of the event here.

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The 2024 Blueprint: Moving Missouri Forward explores 16 policy areas in which common-sense reform could immediately and positively impact everyday life for Missourians. Issues covered range from education and health care to unemployment insurance and budget reform. Each article identifies a problem that affects the citizens of our state, provides background information and analysis, proposes one or more solutions, and then boils the solutions down into actionable recommendations. We believe that the proposals our policy team has assembled can put Missouri on the path to a healthier economy, a better public education system, and a more vibrant and flourishing civil society.

Produced by Show-Me Opportunity

The post Watch: A Blueprint for Missouri in 2024 appeared first on Show-Me Institute.

For years, I’ve been complaining about Missouri’s IT systems and have been begging for improved data quality. Back in 2020, due to insufficient computer systems, pandemic unemployment benefits couldn’t be tied to recipient incomes, which led to the federal government paying many individuals more to stay home than to go back to work.

More recently, I’ve written about Missouri’s sluggish start to the post-pandemic Medicaid eligibility redetermination process. States often struggle to keep up-to-date income or address information on Medicaid and other welfare program recipients, which is why there are frequent checks to see whether those enrolled in these costly programs are still eligible to receive services. But for the last three years, many recipients maintained coverage because the state didn’t know that they no longer qualified, or weren’t allowed to remove them even if they did. It’s easy to see how poor data in such cases can quickly result in serious government waste.

These data limitations are a big reason why I wrote that the recently signed “benefit cliff” legislation is a bad idea. While it may sound good to slowly reduce welfare benefits as recipient incomes increase to avoid an abrupt loss of services, the government implementing something like that requires far better data than what is available. Missouri doesn’t keep real-time income data on program recipients, and often only checks earnings once per year. Even if a program tries to offer a welfare off-ramp, if eligibility is only checked once per year, all you have is another cliff.

All this to say, accountability in government spending is incredibly important, and it’s unfortunate that Missouri has fallen so far behind. But it’s also a good thing that the federal government wants to know that the summer food stamp benefits are actually making it to kids who need them—regardless of whether Missouri could get its act together to comply with the program’s requirements.

For a while now, the costs for Missouri’s insufficient computer systems were primarily borne by state taxpayers via bloated programs. But now that our state is missing out on millions of available federal funds aimed at benefiting children, it is my hope the issue of improving IT is something everyone can agree on. Let’s hope Missouri’s legislature listens and takes action next year.

The post Data’s Double-Edged Sword appeared first on Show-Me Institute.

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The post Teacher Pay, Child Care Costs, and Unemployment Insurance appeared first on Show-Me Institute.

As a reminder, states have the option of using stimulus funds to replenish their Unemployment Insurance Trust Fund. However, if the funds are replenished after April 1st, 2022, states will be subject to a maintenance of effort requirement for unemployment benefits through 2024. On its face, such language could limit the ability of states to take any action to reduce weekly unemployment benefits or reduce the number of weeks of benefits available until after 2024.

This is quite the string to attach. Who knows what the next two years will hold and whether states will want to adjust their unemployment benefits? There’s still time for lawmakers to act and avoid having their hands tied by this rule.

Read more about this issue here.

The post Only Days Left to Replenish Unemployment Insurance Trust Fund appeared first on Show-Me Institute.

The state pays unemployment benefits from this fund, and the COVID-19-induced recession meant that the state was dipping into this fund more than normal. When the balance of the UI Trust Fund is too low, an increase in tax contribution rates on business owners is triggered.

As stated in the spending guide:

States can replenish their UI Trust Funds up to the difference between the balance on January 27, 2020 ($1.054 billion) and May 17, 2021 ($637 million). Thus, Missouri lawmakers should make a one-time contribution to the state UI Trust Fund of $417 million to prevent small businesses from facing hikes in their UI taxes and to keep the fund balance healthy in case of heavy future use.

A tax increase for businesses is the last thing anyone needs right now. Businesses pass on higher taxes to customers, which in turn means higher prices and costs for everyone.

With the finalization of the rules governing State and Local Fiscal Recovery Funds, there is now a tighter timeline for spending stimulus funds on replenishing the UI Trust Fund. If states use funds to replenish their UI trust funds after April 1, 2022, they will be subject to a maintenance of effort requirement for UI benefits through 2024. This means that if states use stimulus funds to supplement UI funds after April 1, they would not be allowed to take any action to reduce weekly unemployment benefits or the number of weeks of benefits available until after 2024.

