March 20, 2015

Mark Your Calendars, Kansas City and St. Louis: Michael Cannon is Coming to Town

Michael Cannon is the director of health policy studies at the Cato Institute and is one of the most prominent figures in the free market movement today. Cannon’s national influence extends to a wide swath of health care issues, but lately it’s his work focusing on the health insurance subsidies of Obamacare that has been most prominent. With Case Western Reserve law professor Jonathan Adler, in 2013 Cannon co-wrote “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits under the PPACA.”

If that topic sounds strangely familiar to you, fear not; it is indeed the topic at the center of the King v. Burwell case, which is currently before the Supreme Court. Cannon has been instrumental in not only providing the research that undergirds the plaintiffs’ case, but he has also been instrumental in delivering clear, concise and compelling explanations of what the government did with these subsidies (and why it matters) to audiences across the country. Michael’s Washington Journal segment below, recorded for C-Span earlier this month, provides a good preview of what he’ll be talking about next week.

I hope you’ll be able to join us, either in Kansas City on March 25 at 5:30 pm at the Kansas City Club, or in St. Louis on March 26 at 5:30 pm at Saint Louis University. Both promise to be excellent events.

Happy Sunshine Week!

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This week marks the 10th Anniversary of Sunshine Week. It’s a time to celebrate freedom of information, but also serves as a reminder that there are still some dark corners of government in need of transparency. In a recent study, the non-profit organization, Better Together, tried to obtain financial and operational information from municipalities using the state’s Sunshine Law.

The report found that some cities responded quickly and at low cost, while others did not. Deputy director of community based studies Marius Johnson-Malon was quoted by Saint Louis Public Radio:

“Sometimes we were met with different requests for money up to $2,000 to provide the information we were looking for. Sometimes people would say it was going to take up to six months, and that is in contrast to some municipalities that got us the information on the same day they received the request and provided it for free.”

Johnson-Malon’s experience with varying transparency is not rare. I encountered a similar issue while requesting information regarding public school collective bargaining agreements. Some districts emailed the information within minutes at no cost. Others referred me to the district attorney or offered to retrieve the information at costs of up to $100.

Collective bargaining in public schools should be transparent, but as SMI Policy Researcher John Wright has pointed out, a legal loophole allows collective negotiations between school districts and teachers’ unions to remain behind closed doors.

Last month, a bill was introduced that will open collective negotiations to the public. Parents and taxpayers have the right to know what demands unions are making, especially if those demands affect the education of children.

The Missouri Sunshine Law may be nothing like a subscription to the Jelly of the Month Club, but as Eddie in Christmas Vacation famously said, it’s “the gift that keeps on giving all year round.” Happy Sunshine Week!

 

March 19, 2015

Righting the Wrongs of the Power & Light District

PowerLight_KCPLOne of the reasons Kansas City is on the hook financially for so much on the Power & Light District is its low assessment value. Back in 2009, Cordish, the project developer argued that the project’s value should be $12.3 million. Jackson County disagreed, and Cordish sued. According to Steve Vockrodt, then of the Kansas City Business Journal:

That [Cordish] valuation, which equates to an average of about $24 a square foot, is a far cry from Jackson County’s appraised value of $160 million, roughly $270 a square foot, which is what county officials say the district is worth for 2009, including Cosentino’s Downtown Gourmet Market.

“They said that $12 million was their number for 500,000 square feet when everything is completed,” said Jeph BurroughsScanlon, a Jackson County spokesman.

“We want to make sure we’re right on it,” said Curtis Koons, director of the county’s assessment department. “We just don’t feel $24 on a brand-new commercial venture is realistic.”

Vockrodt’s story went on to include a this statement on the City’s exposure to debt:

Kansas City Councilman Ed Ford said he was told by city attorneys that the Power & Light District’s dispute would not put the city on the hook financially.

“It looks like the city is not going to have a dog in the hunt on that,” Ford said.

Ford may have been talking about the lawsuit, but of course the city did have a dog in the hunt on the valuation. A low property tax assessment meant there would be less money required of Cordish (as taxes are not voluntary) to keep and apply toward their bond payments. And while, in a normal world, any bond shortfalls would be made up by the people making money off the project, Cordish is not a normal company and Kansas City is not a normal world.

