April 22, 2015

An Idea for Better Transit in Missouri: Raise Fares

Public transportation in Missouri’s major cities is heavily subsidized; taxpayers cover more than 80 percent of total costs in Saint Louis and Kansas City. The main culprits of these subsidies are high costs and low utilization. For example, most bus routes in Saint Louis roll around the city nearly empty. But a contributing factor to this problem is fares, which remain inexpensive in both cities.

KCATA_MAX_DowntownFor instance, in Saint Louis, fares are $2 for the bus and $2.50 for the MetroLink. In Kansas City the bus costs only $1.50, aside from a few more expensive routes. Monthly passes offer a steep discount in both cities, and reduced fares are available for the young, the elderly, the disabled, and students.

Low transit fares are generally sold with two arguments. First, and most common, is that public transportation provides transportation to those with little or no income. Higher fares would therefore be a tax on the poor. But not everyone who uses transit is poor. In Kansas City about 78 percent of transit users are above the poverty line (79 percent in Saint Louis). Moreover, wealthy transit users are more likely to use high-capital-cost rapid transit, so they end up receiving a larger subsidy than poorer riders. In Saint Louis, MetroLink ridership is greatly buoyed by well-off passengers using the rail to get to Busch Stadium or summer festivals (the Cardinals effect is noticeable). They too hardly meet the criteria of a group in need of cheap tickets.

To justify subsidizing the well off, many public transportation advocates use the second argument for low fares: high transit ridership is in the public’s interest. They claim that getting people out of their cars and on to transit is good for the environment and good for congestion, thus worth subsidizing heavily. More than a few have advocated getting rid of fares altogether.

However, low transit fares have not gotten people to ditch their cars; less than 5 percent of Saint Louis and Kansas City residents use transit to commute, and those numbers aren’t increasing much. And the low fare revenue makes it difficult for public transportation to make the investments that might make transit more attractive to more residents. That is why even some transit advocates are calling for higher fares.

Saint Louis and Kansas City could set up a system with much higher standard transit fares with lower prices for those below the poverty line. In addition, tickets to stations near sporting events could be more expensive on game days. By looking for ways to make riders pay for more of what their service actually costs, transit agencies might be able to provide better services without going to the general taxpayers for aid. That could be better for everyone, whether they use transit or not.

April 21, 2015

Getting the True Value of Farmland

farm

It’s interesting when there are two wildly different takes on the same thing. For example, take me vs. the general public on Dances With Smurfs or Michael Burry vs. the rest of Wall Street on the value (or lack thereof) of sub-prime mortgage bonds. Another instance—one that is costing all of us—is the State Tax Commission vs. everyone else on the value of farmland. This difference can affect many our tax rates.

In a recent paper (H/T David Nicklaus), David Larson of the Bureau of Economic Analysis performed a valuation on all land in each of the lower 48 states for 2009. Based on his calculations, Missouri farmland is worth $64.236 billion. Based on my calculations, using data contained in the State Tax Commission’s 2009 Annual Report, the total value of Missouri agricultural property in 2009 would come out to $13.3 billion. That’s a gap of more than $50 billion!

A reason for this big difference is that, instead of assessing all agricultural land at a flat 12 percent rate, actively farmed land receives a different assessment rate depending on its productive capacity. This practice results in an effective assessment rate of around 2-3 percent.

Such low assessments erode the property tax base. Even if the true value of farmland in Missouri was half of Larson’s estimate, if it were assessed at a flat 12 percent rate, the state would have an agricultural property tax base nearly two-and-a-half times the size of its current base. This larger tax base either could allow property tax rates in some areas to be cut or some localities could see an influx of new revenue.

I don’t want farmers’ property tax bills to skyrocket. However, the truth is their property is under assessed to such an extent that governments are forced to rely on other more destructive forms of taxation (i.e., income taxes), which the rest of us have to pay, in order to fund essential services. We should value farmers for the work they do, but we should also properly value the land they work on lest we pay more than we should.

April 20, 2015

Monarch Voters Choose Transparency Over Union-Backed Candidate

firefighter

This month voters in the Monarch Fire Protection District, a fire district in western Saint Louis County, chose to keep Robin Harris on the board of directors. Harris and fellow board member Jane Cunningham were instrumental in implementing transparency policies for the district, including open collective bargaining. The fact that Monarch kept its current board in place is good news for people interested in local government accountability; however, one special interest group, the local firefighters union, may not have seen Harris’ victory in the same positive light.