As Jared Walczak of the Tax Foundation wrote in a great summation piece:

Many states may have no desire to do this. Others may anticipate the need for an adjustment. Regardless, state lawmakers may be wary of having their hands tied by the federal government. But there is a grace period, which could be a motivation for states to act fast.

The bottom line is that if Missouri lawmakers want to replenish the UI Trust Fund without strings attached, they need to act quickly.

The post Lawmakers Should Replenish Unemployment Insurance by April 1st appeared first on Show-Me Institute.

Per the Tax Foundation, states with the best tax systems “will be the most competitive at attracting new businesses and most effective at generating economic and employment growth.” A state should aim for a tax system that does not negatively affect business decisions; you don’t want businesses to relocate or decide not to expand because of tax concerns. Research has found that taxes that are low and broad based are least likely to affect business decisions in this way, and therefore make the best tax systems.

Missouri ranked relatively well for state corporate income tax, unemployment insurance tax, and property tax. Areas for improvement are the individual income tax and sales tax, as Missouri ranked 21st and 25th respectively. (It’s important to note that local taxes are factored into the index, but the main focus is state taxes, so this may not be a full picture of the taxes that affect Missouri’s businesses.) As explained in the index, Missouri has a good definition of taxable income, but a lot of income tax brackets, standard deductions, and exemptions, which complicate the tax system. Missouri’s highest income tax rate, 5.4 percent, is higher than the highest tax rate of 20 other states. The sales tax index is affected by sales tax rates, including the high local sales tax rates from numerous special taxing districts across Missouri.

Lawmakers should act to improve our ranking in this index—not just for bragging rights, but to attract businesses to our state. Lowering tax rates is one way to move Missouri in the right direction. Lawmakers should continue to lower income tax rates and work to rein in special taxing districts to improve the business tax climate in our state.

The post State Business Tax Climate Ranking appeared first on Show-Me Institute.

With all these job openings, it really does seem like it’s time for things to finally get back to normal and for people to get back to work. The reasons we may have needed additional unemployment benefits during the height of the pandemic are fading fast—businesses are opening, vaccines are widely available, and people are returning to life outside their homes.

The economy is recovering from the pandemic, but it’s possible that increased federal unemployment benefits have slowed down our recovery by causing people to push back their job search. Governor Parson decided that Missouri would end all federal pandemic-related unemployment benefits on June 12th to incentivize people to get back to work. I think this was a smart move because jobs are clearly available. It’s time to stop relying on government handouts and fill those job openings.

The post Jobs, Jobs, and More Jobs appeared first on Show-Me Institute.

The CARES Act made several large changes to the unemployment insurance system. These changes were intended to be temporary and preserve family and small business finances during the period of greatest uncertainty. Specifically, the CARES Act extended the duration of unemployment benefits, added a $600 weekly supplement to the usual state benefit amount, expanded eligibility to gig workers and many others traditionally excluded from the unemployment insurance system, and introduced other modifications such as the waiving of job search requirements to account for the unique circumstances of the pandemic. At the end of 2020, the federal government extended into March the supplemental benefit amount at a lower level of $300, and President Biden’s American Rescue Plan extended these enhanced benefits further until September 2021.

These changes to the unemployment system have undoubtedly had major effects on individuals and the economy. The additional $600 was certainly beneficial for the financial situation of the unemployed; researchers have found that additional benefits from the CARES Act resulted in 76 percent of unemployed people earning more than their previous wages on unemployment between April and July. In Missouri, the median replacement rate of UI benefits (including the $600) to lost wage earnings was 154 percent, meaning those on unemployment made 54 percent more than their lost wages. Even with these extra earnings, research has found that unemployment benefits did not harm job growth in spring and summer 2020 when lockdown restrictions made job search very difficult.

However, conditions have changed. Most businesses are open, vaccines are available to those who want them, and the unemployment rate has fallen from 14.8 percent to 6.1 percent. Are these extra unemployment benefits still necessary? Job openings hit a preliminary record high in March and anecdotally, many businesses are struggling to find workers. It’s certainly possible that the additional $300 and the long extension to September are causing people to push back their job search and extend their time receiving UI. Jobs will likely be even more abundant by the time benefits expire, thereby reducing the risk of a delayed job search.