In May 2015, Jackson County will again assess the value of the Power & Light District. Now that the facilities have been improved, will their value jump? After all, according to The Kansas City Star, things are booming:

[Cordish's executive director of the Power & Light District Nick] Benjamin thinks district revenues are likely to continue growing, as the district has finally reached 94 percent occupancy. More than 50 tenants, including 22 locally owned tenants, have 450,000 square feet of retail space leased.

If Jackson County argued in 2009 that the Power & Light District should be valued at $160 million, the valuation should be much higher now, given the high occupancy rates. A higher assessment will mean more taxes paid by Cordish. And while Cordish will get to keep these taxes, they will in effect be paying more toward their own bond debt, meaning a lower taxpayer subsidy from City Hall. Even a large increase in the valuation for Power & Light won’t result in a big savings for Kansas City, but it would be something.

It’s too late for city planners, political leaders or their attorneys to be considered geniuses for the disastrous Power & Light deal. But an aggressive effort to make sure Cordish is paying it’s fair share of property taxes to Jackson County would at least suggest that Kansas City leaders truly have learned a lesson.

Closing Loopholes in the Sunshine Law

government hallwaySometimes we like loopholes. Maybe you’ve used one to get out of a traffic ticket or to pay a little less tax. I remember hearing about a poorly thought out tax credit for electric vehicles that folks were using to pay for golf carts. Cute. A little scummy, but cute. But when the government uses a loophole to set policy behind closed doors, it’s not so cute.

There is a loophole in Missouri’s open records and meetings law that allows government entities, such as cities, fire districts, and school boards, to negotiate with unions and set public policy in meetings that are closed to the public. State law should open the collective bargaining process because the public pays for, and depends on, the policies set in these meetings.

Some government agencies have already opened collective bargaining meetings. In 2014, the Columbia Public Schools opened its collective bargaining meetings. It has held open meetings ever since. According to Christine King, president of the Columbia Public Schools Board of Education, the board opened the process because they felt open meetings advanced the public’s interest in full transparency and openness. Such openness in public affairs empowers citizens to hold their representatives in government accountable.

Since the Columbia Public Schools began holding its collective bargaining meetings in open sessions, the local paper, the Columbia Daily Tribune, has covered these meetings, parents, teachers, and anyone else is welcome to attend, and members of the public can view meeting minutes online and see that the parties negotiate in good faith with one another.

Open collective bargaining, as practiced by forward thinking local government entities like Columbia Public Schools and Monarch Fire Protection District, should be standard practice for Missouri state and local governments. One bill, SB 549, promises to do just that by closing the loophole in Missouri’s sunshine law that some public entities use to justify closing collective bargaining sessions. Reform that requires these meetings be held in the open would be a win for anyone who wants transparent, accountable government.

School Choice and Bullying

‘If I went here, I would have enjoyed learning,’ said a prospective parent at the New City School in the north Central West End.

The response isn’t unusual. New City is a beacon of creativity in education. The private school is known for its academic prowess and unconventional atmosphere, where students call teachers by first names and climb to the tops of tree-house-like structures to use classroom computers.

new city

Of all the fascinating elements that make New City one of the top schools in Saint Louis, the most interesting feature is its students.

‘There’s no bullying here,’ said one of the sixth graders I interviewed. Several other students went on to explain that diversity education is taught early on—individuality isn’t just tolerated, it’s celebrated. In a time when bullying has progressed from the playground to the internet, the perspectives of New City School students are rare.

According to one study, bullying victims are two to nine times more likely to commit suicide, the third leading cause of death among young people.

Since bullying often occurs outside school property after hours, public school administrators can do little. Families who cannot afford to move or pay private school tuition are left without options.  This is close to the situation Las Vegas mother Natika Bird found herself in before her daughter took her own life in early March.

“She had been getting bullied for a long time, to the point where the happy, bubbly girl that I knew changed,” she said. “They hacked into her email and they created a Facebook page and they massacred her.”

Bird said she had discussed the situation with Clark County School District police.

“The school police told me because it was not on school campus and after hours, I needed to call the regular police. The regular police told me, ‘You need to call the school police,’” Bird said.

Public schools have often addressed bullying through prevention campaigns and anti-bullying contracts, but sometimes, parents need other options. Bird’s daughter’s public school was not at fault for her death, but there should be a safety net for parents who have sought help and were told to look elsewhere.