Supporters of both Harris and the opposition, Kelley Miller, were standing outside the polls on election day giving out information and encouraging voters to pick their candidate. A man gave me a flier that read, “Vote for Robin Harris.” I asked him why I should vote for Harris, and he told me Robin has done a good job representing taxpayer interests. The man told me he has known Robin for six years.

Lauren, an emergency medical technician from Troy, Missouri, gave me a glossy card instructing me to choose Kelley Miller instead. I asked Lauren why I should vote for Miller, and she told me that Miller would “take politics out of the district.” While she didn’t know Miller personally, as a fellow fire district employee over in Lincoln County, she felt Miller was the right pick for voters in Saint Louis County. She told me that fire protection employees at districts across the region work together during elections.

Lincoln County Fire Protection District, where Lauren works, is a union shop. If it seems odd that an EMT from two counties away would stand outside on a rainy day and ask Chesterfield residents to vote for a candidate she has never met, then this piece of information should clear things up for you. A union’s job is to negotiate with an employer to get the best deal for its members. If the employer happens to be a local government, such as a fire protection district, then the union spends resources to elect public officials that answer to the union. Thus, the union shops in the region work together to ensure that the people elected to the boards of fire protection districts are favorable to their interests.

The union-backed candidate lost this time, but there will be other district elections. The board of the Monarch Fire Protection District may one day be packed with union-backed members. However, the transparency reforms should stay. Transparency protects both officials and the public, so when it comes to local government, everyone benefits.

Everything Is Choice in Florida

floridaWhen Missourians think of public school choice, they might think of charter schools or the school transfer law, which allows students in failing schools to transfer to quality ones. Currently, only students in Kansas City, Saint Louis, and outlying counties have access to options other than the school they were assigned to. What if all students in Missouri had public school choice?

In Florida, legislators are moving quickly on a bill that would provide students in the Sunshine State with just that. Florida students would be able to attend any public school in the state if the receiving school has not reached 90 percent capacity. Choice advocates view this as an extension of the programs students already have access to.

Florida leads the nation in providing educational options. Thirty percent of Florida’s students attend a school other than the public school they’ve been assigned to. Students have access to tax credit scholarships, education saving accounts, virtual schools, charter schools, and if this latest choice bill is signed into law, statewide inter and intradistrict choice.

There are many benefits to adopting this law. For starters, providing all students with inter and intradistrict choice would allow more quality options, sometimes even options that are closer to home. It would also diminish inequalities that exist within large school districts, where one school might perform better than others.

Missouri should consider expanding the inter and intradistrict choice some students already enjoy. We will never have as much sunshine as Florida, but we certainly can provide students with as much choice.

April 19, 2015

Missouri Could Save Millions by Looking to Wisconsin

A bill is making its way through the Missouri Senate that would allow government workers to hold their union representatives accountable through regular elections. Unfortunately, the bill’s fiscal note—an estimate of how much this bill will cost—overstates the cost of these elections.

If the Department of Labor and Industrial Relations (DOLIR)—the agency tasked with managing government union elections—had examined Wisconsin, another state that has a law like this, they may have seen how the agency would have been able to conduct elections with existing resources.

voteInstead of looking to Wisconsin, where similar elections are already held at no additional cost to taxpayers, DOLIR estimated that it would have to hire at least 21 new employees and 760 temporary elections officers to physically conduct each election. According to DOLIR, these elections and new hires would cost $1.5 million to $2.7 million a year. While $2 million is not a huge portion of a multibillion-dollar budget, it is a significant amount to most of the people paying for it, especially when DOLIR could eliminate that cost altogether by following Wisconsin’s lead.

The Wisconsin Employment Relations Council (WERC) holds union elections at no cost to the taxpayer. This cost savings is possible for two reasons: First, WERC contracts out with a respected arbitration company, the American Arbitration Association, for its union elections. In these elections, workers vote through telephone or the Internet using a secure ID number, rather than a traditional paper ballot. This service has been used successfully in Wisconsin for a couple years now, providing convenient, low-cost union elections to government workers. Second, WERC charges a filing fee to a union seeking election. The filing fee is administered on a sliding-scale basis, charging more to larger unions and less to smaller unions, and is enough to cover the cost of elections. Because of these two smart moves by WERC, Wisconsin began holding elections for state workers in 2013 without increasing WERC’s staff or its impact on the state budget.

