Wichita city hall

Public opinion on Wichita sales tax

As Wichita prepares to debate the desirability of a sales tax increase, a public opinion poll finds little support for the tax and the city’s plans.

Wichita City Hall 2014-08-05 11In April Kansas Policy Institute commissioned SurveyUSA to conduct a scientific poll concerning current topics in Wichita. The press release from KPI, along with a link to the complete survey results, is available at Poll: Wichitans don’t want sales tax increase. In summary:

  • Only 28% say the city has been spending efficiently.
  • Only 34% agree with the idea of local governments using taxpayer money to provide subsidies to certain businesses for economic development.
  • When asked whether they would personally pay a higher sales tax to pay for certain things, there was majority support for securing a long term water source, maintaining existing infrastructure, and building new infrastructure, but one-third or less would pay a higher sales tax for business incentives, developing downtown Wichita, and expanding or renovating convention spaces.
  • 78% said that to fund existing infrastructure, build new infrastructure, and secure a long-term water source Wichita should fund those items by adjusting spending and being more efficient rather than raising taxes.

More detail on these results follows.

Is city spending efficiently?

The first question the survey asked was “In the past few years, have Wichita city officials used taxpayer money efficiently? Or inefficiently?” Following are the results for everyone, and then divided by political party and political ideology.

Overall, 58 percent believe city spending was inefficient, compared to 28 percent believing spending was efficient.

The results are surprisingly consistent. An exception is that political independents strongly believed that city spending was inefficient. Those identifying as liberal were more likely to say that city spending was inefficient.

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Taxes for subsidies for economic development

About one-third of voters polled support local governments using taxpayer money to provide subsidies to certain businesses for economic development.

The second question the survey asked was “In general, do you agree? Or disagree? With the idea of local governments using taxpayer money to provide subsidies to certain businesses for economic development?” Following are the results for everyone, and then divided by political party and political ideology.

Overall, 55 percent disagreed with using taxpayer money to provide subsidies to certain businesses for economic development. 34 percent agreed.

The results are fairly consistent across political party and ideology, although Republicans are somewhat more likely to agree with using taxpayer funds for economic development incentives, as are those who self-identify as political moderates.

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Voters willing to pay for fundamentals

Voters are willing to pay a higher sales tax for fundamentals like infrastructure and water supply, and less willing for business incentives, downtown development, and convention centers.

In a series of questions asking if Wichita voters would be willing to pay a higher sales tax to provide certain services, a pattern appeared: Voters are willing to pay for things that are fundamental in nature, and less willing to pay for others.

As can be seen in the nearby chart, voters are willing to pay for infrastructure, and more willing to pay for maintenance of existing infrastructure than for new infrastructure. Voters are most willing to pay for securing a long-term water source.

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For business incentives, downtown development, and convention centers, Wichita voters express less willingness to pay higher sales tax to fund these items.

For the first three items, the average was 68 percent of voters willing to pay a higher sales tax. For the last three, the average is 30 percent.

Following is the complete text of the questions:

Would you personally be willing to pay a higher sales tax in the city of Wichita to fund incentives to businesses expanding in Wichita or moving here from other states?

Would you personally be willing to pay a higher sales tax in the city of Wichita to fund maintenance work on existing infrastructure, such as sewers and roads?

Would you personally be willing to pay a higher sales tax in the city of Wichita to fund new infrastructure, such as new highways and passenger rail connections?

Would you personally be willing to pay a higher sales tax in the city of Wichita to continue developing downtown Wichita with apartments, businesses, and entertainment destinations?

Would you personally be willing to pay a higher sales tax in the city of Wichita to expand or renovate convention spaces, such as the Hyatt Hotel and Century II?

Would you personally be willing to pay a higher sales tax in the city of Wichita to secure a long-term water source?

How to pay for infrastructure

Wichita voters prefer adjusting spending, becoming more efficient, using public-private partnerships, and privatization to raising taxes.

Question nine asked how Wichita voters preferred paying for new government spending: “To fund existing infrastructure, build new infrastructure, and secure a long-term water source should Wichita fund those items by adjusting spending and being more efficient rather than raising taxes?”

Overall, 78 percent of Wichita voters answered “Yes,” meaning they prefer that Wichita adjust spending and become more efficient. 12 percent answered “No,” meaning they were in favor of raising taxes instead.

A related question was “Should Wichita fund those items through public-private partnerships, or privatization, rather than raising taxes?”

Overall, 65 percent answered “Yes,” meaning they prefer public-private partnerships, or privatization. 25 percent answered “No,” indicating a preference for raising taxes.

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Former Wichita mayor: Where is the water?

Former Wichita mayor Bob Knight explains that when he left office in 2003, we were assured we had water for 50 years. What has happened?

Knight also reminded the audience that there is a Sedgwick County sales tax, part of which is divided among cities like Wichita. He also took the Visioneering planning process to task. In the past ten years, he wondered why no one asked about a city without water.

From a forum at Wichita Pachyderm Club on July 22, 2014. View below, or click here to view at YouTube.

Kansas Capitol

SEC orders Kansas to stop doing what it did under Sebelius and Parkinson

The Securities and Exchange Commission found that Kansas mislead bond investors. It ordered the state to implement reforms, which it has.

Kansas Capitol
Kansas Capitol
According to a press release from the Securities and Exchange Commission, the State of Kansas “failed to disclose that the state’s pension system was significantly underfunded, and the unfunded pension liability created a repayment risk for investors in those bonds.”