It seems that the job market (and therefore our economic recovery) is being helped by vaccine access and business re-openings and hurt by extended unemployment benefits. However, we may be able to see the light at the end of this UI tunnel. Governor Parson announced that Missouri would end participation in the federal pandemic unemployment programs on June 12th, saying that these benefits were always meant to be temporary and it’s time to get people back to work. The federal government is also taking steps to return to pre-pandemic UI rules. Lawmakers seem to recognize that getting people back to work is a priority and enhanced UI benefits may not have been moving us toward that goal. Hopefully, these changes will help us continue to recover quickly.

The post How Are We Recovering? (Part 3) appeared first on Show-Me Institute.

As things currently stand, the American Rescue Plan promises jobless workers $300 per week on top of the usual wage replacement rate of just under 50% all the way into September. For most of the workers who are receiving nearly the same or more to remain jobless, it is understandable that they might be reluctant to accept a pay cut just to go back to work. For small businesses struggling to reopen, these unemployment benefits represent anywhere from a short-term headache to an existential threat. Many of them operate on small profit margins and cannot afford to compete with the artificial compensation offered by a federal government with a nearly endless capacity to borrow. Tacitly acknowledging the role of unemployment benefits in the lackluster jobs numbers, President Biden is now exhorting workers that “if you’re receiving unemployment benefits and you’re offered a suitable job, you can’t refuse that job and just keep getting unemployment benefits.” He has also directed the Department of Labor to work with states to reinstate job search requirements, which in their current form are mostly window dressing that cannot effectively monitor or induce search effort. Instead of trying to fill the leaky bucket caused by bad policy, the federal government ought to plug the hole and stop erecting hurdles to small business hiring and reopening.

In Missouri, the economy sports what sounds like a healthy 4.2% unemployment rate, but here, too, many Missourians have exited the labor force, and there are over 114,000 fewer people working relative to back in February 2020. Missouri’s recently announced termination of enhanced unemployment benefits is one positive step toward addressing this jobs shortfall and returning its economy to pre-pandemic strength.

The post How to Put Missouri on a Faster Path to Recovery appeared first on Show-Me Institute.

Generally, UI affects the labor market by changing job search behavior. UI decreases the gap in pay between working and not working. It creates an incentive for unemployed workers to take more time in their job searches, resulting in fewer job applications and longer jobless spells. On the other side of the labor market, the UI benefits that make it easier for workers to put off job searches and be more selective also make it more difficult and costly for businesses to hire, which reduces the incentive to post job openings. Ultimately, UI can damage both sides of the labor market.

Providing money to help someone between jobs isn’t inherently a bad thing, especially during difficult economic times. In fact, one justification for having an unemployment insurance system at all is that the added time spent searching for a job leads to the possibility of a higher-quality job fit, which has stabilizing effects on consumer spending. However, excessive generosity or duration of UI benefits can hamper the economic recovery following a recession.

Researchers have cited the extensions of unemployment benefits as playing a role in the slowest job recovery on record—the aftermath of the Great Recession—and other jobless recoveries. Similarly, eventual cuts to UI benefits after periods of extensions have led to large influxes of workers and decreases in unemployment levels.

All this research on the relationship between UI and the labor market makes me question whether our UI policy during this economic downturn has been optimal. The recent extension of unemployment benefits with the $300 weekly supplement may threaten to impede the pace of our current recovery as UI has in the past. Governor Parson has even decided to end Missouri’s participation in the federal pandemic unemployment benefits beginning on June 12th, saying that it’s time to get people back to work. The complicated topic of UI and our current recovery with be discussed in the next blog in this series.

The post How Are We Recovering (Part 2) appeared first on Show-Me Institute.

In the spring of 2020, the COVID-19 pandemic and associated shutdowns quickly sent our country into unimaginable economic lows. The national unemployment rate reached its peak of 14.8 percent in April 2020 while Missouri’s unemployment rate jumped to 12.5 percent the same month. However, the economy has bounced back faster than expected. Recent numbers show the national unemployment rate at 6.2 percent in February 2021, and Missouri’s preliminary unemployment rate for January 2021 was 4.2 percent.