Why didn’t DOLIR look to the practices of other state agencies when estimating the cost of these elections? That seems like the first thing you’d do when estimating the cost of a new government practice. I don’t know why DOLIR screwed up so badly. I do, however, know that government union elections can be an inexpensive and reliable way to protect our government workers’ voices when it comes to their unions and professional associations.

April 18, 2015

No, Post-Dispatch, the Rams Don’t Pay Their Way

StadiumEarlier this week, the St. Louis Post-Dispatch published an editorial discussing whether the tax revenue brought in by the Rams is enough to cover the costs associated with building the Edward Jones Dome. Their answer: probably yes. My colleague Joe Miller and I have looked at this issue, and our answer: probably no.

Why the discrepancy? Well, let’s look at the Post-Dispatch‘s “back-of-the-envelope” calculations:

  • They assume roughly $1 million a year from taxes on the Rams’ profits. We have no problem with that.
  • The Post-Dispatch counts the total $151 million of player payroll as taxable, when it isn’t. Rams players play half of their games in other states/cities, so they pay income taxes to those states. This is double counting, since they also count visiting teams’ income taxes too. Taking this into account, Joe and I estimated the income taxes generated by players’ salaries—along with those generated by the coaches, staff, and other employees of the Rams—comes to roughly $11 million.
  • Taxes from sales of merchandise and food and beverages have to be balanced against what would have been received from local businesses had the Rams been absent. The Post-Dispatch gave no indication that they took this into account. According to our calculations, the net sales tax revenue along with ticket tax revenue amounts to roughly $3 million.
  • Add in the Rams’ rent, and you get another $250,000 in revenue.
  • Like the Post-Dispatch, we found it difficult to determine how much the city, county, and state would receive in additional hotel tax revenue.
  • Overall, we estimate the Rams generate between $15-16 million in tax revenue ($10-11 million for the state, $3-4 million to the city, and the remainder to the county). That’s a far cry from the $24 million the city, state, and county put in to finance the dome. Plus, the Post-Dispatch makes no mention of the annual maintenance costs of the dome, which totaled $7 million last year and are projected to run between $5-9 million going forward.

I like football and want the Rams to stay in Saint Louis, but the only way I want to pay for them is by buying a ticket on game day. Giving further subsidies to the Rams will not be a boon to the local economy (which the editorial board, to its credit, recognizes), and it probably will end up being a net loss for taxpayers.

April 17, 2015

What Does It Mean to “Have Health Care”?

This question has come into sharp focus just five years after the Affordable Care Act’s (ACA) passage. Does it mean having insurance? Or does it mean having accessible, affordable, and fundamentally personal care?

These may sound like philosophical questions, but the answers have very real consequences, as this story in the New York Times shows.

Alison Chavez, 36, who is self-employed, signed up for a marketplace plan in October 2013 that she hoped would be an improvement on her previous plan. She had recently been given a diagnosis of breast cancer and was just beginning therapy, so she was careful to choose a policy on the Covered California marketplace that included her physicians.

But in March, while in the middle of treatment, she was notified that several of her doctors and the hospital were leaving the plan’s network. She was forced to postpone a surgery as she scrambled to buy a new commercial policy that included her doctors. “I’ve been through hell and back, but I came out alive and kicking (just broke),” she wrote in an email.

Obamacare tries to treat the symptoms of a sick American health care system—the rising cost of insurance—but it doesn’t really treat the underlying sickness, the rising cost of care. And that’s ultimately what we expect when we “have health care”: care. It’s just not necessarily what people receive under the ACA.

In that context, it’s understandable that many Americans are looking for alternative care models that meet their needs, not the needs of a government bureaucrat. The “direct care” model is one of the most promising. The direct care model is simple; for a set fee, patients and doctors can contract for health care services. These care “subscriptions” guarantee access to a doctor of the patient’s choosing, oftentimes because the doctor is limiting the number of total patients he or she will take over that period. Instead of paying for insurance and getting poor care or no care at all, patients pay for care and receive . . . care. Imagine that.

An article published in Time Magazine late last year sums up what makes direct care arrangements attractive.