This refers to a series of eight debt, or bond, issues in 2009 and 2010. Collectively they were worth $273 million. The SEC press release explains:

According to the SEC’s order against Kansas, the series of bond offerings were issued through the Kansas Development Finance Authority (KDFA) on behalf of the state and its agencies. According to one study at the time, the Kansas Public Employees Retirement System (KPERS) was the second-most underfunded statewide public pension system in the nation. In the offering documents for the bonds, however, Kansas did not disclose the existence of the significant unfunded liability in KPERS. Nor did the documents describe the effect of such an unfunded liability on the risk of non-appropriation of debt service payments by the Kansas state legislature. The SEC’s investigation found that the failure to disclose this material information resulted from insufficient procedures and poor communications between the KDFA and the Kansas Department of Administration, which provided the KDFA with the information to include in the offering materials.

“Kansas failed to adequately disclose its multi-billion-dollar pension liability in bond offering documents, leaving investors with an incomplete picture of the state’s finances and its ability to repay the bonds amid competing strains on the state budget,” said LeeAnn Ghazil Gaunt, chief of the SEC Enforcement Division’s Municipal Securities and Public Pensions Unit. “In determining the settlement, the Commission considered Kansas’s significant remedial actions to mitigate these issues as well as the cooperation of state officials with SEC staff during the investigation.”

In other words, Kansas had a grossly underfunded state pension system, and did not adequately disclose that to potential purchasers of new state debt. The full text of the order gives more detail as to how Kansas was an outlier among the states, not only in the magnitude of its problem, but in its lack of disclosure:

Kansas’s practice of not disclosing the underfunded status of KPERS became increasingly inconsistent with the practice of most states issuing municipal securities, which generally provided disclosure in their CAFRs or the body of their Official Statements regarding the financial health of their pension funds. By 2008, with the exception of Kansas, the overwhelming majority of the Official Statements for state-level bond issuances at a minimum disclosed the UAAL or funded ratios of the associated state-level pension plans, particularly if those plans were significantly underfunded.

Here’s what this means to public policy:

First, the Kansas Public Employee Retirement System (KPERS) was in terrible financial condition, compared to other states.

Second, Kansas did not adequately disclose that to potential investors, according to the SEC.

Third, reforms have been implement to the satisfaction of the SEC.

Kansas Department of Administration logoFourth, the SEC was quite critical of the Kansas Department of Administration, or KDA.

Fifth, the head of KDA at the time was Duane Goossen. On his blog his biography contains: “[Goossen] was appointed by Sebelius in 2004 to concurrently serve as Secretary of the Kansas Department of Administration, the agency that manages state facilities, accounting, information services and employee programs.”

Although retired from state government, Goossen maintained a role in public affairs as former Vice President for Fiscal and Health Policy at Kansas Health Institute, and now authors a blog concerning issues related to the Kansas budget.

More reporting on this matter from Kansas Watchdog is at SEC charges Kansas with fraud for Parkinson-era omissions.

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What is truth on education finance in Kansas?

From Kansas Policy Institute.

Duane Goossen distorts the truth on education finance

By Dave Trabert

Former state budget director Duane Goossen’s recent blog post entitled “Woe to Education Finance” is yet another example of data being deliberately distorted or falsified for political gain. Mr. Goossen served as budget director under governors Graves, Sebelius and Parkinson and has been a vocal critic of anything even hinting at efficient government…let alone lower tax burdens. Indeed, his post concludes, “The fallout from the governor’s tax plan has made investment in Kansas public schools impossible.” That false claim is completely debunked on page 60 of the Division of Budget’s FY 2015 Comparison Report, showing that state funding of schools will increase by $176 million this year (not counting property taxes that will finally be recorded properly as state aid).

And that’s just the beginning of the false claims and distortions.

Goossen: “Costs for supplies, electricity, transportation, and teachers’ salaries are all increasing. But for the coming academic year, schools must cover those growing expenses with $548 less for each student than they had 6 years ago.”

Table 1 shows the most recent estimate of per-pupil spending for the year just ended. Even if the portion recorded as Federal and Local is unchanged this year, the addition of $176 million will take per-pupil expenditures to roughly $13,411. That would be $751 more per-pupil than six years ago … not $548 less.  Mr. Goossen is only telling a partial story, as shown in the next section.

What’s more, to the extent that costs are increasing for schools, they are also increasing for individual families and businesses. Mr. Goossen is essentially demanding that taxpayers give government a raise when they have no such power with their own paychecks and are facing rising costs as well. His demand for more money also presumes that districts are organized and operating efficiently, which we know is not true according to multiple Legislative Post Audit studies.

Note: The KSDE estimate for 2013-14 was provided before the addition of funding during the recent legislative session, so it is possible the actual spending will be higher than the estimate. It should also be noted that KPI’s estimate of 2014-15 utilizes data from Budget and KSDE and that there could be reporting differences between those entities that would affect the Total. This note also applies to Table 5.

Goossen: “In the 2008/2009 school year, school budgets were based on a per pupil amount of $4,400 — the high point for school finance in Kansas. For the upcoming 2014/2015 school year, lawmakers budgeted $3,852.”

Mr. Goossen writes this as though the amounts listed are all that is provided to schools. In reality, he is talking only about Base State Aid Per Pupil, which is just the beginning point for a portion of school funding. As shown above, total aid per-pupil is about three times greater than Base and that total state aid that is more than double the Base. He deliberately ignores funding that doesn’t suit his preferred narrative.

Goossen: “At its root, a school district’s budget is determined by an amount per pupil multiplied by the number of students. School districts can then add on a “local option budget” of up to 33 percent of the basic budget. Schools must run their classrooms and education programs within that total.”