Though still higher than the national unemployment rate of 3.5 percent from January 2020, we’ve recovered much more quickly than we did from the Great Recession.  It took nearly five years for the unemployment rate to fall from its peak of 10 percent in October 2009 to below 6 percent. As the image below shows, unemployment reached an even higher peak during the pandemic but has still managed to fall to 6 percent in less than a year’s time.

Source: https://www.bls.gov/opub/mlr/2020/article/employment-recovery.htm

Perhaps the historical fiscal relief packages passed in 2020 help explain the more robust recovery. The CARES Act was passed in March 2020 to support the economy in a variety of ways through a period of widespread lockdowns. Included in the CARES Act was enhanced unemployment insurance to help those who had lost their jobs at a time when it was difficult to find jobs.

However, with the economy re-opening, job postings on the rise, and accelerating vaccinations signaling a potential end to the pandemic, it is worth re-examining the evidence on the effects of unemployment benefits during downturns and recoveries. Are the benefit extensions helping the recovery by sustaining consumer spending, or are they slowing the recovery by discouraging people from searching for jobs by paying them generously not to work? This will be discussed in future blog posts.

The post How Are We Recovering? (Part 1) appeared first on Show-Me Institute.

We saw similar weak employment recovery following the 2009 financial crisis when endless extensions of unemployment insurance benefits discouraged some from seeking jobs and reduced job creation. Could the forces that created the “Redistribution Recession” last time also be a threat now?

One reason to be extra concerned is that people may be getting more money on unemployment than they would if they were working. The most recent federal relief package, the American Rescue Plan Act, extends unemployment benefits through at least September and maintains the $300 supplement that gets paid out on top of the usual state benefit.

Unemployment benefits are meant to provide temporary assistance for people as they look for jobs. These benefits are not intended to replace work and therefore should not put people in a position of taking a pay cut to get a job. Why would people go back to work if that’s the case? We also need to be mindful of other factors here—disincentivizing work hurts small businesses that are trying to find workers to get back up and running.

Of course, not all unemployment benefit recipients are receiving more than their previous paychecks. Some workers are getting paid too much—disincentivizing them from taking a job—while others are still left to make do with less money than when they had a job. To fix these problems, it may make sense to replace the $300 supplement with unemployment benefits that are more closely tied to previous wages.

The best way to get the economy on track is to help jobless workers avoid financial distress while still ensuring that it is financially advantageous for them to find a new job rather than remain unemployed. Putting money in people’s pockets is a temporary Band-Aid that staves off hardship. But if an unemployment insurance program delays the real cure of getting people back to work, is it really a stimulant for the economy? Or a depressant?

The post Are Unemployment Benefits Making It Harder to Find Workers? appeared first on Show-Me Institute.

The Missouri state government has $1.5 billion leftover from CARES Act federal relief funds and must spend it by December 31 or lose the money, despite scores of individuals and business owners that still need help. The Governor plans to spend $1.3 billion on measures such as personal protection equipment, school lunch programs, and unemployment insurance, among others.

It’s important to note that these funds have several strings attached. The money must be spent on expenses incurred due to COVID-19—it can’t just be used to fill unrelated budget gaps.

According to a new report from the state auditor, the Missouri state government had received a cumulative total of a little over $3 billion in federal relief funds through the end of October. County governments also received relief funds. Jackson County and St. Louis County received $123 million and $173 million, respectively, directly from the federal government due to meeting population requirements. The Missouri Legislature also chose to send $521 million to the remaining counties and St. Louis City, based on population proportions.

Of this combined $817 million sent to counties, roughly $543 million remains unspent, not including planned purchases. This is in addition to the state government’s remaining $1.5 billion.

Why hasn’t the money been spent, and what should be done with it?

If it really is the case that the money isn’t needed, then the funds should be returned to the federal government, and our state and municipal leaders should be commended for declining to help themselves to taxpayer money.

However, if it is needed, it should be spent wisely. For example, some money could be used to support businesses that struggled or closed during state and county-mandated shutdowns. Jefferson City imposed a statewide lockdown from early April to early May, and many counties continued with further lockdowns. Unemployment benefits for affected workers may well be appropriate, but they should be accompanied by relief to the business owners who were deprived of the opportunity to operate (and to employ those workers) for significant parts of the year.