The driving insight here is that primary care and specialized care have two very different missions. Americans need more of the first so they’ll need less of the second. And each requires a different business model. Primary care should be paid for directly, because that’s the easiest and most efficient way to purchase a service that everyone should be buying and using. By contrast, specialty care and hospitalizations—which would be covered by traditional insurance–are expenses we all prefer to avoid. Car insurance doesn’t cover oil changes, and homeowners’ insurance doesn’t cover house paint. So why should insurance pay for your annual checkup or your kid’s strep swab? [Emphasis mine]

You can think of it as “a la carte care” or “concierge care,” or something else, but it is indisputably care—care that the patient has chosen and can actually access. The potential for direct care extends even to more specialized care, too. At the Surgery Center of Oklahoma (SCO), the surgeons post the prices of their services online, with prices oftentimes a fraction of what other hospitals and insurance companies charge patients. This 2012 video from Reason TV explains the lower-cost, and arguably more personal, SCO model.

It is no wonder several proposals now floating around the Missouri Legislature aim not only to protect direct care arrangements, but also to facilitate them. One proposal would insulate direct care arrangements from undue bureaucratic interference; another would initiate a pilot program to make direct care available to the poor. Both are well worth the consideration of Missouri legislators, especially before the legislature’s session comes to a close next month.

Direct care has the potential to help patients like Alison find and keep the doctors they want—and not have that relationship jeopardized by some middleman insurance relationship. Amidst all the problems of America’s post-Obamacare medical system, direct care represents a bright shining possibility for a better model for our health care: one that puts the patient first, not the government.

Blame It On the MTC

Traveling can be stressful. I’m usually comforted when the airplane safely touches down at my final destination, especially when it’s at Lambert International Airport. Unfortunately, Saint Louis cabs can add to the stress and deplete the pocketbook.

This past week, when my flight into Saint Louis was over an hour and a half delayed, I realized I would have to catch a cab home. I usually can persuade my friends to pick me up by offering them Starbucks, but since my flight landed at 1:00 a.m. no one was able to pick me up. With MetroLink stopping service at 12:57 p.m., I was left with no other choice than to get a cab ride back to my apartment in Midtown. After collecting my bags, I went to the taxi stand to find only one company offering cab services. After a 15-mile ride to my apartment, I was stuck with a $44.14 cab fare.

Ride_RequestRidesharing companies like Uber and Lyft operate out of cities like San Francisco and Chicago at much more competitive rates. San Francisco even offers UberPool, which matches you with other riders heading in the same direction with the fare split among several riders.

However, since I live in Saint Louis, a city that is inhospitable to innovative and competitive ridesharing companies, I was unable to seek an affordable option.

The Metropolitan Taxicab Commission (MTC) is a regulatory body meant to protect the consumer. Instead, they protect the cab companies who profit from anti-competitive regulations, while consumers are left without options that are prevalent in a competitive market.

Looking through the ridiculous regulations of the MTC’s code, cab companies picking up customers from the airport must obtain a permit and give one dollar for every fare to the MTC. At this time, the MTC has only granted permits to seven cab companies. With limits on the number of permits made available, cab companies are shielded from meaningful competition and can set prices that would be too high in a market with free entry.

I hope the next time I fly into Saint Louis, UberX or Lyft will be an option because I cannot afford many more $45 cab rides.

SEMO May Embrace All-You-Can-Eat Education

Funnyman Owen Wilson describes the University of Phoenix as “the Harvard of Internet colleges” during an interview with Google in the film, The Internship.

“That reputation hasn’t made it out here,” responds the Google executive.

While online universities haven’t exactly obtained an “Ivy league” status, they certainly are impacting the education market.

Massive Open Online Courses (MOOC), such as Udacity and edX, provide free access to lectures, readings, and coursework. Participants can receive a certification or credit, which may be used for educational or professional purposes. In January, San Jose State announced a partnership with Udacity to offer remedial courses to incoming freshmen.

Last week, Southeast Missouri State University (SEMO) announced it would explore another type of online model, competency-based education. The model is based on Western Governors University (WGU), which is basically “all-you-can-eat.” Students pay one flat rate per term. This allows students to skip ahead by testing out of modules. It would be possible to earn a degree in one year for under $6,000.

wgu

While the quality of these programs and the acceptance by employers is debatable, MOOCs and competency-based programs are competition for state universities like SEMO and San Jose, who have had to adapt to attract students looking for a flexible, low-cost college experience.

April 16, 2015

Tax Foundation: Missouri’s Sales Taxes Still Well Above Average

Last year, I wrote in Forbes about whether Missouri is a “low tax state.” (It isn’t.) I explored how Missouri compared to other states on a variety of taxes. At the time, by the Tax Foundation’s metrics, Missouri’s combined state and local sales taxes ranked 14th highest in the country.