“Deceptive” would be a generous interpretation of Mr. Goossen’s representation in this regard.  As shown in Table 2, he is grossly understating total aid to school districts. Multiplying Base State Aid Per Pupil times Weighted Enrollment produces an amount roughly equal to Base State Aid plus extra money provided through many weightings (At-Risk, Bilingual, Transportation, etc.); adding Local Option Budget money would lead on to believe that school funding for 2013 was about $3.2 billion.  The actual total, according to the Kansas Department of Education, was $5.8 billion.

 

Saying “schools must run their classrooms and education programs within that total” is the caveat that saves his representation from being an outright false claim. There is no official definition of “education programs” but he later provides a few examples of what he may exclude from “education programs,” saying “… school districts also receive funds for to pay for other things: the Kansas Public Employees Retirement System (KPERS), special education, school building construction, capital outlay, food service, etc. However, that funding must be used for its intended purpose.”

It is true that money for the listed spending categories must generally be used for those purposes, but his “etc.” contains a lot of unrestricted funding, the most notable of which, Supplemental General State Aid, was $339 million for 2013 and is budgeted to be $448.5 million this year.

Mr. Goossen and other “just spend more” proponents loudly proclaimed over the last few years that the Legislature should raise Base State Aid in accordance with the Supreme Court settlement over Montoy. But now that the Supreme Court has effectively reversed that ruling and says that all funding, including State, Federal, Local and even KPERS must be counted toward adequacy, they have a decidedly different — and quite hypocritical — position. They still cling to Base State Aid as their touchstone and refuse to acknowledge that, as the Supreme Court says, “… a stable retirement system is a factor in attracting and retaining quality educators — a key to providing an adequate education.”

It is also worth noting that school districts say nicer facilities lead to better student outcomes when they want more money for that purpose, but facilities suddenly don’t count when they want other money. Spending more money on facilities also makes less available for other functions, as does having district employees perform functions that could be privatized, which forces more money to be spent on KPERS.

Goossen:  “Costs for supplies, electricity, transportation, and teachers’ salaries are all increasing. But for the coming academic year, schools must cover those growing expenses with $548 less for each student than they had 6 years ago.”

The false claim about per-pupil spending being down was already debunked but Goossen also implies here that Base State Aid Per Pupil is all that schools receive to pay for supplies, electricity, transportation and teachers’ salaries, which of course is not true. Table 3 highlights other major unrestricted funding sources that Mr. Goossen and others routinely ignore in their pursuit of more money.

At-Risk funding does carry some restrictions but that funding is not required to be used for the exclusive benefit of students who generate the funding. For example, the KSDE At-Risk Guidelines say “At-Risk funds can be used to support classroom teacher salaries to the proportional percent identified at-risk students.” The guidelines merely require that at-risk students be present in the classroom.

Table 4 shows spending from the K-12 At-Risk Fund in 2013 (another $19.8 million was spent from the At-Risk 4 year-old Fund, which can be used for K-12), including money spent on each category that Mr. Goossen implied could only be funded with Base State Aid dollars. Most of the salary expenditure was for regular classroom teachers but money was also used to pay for custodians, support staff and administration.

Goossen: “The per-pupil figure has dropped because state funding has dropped.”

Table 1 shows that per-pupil funding of schools has increased. Table 5 shows that state funding has also increased each year since 2011 and is budgeted to set a new record this year. Again, Mr. Goossen does not allow the facts to get in the way of his political narrative.

Goossen: “Is the state in a position to add money to push the per-pupil amount up?

Set aside the fact that that just happened. The real issue here is that Mr. Goossen is posing the wrong question. “Just spend more” is simply about institutional demand for more money and completely disregards the educational needs of individual students. Political demand for more money also ignores these realities:

  • Every Legislative Post Audit report says districts are not operating efficiently.
  • $430 million of education funding was used to increase district cash reserves since 2005.
  • Student achievement on independent national tests is relatively unchanged despite large funding increases over the last decade.

One must wonder how much of Kansas’ and the nation’s student achievement woes are attributable to political self-interest and putting a higher priority on institutions than on the needs of individual students.

Wichita Transit Center, August 11, 2014, 6:13 pm

Before asking for more taxes, Wichita should stop wasting what it has

Voters should ask that Wichita stop blatant and avoidable waste before approving additional taxes.

Wichita Transit Center, August 11, 2014, 6:13 pm
Wichita Transit Center, August 11, 2014, 6:13 pm
At 6:13 pm on August 11, 2014, a full two hours and nine minutes before sunset, with Wichita bathed in golden sunshine, the outside lights are on at the Wichita Transit Center. I wasn’t surprised to see this. These lights were probably burning and wasting electricity all day long.

While waste like this is unacceptable, it is all the more intolerable considering that Wichita’s transit system is out of money. The city council has recommended that Wichitans vote for higher sales taxes, part of which would fund the transit system. That would include, I suppose, funding the wasteful spending on burning street lights on sunny days. This is indicative of the attitude of the city as explained in Forget the vampires. Let’s tackle the real monsters.

Wichita Transit Center, July 11, 2104. Some of the bulbs are apparently burnt out.
Wichita Transit Center, July 11, 2104. Some of the bulbs are apparently burnt out.
You have to wonder: If the city’s transit department is, apparently, not concerned about blatant waste like this — waste that anyone can easily observe — what is it doing about waste that can’t easily be seen?

So before considering any extra funding for Wichita transit, let’s ask that it stop wasteful spending like these lights. Even better, before sending any funding, let’s stop this waste.