School choice is that safety net. Though, New City School prides itself in attaining socioeconomic diversity by offering financial aid, choice is still limited for many children.

That all children should have the opportunity to enjoy learning without the fear of bullying is just another reason why Missouri should expand school choice.

March 18, 2015

In Support of An Outside Audit of Missouri’s Medicaid Program

HealthcareLast month we wrote about a state audit of the St. Joseph School District that turned up tens of millions of dollars in questionable stipends, given out over the course of a decade. Good government requires constant vigilance over how our officials spend taxpayer money; events in St. Joe underline that fact.

But the state’s school districts aren’t the only state programs that deserve a closer look from Missourians. So, too, does the state’s Medicaid program, and neighboring state Illinois serves as a good example. From the Wall Street Journal late last year:

The federal government requires states to do an annual audit of the Medicaid rolls to ensure that participants are eligible, but in most states few people are removed. Ms. Bellock wanted to use an outside, private firm, Virginia-based Maximus, to audit [Illinois's] 1.3 million Medicaid case files—which represents about 2.7 million individuals. The company has more extensive databases than the state and would likely identify more ineligible Medicaid beneficiaries.

Maximus recommended removing 249,912 cases by the end of February 2014, according to the state. By law, state employees had to review the recommendations and decide if cancellation is appropriate. The state removed 148,283 cases—about 234,000 individuals, as many cases represent families—from the Medicaid rolls.

Many of the removals suggested in Illinois were probably the product of expected churns in incomes; as people earn a little more money, they may no longer qualify for the Medicaid program. There’s nothing necessarily nefarious about that.

But whether people receiving benefits improperly are doing so because their incomes have recently changed or because they’re unambiguously defrauding the system, that doesn’t change the fact that the money has been misspent — and misspent needlessly. No one knows for sure if the same kind of waste that happened in Illinois is going on in Missouri, but that’s sort of the point; like in the St. Joseph School District and Illinois, the only way we can prevent future problems is with vigilance today.

Wasted money hurts the people Missouri is trying to help by siphoning off limited state resources, and that’s why Illinois’s third party eligibility verification framework, which appears to have effectively identified thousands of ineligible beneficiaries in the Land of Lincoln, is one Missouri may want to consider. Our state’s auditors deserve our immense appreciation for the work they do currently, but they don’t always have the resources or data to do some of the analyses some of these private vendors can do. As a supplement to our auditors’ work — and mark your calendar, because I don’t say this often — the state should think about following Illinois’s lead.

All Right Class, It’s Time For Your Pension Lesson

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At the Show-Me Institute we have written a number of times about Khan Academy, the online resource that seeks to provide a “free, world-class education for anyone, anywhere.” We have discussed how teachers are using Khan Academy to “flip the classroom.” Instead of having students do homework at home and lecturing at school, they have students watch Khan Academy videos at home and use class time to practice the skills they are learning.

So, I’m going to take a page from the ‘ol flipped-classroom routine and assign you a homework assignment – pensions. Sal Khan has created two videos that offer a great explanation of how defined-benefit pension plans work. In this first video, he shows how these plans can become dramatically underfunded.

In the second video, he uses the Illinois boondoggle of a pension system to provide a real world example. One of the amazing things he shows is that pension payments will soon surpass K-12 education funding.

Watch these videos to learn more about the pitfalls of defined-benefit pension systems. Then, connect with us in the comments section, on Twitter, or on Facebook to discuss more.

A Public School and a Private School Experience

Two hours—that was the amount of time it took me to get dressed, do my hair, get dressed again, decide which shoulder my backpack looked cooler on, and make it to first period on time. Concern about physical appearance is a shared concern for many high school students, but that’s not often the case for students who attend an all-girls or all-boys high school.

Across Missouri, there are about twenty private schools offering single-sex education. On average, these schools cost $12,320 per year. Aside from alleviating opposite gender social pressures, single sex education can offer many benefits for students in need of an alternative environment. Unfortunately, students from economically disadvantaged backgrounds do not often have access.

hawthorn school

Because of school choice, adolescent girls from low-income backgrounds in Saint Louis now have access to the option for the first time. This fall, the state’s first all-girls public charter school – the Hawthorn Leadership School for Girls – will open its doors. An affiliate of the Young Women’s Leadership Network, which boasts 100 percent college acceptance rates, Hawthorne will focus on science, technology, engineering, and math (STEM).