This finding probably surprised a few Missourians, but it shouldn’t. Missouri’s state sales tax may be relatively low at 4.225 percent, but locally imposed sales taxes nearly double the average sales tax paid in Missouri stores. This includes extra sales taxes in special taxing districts like Kansas City’s Power & Light District, which can pump the sales taxes actually paid by consumers to well over 10 percent. These sales taxes are, of course, in addition to the state’s income and property taxes, which aren’t exactly low either. This is why Missouri isn’t a “low tax state.”

The Tax Foundation released its 2015 sales tax rankings, and . . . well . . . Missouri still ranks 14th at a rate of 7.81 percent, well ahead of 29th-ranked Florida (6.65 percent), which, of course, doesn’t have an income tax. The Tax Foundation’s report makes special mention of the failure of Missouri’s transportation sales tax last year, which would have added another three-quarters of a percent to the state’s already-high sales tax. Had Amendment 7 passed and bumped the state’s average sales tax to over 8.5 percent, chances are very good that Missouri would have jumped into the top 10 of high sales tax states, ahead of states like California (8.44 percent) and New York (8.48 percent). Missouri’s sales taxes are already bad; this year it is cold comfort to know that they could have been worse.

Missouri needs substantive, across-the-board tax relief. There’s still time for the legislature to act this year—at least on the income tax—but the clock is ticking.

Kansas City Builds by Digging Itself into Holes

We’ve written extensively about the money that Kansas City has been handing out to downtown developers. Every dollar they give away is one less for infrastructure and basic services. Proponents claim that this is all worth it because of the revitalization of downtown. (Other observers, such as the Kansas City Business Journal, seem more cautious.) If the handouts of the past have been so successful, we should be able to sit back and watch all the private economic development dollars roll in. Yet despite claims of success, Kansas City is still giving away money.

  • Cordish, the company that brought us the Power & Light District then sued to lower their county property taxes, says that the downtown investment has been a success! But apparently the success wasn’t great enough to forgo further subsidies for two more residential buildings.
  • The Port Authority in Kansas City recently announced that they will be using public dollars to subsidize the construction of luxury residential condominiums along Kansas City’s riverfront. There is great demand they say, but apparently not enough to avoid the use of public underwriting.
  • A Crossroads hotel has received TIF subsidies, and an apartment building in the same area is receiving a property tax abatement and a $1 million exemption in sales taxes.

When will the public subsidies end? How do we know when we’re done? Is there any incentive for developers to say they do not need public subsidies? (The answer to that last question is no.) This is important because every subsidy means less money for city and county services; every abatement means less money for schools, less money for libraries. Right now, at least $93 million of city revenue is redirected each year to these developers. That doesn’t include the new projects for Cordish, Burns & McDonnell, and Cerner. Developers shouldn’t be encouraged to build skyscrapers while digging taxpayers into a hole.

What Public Schools Can Learn from Homeschool Parents

In March, dozens of families attended the Greater Saint Louis Home Educators Expo. The discussions led by parents, former educators, and homeschool alumni were an echo of what public school teachers have rallied for since the establishment of standardized testing—more creativity in education.

hands

Much like public school teachers, parents must ensure children receive a well-rounded education, but the difference is that parents are able to spend more time exploring their children’s interests.

“I want to help you love this,” Diana Waring explained to her children about her approach to educating at home.

Waring relayed her friend Beverly’s story.

Beverly was a mother who homeschooled her two boys. Lacking a college degree, she was afraid she would not be able to properly educate her children. One day, Beverly took her sons to the public library to pick out books that interested them. The boys gravitated toward cartoons. At home, they spent time creating their own drawings using homemade equipment. They caught the attention of a Disney cartoonist, who was amazed at what the boys were able to do on their own. Chris and Allan Miller are now professional graphic artists.

If the Miller brothers had been educated in a traditional school, certainly they would have been taught by a teacher with a college degree or higher, but would their creative interests have been fostered?

In Missouri, homeschool parents are directed to keep records of their children’s studies, much like the plan books teachers keep, but unless there is an issue—the state does not actively regulate what occurs inside the home environment. This freedom allows parents to teach in a stress-free atmosphere.

Often, homeschoolers are viewed with suspicion by traditional educators, but they shouldn’t be. Instead, officials should be looking for ways to provide a customized educational experience, like the homeschool experience of Chris and Allan Miller, for every child. We could start by creating an Education Savings Account program and empowering students with access to course choice.

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