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Kansas base state aid is only a part of spending

Using base state aid per pupil as the only measure of school funding leads to an incomplete understanding of school spending in Kansas.

Much of the discussion surrounding school funding in Kansas has centered around base state aid per pupil. It’s the starting point for the Kansas school finance formula, and therefore an important number.

Base state aid per pupil has fallen in recent years. Public school spending advocates want Kansans to be aware of only this fact. For them, only this number is important.

But Kansas schools have much more to spend than just base state aid.

Ratios of school spending to base state aid.
Ratios of school spending to base state aid.
In the last school year base state aid per pupil was $3,838. But in that year total spending funded by Kansas state sources was $6,984 per pupil, or 1.82 times base state aid. Adding local and federal sources, spending was $12,781 per student, or 3.33 times base state aid.

As shown in the nearby chart, there has been a steady increase in measures of school spending when compared to base state aid.

Considering Kansas state spending only, the ratio of state spending to base state aid was 1.10 in 1998. By 2013 that ratio had risen to 1.82, an increase of 65 percent for the ratio.

For total spending, the ratio rose from 1.86 to 3.33 over the same period, an increase of 79 percent.

What’s important to realize is that the nature of Kansas school funding has changed in a way that makes base state aid per pupil less important as a measure of school spending.

Wichita City Library, 1965

What incentives can Wichita offer?

Wichita government leaders complain that Wichita can’t compete in economic development with other cities and states because the budget for incentives is too small. But when making this argument, these officials don’t include all incentives that are available.

In making the case for an economic development fund paid for by a sales tax, the argument goes like this: “Wichita and Sedgwick County compete conservatively with incentives. The City of Wichita and Sedgwick County have a total of $1.65 million in new uncommitted funds for cash incentives this year with any unused money going back to the general fund.” (Will Wichita Accelerate Competition for Primary Jobs?, presentation made to Wichita city council.)

This statement is true only if we use a very narrow definition of the word “incentive.” By any reasonable definition, Wichita has many incentives worth much more than what is claimed by Wichita economic development officials and politicians.

In fact, the report cited above contains contradictory information about the amounts that are available for economic development incentives in Wichita. Here is an example: “The $4.5 million PEAK program incentive from the Kansas Department of Commerce was an important factor in keeping NetApp in Wichita. Locally we were able to provide $836,000 in incentives.”

So with an incentives budget of $1.65 million, a Wichita company received $5.3 million in incentives. Some of that, like the PEAK incentive, is paid over a period of years. But that amount doesn’t begin to describe the benefits NetApp received.

Available incentive programs

Kansas Department of Commerce logoA letter to NetApp from the Kansas Department of Commerce laid out the potential benefits from the state. As detailed in the letter, the programs with potential dollar amounts are:

  • Promoting Employment Across Kansas (PEAK), up to $7,705,535
  • Kansas Industrial Training with PEAK, up to $160,800
  • sales tax savings of $6,880,000
  • personal property tax exemption, $11,913,682
  • High Performance Incentive Program (HPIP), $8,500,000

The total of these is $35,160,017. Some of these benefits are paid over a period of years. The PEAK benefits are payable over seven years, according to the letter, so that’s about $1.1 million per year. These are potential benefits; the company may not actually qualify for and receive this entire amount. But it’s what the state offered.

It’s true that some of these programs are not cash incentives of the type Wichita complains of lacking. But if a company is going to make purchases, and the state says you can skip paying sales tax on the purchases — well, that’s as good as cash. $6,880,000 in the case of NetApp, according to the Kansas Department of Commerce.

Local tax exemptions

Besides sales tax exemptions, the city has other types of tax exemptions it regularly offers. These exemptions can have substantial value. In 2008 as Drury contemplated Broadview Hotel 2013-07-09 020purchasing the Broadview Hotel, the city allowed the hotel to escape paying much of the taxes that the rest of us have to pay. According to city information, Drury planned to spend $22,797,750 on the hotel. If we use this as the appraised value for the property when it is complete, the annual property taxes due for this property would be $22,797,750 times .25 times 126.323 divided by 1000, or $719,970. This calculation may be rough, but it gives us an approximation of the annual operating subsidy being given to this hotel for the next ten years.

It's important for citizens to know incentivesWhen Boeing announced in 2012 that it was closing its Wichita operations, city leaders complained that Boeing was leaving Wichita even though it had received many incentives. From 1979 to 2007, Boeing received tax abatements through the industrial revenue bond process worth $658 million, according to a compilation provided by the City of Wichita. (This is not money the city lent or gave to Boeing. IRBs provide a vehicle for granting tax abatements or exemptions.) At the time, city officials said the average amount of bonds was $120 million per year. With Wichita commercial property tax rates at 3.008 percent ($30.08 per $1,000 of appraised value), according to GWEDC, that’s a tax savings of around $3.6 million per year. To Boeing, that’s as good as receiving cash year after year.

Tax increment financing

In 2013 Wichita approved a package benefiting Exchange Place in downtown. Here’s what the city council agenda packet gives as the sources of financing for this project.

HUD Loan Amount         $29,087,700
Private Equity            5,652,254
Tax Credit Equity        19,370,395
TIF Proceeds             12,500,000
Total Sources of Funds  $66,610,349

TIF, or tax increment financing, diverts future increased tax revenues away from their normal uses and diverts them back to the project. In this case, the city will borrow $12,500,000 by selling bonds. It will give this money to the developer. Then, TIF proceeds will be used to repay these bonds.