Founder Mary Stillman fondly remembers her experience at Holten-Arms, an all-girls college prep school in Bethesda, Maryland. Stillman founded Hawthorn to provide low-income, urban students with the joy and rigorous academic focus associated with private same-sex education. According to the charter’s brochure, young girls should expect a sisterhood with traditions, celebrations, and strong relationships, as well as 1 to 2 hours of homework per night.

Though Hawthorn will be the first public school option of its kind, it won’t be the first public school to use a gender-specific educational approach. Woerner, an elementary school in St. Louis Public Schools, adopted a gender-sensitive model four years ago. According to a recent article in St. Louis Magazine, the school divided students by sex, giving boys more hands-on learning, while instilling more confidence in girls in math and science. The school has moved from provisional to full accreditation.

This isn’t to say that single-sex education is the right choice for every student, but the option, if it’s a better fit, should be available to every student. In the absence of a private school choice program, charter schools are one way to expand the option which previously was experienced only by students whose parents had the financial means to afford private school tuition.

 

March 17, 2015

Saint Louis Riverfront Stadium: The Maintenance Dimension

Missouri officials say they need a new stadium to keep the Rams. They plan to pay $405 million toward the riverfront stadium by extending existing bonds and offering millions in state tax subsidies. Unfortunately, they do not talk about how that new stadium, along with the teamless dome, will pay for upkeep.

In 2015, the Edward Jones Dome’s maintenance and renovation is $7 million. In the next decade, regular maintenance costs are expected to vary between $7 million and $9 million annually. The upkeep of the dome is paid for by the public, not the Rams or conventions. Approximately $4 million a year comes from the city and county. In addition, the state pays $2 million toward maintenance as part of the deal that originally financed the dome ($10 million for construction debt, $2 million for upkeep and renovation). As the Post-Dispatch reported last year, the dome is in a relatively serious financial hole, and Missouri officials are going to need to find new revenue sources to maintain Saint Louis’ current stadium.

The riverfront stadium plan, unlike the Edward Jones Dome, apparently does not have a revenue stream for its upkeep. However, if costs are anything like the dome’s, the stadium will require at least $5 million to $9 million a year over its useful life. Setting aside the unlikely event of the Rams deciding to cover that cost, Missouri and the Saint Louis region should be preparing to spend at least $125 million in present-value dollars for the upkeep of a new stadium, over and above the initial capital cost.

The additional cost of maintaining a new stadium, and not just its initial cost, makes justifying the project, on economic terms, very difficult. A $405 million upfront cost, plus $125 million for maintenance, far exceeds even rosy projects for the additional tax revenue a stadium might generate. Since the vast majority of economists agree that stadiums do not spur urban regeneration or create economic development, there is only one defense for the new stadium plan: civic pride.

EdwardJonesDome

Can Laclede’s Landing Survive Government Planning?

Recently, the Post-Dispatch reported that many businesses in Laclede’s Landing, a riverfront entertainment district in downtown Saint Louis, are struggling to stay afloat. Half of the district’s 14 bars have closed in the last 18 months.

The immediate culprit of the decline is construction: work on the area’s road system and renovations to the Arch grounds have made the Landing difficult to get to for tourists and residents alike. With construction slated to continue for the next couple of years, many local businesses are calling it quits. According to some business owners, regional planners were so focused with large improvements to the riverfront that they were unwilling to heed the concerns of the neighborhood.

Officials can argue that, despite the present hard times, the area will be better served in the long run by riverfront improvements. However, Laclede’s Landing has deeper problems than transitory construction disruptions. Saint Louis has changed since the 80s and 90s, when the Landing was downtown’s premier entertainment district. From the mid-90s onward, Laclede’s Landing has had to deal with the rise of competitor bar districts, often heavily subsidized by the city and state government.

We can see evidence of the declining comparative vitality of Laclede’s Landing in the neighborhood’s building permits. In the 1990s, Laclede’s Landing had a greater value of building permits per square mile than other entertainment districts in the city, excluding the Central West End.

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Since the 1990s, Laclede’s Landing has been eclipsed. Whereas the Landing had more building permits than the center of Washington Avenue in the 1990s, in the 2000s Washington Avenue had more than ten times the permits of Laclede’s Landing. From 2011-2014, Laclede’s Landing had the least new building permits by value of any of the neighborhoods sampled, even falling behind the upstart Cherokee Street. Lacelde’s Landing was also the only entertainment district to have fewer building permits in the 2000s than it had in the 90s.