Parents of school-aged children also deserve consideration. The pandemic has led to school closures and a switch to distance learning that caught many if not most school districts unprepared. Statewide, public school enrollment is down by nearly 25,000 students this year as parents struggle to find alternatives to their assigned public schools for their children. These parents would be facing a daunting task under any circumstances, but consider the parents whose incomes have been reduced by pandemic-related closures and who are also trying desperately to keep their children from losing a year of education. Shouldn’t some of the federal relief money be used to help them pay for tutoring, private-school tuition, or other resources?

Finally, policymakers should keep in mind that the challenging and complicated process of the COVID-19 vaccine rollout is now ramping up. It’s not going to be easy, and without a solid plan for vaccine distribution, it’s unlikely to go well. Does Missouri have a plan? If so, what kinds of resources will be needed to carry it out?

It’s hard to say what would be the very best use of the still-unspent portion of the federal relief money because of the number of variables in play. But if we can’t spend it in a way that provides meaningful help to pandemic-affected businesses and workers—if we can’t use it to help educate children whose school districts have let them down—and if we can’t use it to make the vaccine rollout as fast and effective as possible—then we should give it back to the federal government. It would be both injurious and insulting to Missourians who have suffered through months of this pandemic if their elected officials leave nearly two billion dollars of money unspent until the final weeks of the year only to squander it out of fear of leaving it on the table.

The post New Report on Federal Relief Funds in Missouri appeared first on Show-Me Institute.

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In basic theory, workers offer services in exchange for wages. There is a set (yet always changing) demand for labor in any field. There are a number of people with the skills and desire to perform that labor in exchange for money. If the number of people with the skill and desire to perform a service is greater than the demand for that labor, wages in that field will go down. If, because of the reduced wages, certain workers leave that field, wages may go back up and the wage labor in that field will come to equilibrium. It works the other way, too.

But let me tell Mr. Borich how it does not work, or, at least, would not work unless the government interferes. When the supply of labor in a given field exceeds the demand for their work, not all individuals should be guaranteed employment. By his own admission, there are too many college adjuncts. This means we need fewer of them, not more adjuncts on government assistance. As the author himself explains:

This summer I was fortunate to be promised an English Composition class because more like me want to teach than there are classes.

Alas, enrollment was low; my class was canceled at the last minute.

Read more here: http://www.kansascity.com/2012/08/21/3772593/as-i-see-it-a-policy-unfair-to.html#storylink=cp

In a market with a labor surplus, some of those people will, over time, choose alternate jobs. Supply of labor will decrease and compensation for that labor will equalize. That is how it should work. But Mr. Borich wants a system where everyone gets to do what they want whether there is appropriate demand for it or not, and the government will intervene to ensure people do not have to make any hard choices.

Unfortunately, there are far more examples where the government interferes in market decisions instead of staying out of those decisions. Too many people have Mr. Borich’s attitude that the government should subsidize their choices rather than have them compete in the free market.

And do not even get me started on what happened to the stigma of being on public assistance. I am going to stop now before I get myself in trouble. Thanks to johncombest.com for the link.

The post He Cannot Be Serious appeared first on Show-Me Institute.

You might be tempted to dismiss that idea as little more than armchair theorizing, but there are solid numbers to back it up. For instance, take this blog post from University of Chicago economist Casey Mulligan about unemployment in Pittsburgh from 1980–1985:

Unemployment rates got quite high in Pittsburgh in those days, reaching 16 percent at one point, and staying over 10 percent for two and a half years. The chart below shows some of the results. It graphs weeks from unemployment benefit exhaustion against the fraction of unemploy[ed] people either finding a new job or being recalled to a previous job in that week. “Exhaustion” refers to the time when benefits cease being paid to the unemployed person, regardless of whether they have found a job.

Almost no one started working during the 2-3 weeks prior to the exhaustion of their unemployment benefits (weeks “-3” and “-2” in the chart). Miraculously, more than one quarter started work a week later (19% started a new job, 10% returned to a previous job). Economists agree that a huge reason for this behavior is that people are more willing to remain unemployed when unemployment itself generates a paycheck. (The job they take may not be great, but the data show that often there is a job to take).

If incentives mattered in Pittsburgh in the early 1980s, why wouldn’t they matter in the United States today? Or why did employment increase almost 1,000,000 last summer?

Not only would this decision cause more unemployment in Missouri, it would also further stretch an already overextended budget. It’s a bad idea all around.

(Casey Mulligan link via Marginal Revolution.)

The post Ensuring Unemployment appeared first on Show-Me Institute.