Some will argue that TIF isn’t really an incentive. The owners of the property will have to pay their property taxes, just like any other property owner. But for this project, the property taxes are used for the project’s own benefit instead of funding the costs of city government. This project gets to spend $12.5 million of its property tax payments on itself, rather than funding the costs of Wichita city government.

Tax credits

Ambassador Hotel sign 2014-03-07Note that the sources of financing for the Exchange Place project includes “Tax Credit Equity.” Here’s an example of another downtown project, the Ambassador Hotel, and the incentive package the city prepared:

  • $3,325,000 in tax increment financing.
  • $4,245,000 in city funding under the capital improvement plan (CIP), to build parking for the hotel.
  • $3,800,000 in tax credits from the State of Kansas.
  • $3,500,000 in tax credits from the U.S. government.
  • $537,075 in sales tax exemptions on purchases during the construction and furnishing of the hotel.
  • $60,000 per year in community improvement district (CID) sales tax. The hotel charges an extra two cents per dollar sales tax, which the state returns to the hotel.
  • $127,499 per year (estimated) in rental revenue to the developers from a sweetheart lease deal.
  • Participation in Wichita’s facade improvement program, which provides special assessment financing that is repaid.

All told, this project was slated to receive $15,407,075 in taxpayer funds to get started, with additional funds provided annually.

The tax credits for this project are historic preservation tax credits. They have the same economic impact as a cash payment. The federal tax credits are available across the country, while the Kansas tax credits, of course, are a state program. In this case the hotel developers received an upfront payment of $3.8 million from the state in a form that’s as good as cash.

STAR bonds

Last year a STAR bonds district in northeast Wichita was approved to receive $31,570,785 from these bonds. The STAR bonds are paid off with sales tax revenue that would otherwise go to the state and overlapping jurisdictions. This is sales tax collected from the business’s customers, and doesn’t cost the business anything.

Adding it up

This list is not complete. There are other programs and other beneficiaries of economic development subsidies. With this in mind, it is disingenuous for city and other officials to use the $1.65 million figure as though it was all Wichita had to offer. It’s important for citizens to know that contrary to the claims of officials, Wichita has many economic development incentive programs available, and some have substantial value to the recipients, with corresponding cost to the city and other jurisdictions.

WichitaLiberty.TV July 2, 2014

WichitaLiberty.TV: Issues surrounding the Wichita sales tax and airport

In this episode of WichitaLiberty.TV: Who would be most harmed by the proposed Wichita sales tax? Also: A look at updated airport statistics, and what the city could do if it wants to pass the sales tax. View below, or click here to view at YouTube. Episode 55, broadcast August 17, 2014.

Kansas School Finance Formula, from Kansas Policy Institute, August 2014

Kansas school finance formula explained

From Kansas Policy Institute.

Kansas Policy Institute presents the 2014-15 student weighted funding formula

By David Dorsey

The updated version of the formula that will be used by the Kansas State Department of Education to determine student weighting in the coming school year is presented below. This complex formula is the basis to adjust (increase) the number of “students” in a school district for state funding purposes.

Dissecting this complicated formula reveals those factors the state recognizes that require additional money.

Highlights include:

  • Up to 13 different factors decide what the “real” student count will be for a particular district*.
  • Seven factors (at-risk, vocational ed, bilingual ed, high-density at-risk, new facilities, high enrollment, and virtual students weighting) are calculated using percentages of student enrollment.
  • Four factors apply to all 286 districts. They include:
    • at-risk students (those who qualify for free lunch)
    • low or high student enrollment
    • special education weighting
    • transportation
  • The others vary in applicability from the vocational education weighting (267 districts in 2013-14) to declining enrollment weighting (2 districts in 2013-14).

Once all applicable factors are determined, the total weighted number of students is multiplied by the Base State Aid Per Pupil (BSAPP — $3,838 in 2013-14 and $3,852 in 2014-15) to calculate that part of the amount of state aid a district receives.

These weightings are no small affair. For example, in the Elkhart School District (USD218) last year, the weighting factors increased the student count from 502.6 (actual enrollment) to 1,668. 2, a 231.9% increase. In dollar terms, that increased Elkhart’s BSAPP funding by $4,473,573 from $1,928,979 to $6,402,552. That’s an effective BSAPP of $12,739! And that’s not an isolated case. Nearly half of Kansas’s 286 school districts realized at least a doubling of the effective BSAPP due to weighting.

People in the education establishment are quick to lament that BSAPP is down from the pre-recession figure of $4,400 in 2008-09 to the current $3,852 for the 2015 fiscal year. However, you never hear them speak of the all the weightings that significantly add to the dollars actually received. In fact, when all students statewide are included, the real BSAPP for 2013-14 was $6,640. In a recent Lawrence Journal-World article it was reported that Lawrence Superintendent Rick Doll said the district is still suffering from cuts in base state aid. According to Doll, “We are operating basically at about 1999 school funding levels.” That’s not even close to being accurate. According to KSDE, state funding per pupil in 1999 was $4,533. That figure rose to an estimated $7,052 per pupil for last school year. Local support has more than doubled since ’99 (from $2,238 to $4,809 per pupil). Likewise for federal support.

It is important to understand what a difference in the level of funding the weighting of students adds. Last school year, the weightings provided $1.3 billion over and above BSAPP to the state’s 286 districts. But some Kansas politicians, particularly those more interested in protecting institutions than serving children, and the education establishment don’t like to talk about that part of state aid to education. Instead, they like to focus only on the BSAPP figure. That’s why we hear statements made like Superintendent Doll’s.

If I were still a math teacher and they were my students, their homework assignment would be learn and understand this formula. And yes, it would be on the test.