One entertainment district being eclipsed by others is no reason to blame regional planners. However, the competition has not been on a level playing field. The region and state have given extensive tax credits to much of Laclede’s Landing’s competition (especially nearby Washington Avenue), as the map below shows:

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In just the sample area of Washington Avenue, the city handed out more than $60 million in tax credits from 1999-2011. The sample area of the Central West End received almost $50 million. Laclede’s Landing, by comparison, received less than $2 million in tax credits.

The future of Laclede’s Landing is uncertain. But it seems assured that Saint Louis will continue to make where people spend their free time a matter of public policy. And while government preference can create well publicized winners, it can also make losers. In the 70s, Laclede’s Landing was arguably part of the former, now, it is in danger of joining the latter group.

March 16, 2015

Florida Story Shows Risk of Conflating Medicaid Waivers With “Block Grants”

HealthcareEarlier this week I was asked by the Kansas City Star for my thoughts on a Medicaid expansion proposal being marketed as a “block grant” that’s currently circulating in the Missouri Senate. The problem? It’s not a block grant but rather a waiver, and I noted that as structured, the proposal could “guarantee Obamacare’s expansion but would not guarantee key reforms.”

The concern with waivers (Medicaid and otherwise) is their time limitations. When a waiver’s term expires, it’s up to the Federal government to determine whether that waiver will continue — and if the waiver continues, under what conditions.

Enter Florida.

The CMS will not renew a Medicaid waiver in Florida expiring at the end of June that provides more than $1 billion a year to help the state’s hospitals with uncompensated-care costs for low-income and uninsured patients. That may put additional pressure on Florida Republican leaders to consider expanding Medicaid to low-income adults under the Affordable Care Act.

Since 2005, Florida has had a Section 1115 Medicaid waiver establishing a low-income funding pool to aid the state’s hospitals. The state has received between $1 billion and $2 billion annually to support safety net providers.

To have genuine block grant Medicaid reform at the state level, the Medicaid laws would first have to change at the Federal level. Short of that, states and their Medicaid programs will always be subject to having the policy rug pulled out from under them. Florida is seeing this firsthand with a waiver that existed long before Obamacare passed but whose continued existence may hinge on implementation of Obamacare’s Medicaid expansion.

It’s good to hear politicians at least give lip service to a substantive change to Medicaid, but if little more than lip service is all that can be guaranteed in the Medicaid reform discussion, then Missouri taxpayer: beware. A waiver may look like a carrot, but it can easily be used like a stick. Just ask Florida.

Until flexibility in state reform is enshrined in Federal law with unambiguous block granting language, enduring and dynamic Medicaid reforms will be little more than a policy mirage. Unfortunately, a request for a waiver under Obamacare simply doesn’t cut it if long-term, state-based and patient-centered Medicaid reform is going to ever be a reality in the Show-Me State.

New Study on City Spending Confirms What We Already Know

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Photo: Union Station in Kansas City by Dual Freq

Visitors to Show-Me Daily have probably come across the numerous ways that Kansas City has wasted money. Now, it’s possible that these were isolated incidents. However, WalletHub published  a new study that points to Kansas City having a larger, systemic problem with how it spends taxpayer dollars.

According to this study, Kansas City ranks 61st out of 65 cities in regards to spending efficiency. I won’t bore you with all of the gritty details on how WalletHub came up with their figures. The Reader’s Digest version is that this study divides a city’s total park acreage, test scores, and crime rate by it’s per person spending on parks, education, and police. The city with the highest quotient is the “most efficient”.

Besides pointing out the ways that Kansas City has wasted money, the Show-Me Institute has also shown that Kansas City spends a lot of money overall. In a 2013 case study, I examined St. Louis and Kansas City’s per person expenditures compared to six other other cities. Kansas City spent the 3rd most, just barely behind Denver. The case study didn’t say whether Kansas City was being efficient or not with taxpayer money, but with such high spending, the chance for inefficiencies increased. The WalletHub Study lends further credence to the notion that Kansas City taxpayers aren’t getting the best bang for their bucks.

The WalletHub study isn’t the definitive work on city spending, but it should serve notice to policymakers that maybe Kansas City should take a good look at how to improve the way it runs things.

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