*There is one change in the formula from the 2013-14 school year. The low-proficient, non-at-risk factor was removed during the 2014 legislative session.

Kansas School Finance Formula, from Kansas Policy Institute, August 2014
Kansas School Finance Formula, from Kansas Policy Institute, August 2014
WichitaLiberty.TV set 2014-04-29 01 800

Economic development in Wichita, one tale

In this excerpt from WichitaLiberty.TV: A look at a recent episode of economic development in Wichita, and what can we learn from that. View below, or click here to view at YouTube. Originally broadcast June 15, 2014.

For more on this issue, see A lesson for Wichita in economic development.

Additional cost of proposed Wichita sales tax as percent of after-tax income, by income quintile

Wichita sales tax hike would hit low income families hardest

Analysis of household expenditure data shows that a proposed sales tax in Wichita affects low income families in greatest proportion, confirming the regressive nature of sales taxes.

One of the criticisms of a sales tax is that it is regressive. That is, it affects low-income families in greatest proportion. This is an important consideration to explore, because in November Wichita voters will decide whether to create a new city sales tax of one cent per dollar. If enacted, the sales tax in Wichita would rise from 7.15 percent to 8.15 percent.

It’s an important issue because to hear some people talk, it seems as though they are saying the proposed tax is “one penny.” Anyone can afford that, they say. But the tax is an extra penny on each dollar spent, meaning that the cost of, say, fifty dollars of food at the grocery store increases by fifty cents, not one penny.

Further, we hear the sales tax spoken of as being a one percent increase. That’s true, if we mean a one percent increase in the cost of most things we buy. And one percent, after all, is just one percent. Not a big deal, people say. But considering the sales tax we pay, a relevant calculation is this: (8.15 – 7.15) / 7.15 = 14 percent. Which is to say, the amount of sales tax we pay will rise by 14 percent.

Click the table for a larger version.
Click the table for a larger version.
To explore the effect of the proposed sales tax on families of different incomes, I gathered data from the U.S. Census Bureau, specifically table 1101, which is “Quintiles of income before taxes: Annual expenditure means, shares, standard errors, and coefficient of variation, Consumer Expenditure Survey, 2012, (Selected Values).” This table divides families into five quintiles. It gives annual expenditures for each quintile in various categories. For each category, I judged whether it is subject to sales tax. For example, for housing, I indicated it is not subject to sales tax. This is not totally accurate, as some of the spending in this category may be for taxable items like maintenance and repair supplies. Food is subject to sales tax in Kansas, although low-income families may apply for a rebate of the tax. Despite these shortcomings, I feel this data gives us an approximation of the effect of the sales tax. (Click on the table to view a larger version, or see below for how to obtain the data.)

As you might imagine, as income rises, so does total taxable expenditures. Of interest, the percent of expenditures that are taxable is relatively constant across income levels.

Additional cost of proposed Wichita sales tax as percent of after-tax income, by income quintileAn important finding is the bottom line of the table, which shows the increase in cost due to the proposed sales tax as percent of income after taxes. This calculates the relative impact of the proposed sales tax increase as a percent of income. It is here that we expect to see the regressive nature of a sales tax appear. For all consumers, the increase in cost is 0.35 percent. For the lowest class of income, the increase in cost is 0.97 percent of income. It falls to 0.26 percent for the highest income class.

This means that the lowest income class of families experience an increase nearly four times the magnitude as do the highest income families, as a percentage of after-tax income. This is the regressive nature of sales taxes illustrated in numbers, and is something that Wichita policy makers and voters should consider.

I’ve made the data available as a Google Docs spreadsheet. Click here for access.

Kansas Capitol

Kansas budgeting “off the tops” is bad policy

From Kansas Policy Institute.

Budget “Off The Tops” Bad Policy

By Steve Anderson

Direct transfers of taxpayer money sent to a specific business or industry is always a tough sell to politicians, let alone the voting public. But, that is why some corporations pay lots of money to lobbyists. If we can’t get a company more revenue (via a taxpayer-funded payment) why don’t we lower their expenses via a tax loophole that lowers how much they pay in taxes?

These sort of special interest tax breaks come in a variety of different forms but the net effect of each is the same — revenues are diverted from the appropriation process and instead sent to some “special” group. A shrewd lobbyist will often make sure the program is funded in a way that their client(s) will receive their funding even if the statute is changed in the future. However, that should not preclude bringing these special interest deals to an end. This is especially important given that the reduction in tax rates will increase the impact of these programs on the revenue stream even as the state continues along the path to eliminating the individual income tax.

These transfer schemes are funded in a number of different ways that obscure the transaction from both the public and the appropriation process. For example, there are a number of these special deals that are funded by payroll withholding taxes. The payroll withholding exemptions are programs where the state abates collection of state income tax withheld on employee’s wages. The state then provides either a program or directly funds some benefit for the employer. These programs come in many forms and often are nearly impossible to find within the very complex tax and revenue reporting statements. In general these programs require relatively long commitments by the state of taxpayer funds. The discontinuance of these type of programs will not generally eliminate the programs immediately but it will create savings going forward that could be substantial to the maintenance of a stable fiscal environment and a more transparent tax code. It would also be a breach of trust, on some level, to yank away a promise made by the state to an entity or individual. But, that doesn’t mean we have to let these program exist into perpetuity.

Investments in Major Projects and Comprehensive Training (IMPACT)

IMPACT provides for major project investment to provide financial assistance to defray business costs. IMPACT uses withholding revenue for a direct funding source to pay for bonds issued by the state for projects. In fiscal year 2013 that percentage was 2% and the program expended $25,420,654 of funds that otherwise would have gone to the state coffers. The good news is that Kansas stopped issuing bonds in the IMPACT program effective Dec. 31, 2011. The bad news was it was replaced with other programs that are very similar. The IMPACT payments will extend on for a number of years in to the future because of the bond’s that funded those projects. This ability to bind future legislators and taxpayers to these sort of “deals” is, in and of itself, problematic but there is more damage done to the state of Kansas than just the direct cost of these bonds.

Bad policy like the type of special interest payment that IMPACT represents often have negative impacts in the future that are not foreseen at the time of their passage. For example, the IMPACT bonds were at the heart of the recent Moody’s down grade of the Kansas state bond rating. The IMPACT bond’s ratings were reviewed by Moody’s rating agency because the funding source to pay off the bonds — withholding taxes — was being reduced by a cut in the tax on wage earners in the state income tax rates. The media, which generally is not comprised of individuals with a financial background, reported that the change in the IMPACT bond ratings were caused by the broad tax cuts, which is only partially true. What the media in general did not report, at least not with the same enthusiasm as their portrayal of the impact of the income tax cuts, was that Moody’s noted the long running unfunded liabilities of the Kansas Public Employees Retirement System (KPERS) and the lack of spending cuts as key elements of their downgrade.

However, analysis of the IMPACT bond rating issues bring to light another important problem with these type of giveaways. Future legislators have their hands tied because their predecessors have committed future tax revenues in a manner that precludes the ability to bring an immediate cessation, or even partial reduction, in the special interest funding source without repercussions such as the recent bond rating issue.

Promoting Employment Across Kansas (PEAK)

The PEAK program allows companies that create 100 new jobs within a specified two-year period to retain 95% of employee withholding taxes for up to 10 years. Not surprisingly with such a generous incentive companies have grown its use rapidly going from $2.7 million in expenditures in 2010 to an estimated $12.5 million in 2012 years. The “cap” on this program going forward is: In FY 2014, the cap is $12 million. In FY 2015, the cap is $18 million, $24 million in FY 2016, $30 million in FY 2017, $36 million in FY 2018, and $42 million 2019. Immediately freezing the cap at the current level and eliminating the program going forward to prevent new obligations generates significant savings going forward for the state. This is giveaway is even more troubling when considering that a recent analysis from Kansas City’s Kauffman Foundation found that, “PEAK incentives recipients are statistically not more likely to generate new jobs than similar firms not receiving incentives.”

Kansas Bioscience Authority (KBA)

The KBA’s short lifespan is a microcosm of what can go wrong with the concept of dedicated directed funding. The lack of transparency created by bypassing the scrutiny of the appropriation process often leads to expenditures that generate headlines but don’t create economic growth.

The legislation that created the KBA produced a number of programs and funding streams. It also set the total funding limit to the authority over 15 years at almost $582 million. The funding was to be for a period of 15 years from the effective date of the establishment of the KBA and required the State Treasurer to annually pay 95% of withholding above the certified base, as certified by the Secretary of Revenue, on Kansas wages paid by bioscience employees to the bioscience development (code categories from NAISC) and investment fund of the KBA.

The amount of funding transferred to the KBA grew from almost $20 million in 2006 to nearly $36 million by 2008 before the creation of the annual funding cap of $35 million in 2009. Issues with operations and management emerged in 2011 which led to a forensic audit by an outside CPA firm. The audit pointed to a number of issues that led subsequent legislatures to reduce the Authority’s funding to $11.3 million in 2012, $6.3 million in 2013, and $4.0 million in 2014 (KBA funding history here). It is doubtful that the current Administration or legislatures would increase funding above current levels but the $35 million is still the statutory cap leaving open that possibility.
There is a secondary issue with KBA’s statutory cap caused by the treatment of these type of dedicated directed funding in the budgeting process. These statutory caps for entities like KBA are considered to be at their cap amount when forecasting future budgets. The $35 million of KBA statutory cap, for example, creates an illusion in fiscal impact statements issued by the Kansas Legislative Research Department (KLRD) because those statements show the full statutory amount of $35 million being spent every year for the five years they project. Based on the current trend line of KBA funding this will not happen and, instead, creates a significant overstatement of expenditures and helps create fiscal deficits where none may exist. These projections are used by legislators and the media and should strive to present as accurate a picture as possible of current and possible future realities. A more proper and accurate display of these type of funded programs for five year projections like KLRD produces would consider whether spending could be altered or removed completely. This should be reflected in either the actual amount shown, if there was a history of partial funding, or, at the very least, in a separate line item with a notation that the sum could be arbitrarily reduced or eliminated.

Job Creation Fund

Another of those dedicated directed funds is the Job Creation Fund (JCF). The Job Creation Program Fund or the “deal closing” fund, its more press-friendly moniker, lets the state, led by the Office of the Governor, make investments and extend incentives aimed at attracting or retaining businesses within a range of statutory guidelines. The funding for the JCF was from the elimination of three other credits: Kansas Enterprise Zone, Job Expansion and Investment Credit Act and a refundable credit for property taxes paid on machinery and equipment. This sort of reallocation of funding sources carry the coveted title of “revenue neutral” and hence have no fiscal impact statement for legislators to worry about when the funding was created. This allowed elected officials to be able to say on one hand they eliminated special interest funding while creating another special interest fund out of the “elimination” of those entities. The annual cap on JCF funds is $10 million which is how much could be immediately saved by letting JCF join its now-defunct predecessors in state history.

Transfers Out of the State General Fund

There is another area where what would be State General Funds are diverted from the appropriation process. There are a number of transfers out of the State General Fund with the largest and most notorious being the $135 million School District Improvements Fund. Not only does this amount not get counted in the school formula, the recent Gannon ruling on school funding pointed directly to this fund as an example of inequity in funding. This “inducement” to issue bonds for new buildings was a bad idea both from a policy and process aspect. Policy-wise the Kansas Supreme Court’s Gannon ruling was correct in pointing out that only the growing school districts could use this fund with a few big school districts garnering most of the monies. Process-wise the choice to use a transfer as the funding mechanism not only bypassed the school finance formula but also ensured that these funds are not counted by the National Center for Education Statistics; NCES is the “go to” place for comparing education-related data from across the country and is run by the U.S. Dept. of Education.

There is also another series of transfers that have their own particular issues.The adjacent list shows the recipient and the amount for FY-2015 (available at link above).The picking of winners and losers by government is never a good idea and the direct transfer of taxpayer funding to companies is a suspect type of economic development.

Transfers out of the State General Fund
Spirit Aerosystems Incentive ($3,500,000)
Eaton MDH Spec. Qual. Indus. Mfg. Fund ($30,000)
Siemens Manufacturing Incentive ($650,000)
Learjet Incentive ($6,000,000)
TIF Replacement Fund ($900,000)
Learning Quest Match  ($500,000)
Total ($11,580,000)

It is also troubling when local communities enter into Tax Increment Finance (TIF) arrangements, not to mention other subsidy giveaways, which are basically an agreement between a company or individual and the city to suspend property tax payments for that company or individual. State taxpayers as a whole have to make up for lost revenues to the governing body of each such city from the TIF arrangement. This means that a TIF issued in Johnson County is, at least in part, paid for by residents of Bourbon County and Elkhart. This distribution of funds from taxpayers across the state to individual “redevelopment areas” that were created by local governments in a manner that is basically hidden from the citizens is another great example of why these “off the tops” are bad policy. Requiring these TIF subsidies to be debated in the light of the full appropriation process would no doubt lead to questions by legislators whose districts did not include cities who receive this subsidy.

A general thought for legislators, citizens and industry on these economic subsidies. The reduction in income tax rates by the state on withholding rates has already provided a huge incentive for these companies in addition to the direct largess they receive from these dedicated funds. The rate cut on withholding taxes increased the take home pay of their employees without those companies having to give a pay raise to their employees out of company funds. Note that the “incentive” of lower withholding taxes is applied to EVERY wage earner in the state and does not go about picking favored businesses, industries, or individuals. This type of transparent, rules-based, and equally-applied policy is the correct way to encourage economic growth and allow the free market to dictate outcomes not politicians or bureaucrats.

Conclusion

Every program that spends the funds of the taxpayer should be examined regularly and the nature of these “off the tops” suggests that is not happening. The need for transparency and accountability is especially true of programs that benefit any specific individual, company or sector of the economy at the expense of another. Because of the contractual type of arrangement some of these represent we do not advocate for the state breaking existing contracts in regards to incentives. But, the creation of new or expansion of existing economic development handouts that are direct redistributions from taxpayers to other sectors of the economy needs to be halted and those still in existence need to be reviewed.

A complete review of every agreement entered into by the state to ascertain if that agreement is contractual in nature or are not legally binding going forward should proceed this next legislative session. The state should review those that are not legally binding and current renewals that can be foregone and put this “off the top” funding back in the appropriation process going forward. How much could the state expect to realize would be determined by that review. Even a preliminary, informed estimate would be in the neighborhood of $50 million annually without breaking any contractual arrangements. The following chart gives an estimate of just three programs with statutory flexibility.

Total Dollars Returned to the State Coffers
$s in Millions FY16 FY17 FY18 FY18
Freeze PEAK at Current Levels $6 $12 $18 $24
Kansas Bioscience Authority $25 $25 $25 $35
Cease Job Creation Fund $10 $10 $10 $10
Totals $41 $47 $53 $69
The issue of transparency is front and center in all of these programs and it would be appropriate for every “off the top” to be displayed on both Consensus Revenue Estimates and Appropriation profiles so that legislators and citizens can see that a significant amount of funds have already been appropriated by these arrangements.

Wichita Airport Passengers, Monthly, All Carriers vs. Airtran/Southwest, through May 2014

Wichita airport statistics updated

Why do Kansans pay taxes, including sales tax on food, to fund millions in subsidy to a company that is experiencing a sustained streak of record profits?

As the Wichita City Council prepares to authorize funding for Southwest Airlines, it’s worth taking a look at updated statistics regarding the airport. The agenda item the council will consider is available here.

Passengers

Wichita Airport Passengers, Monthly, All Carriers vs. Airtran/Southwest, through May 2014
Wichita Airport Passengers, Monthly, All Carriers vs. Airtran/Southwest, through May 2014
The city has pointed to the arrival of Southwest last June as a game-changer for the airport. It’s true that passenger counts have increased. In the nearby chart I present monthly passenger counts, enplanements only, at the Wichita airport for all carriers and for Southwest separately. I’ve treated Southwest as a continuation of AirTran, as Southwest started service at the same time AirTran stopped, and Southwest is receiving a similar subsidy. I show monthly traffic, and also a 12-month moving average to smooth out the extreme monthly variations in passenger traffic. (Click on charts for larger versions.)

Of note is that while the Southwest passenger count is rising, it started from a low position. Also, the count has not risen to the level that AirTran experienced in the middle of the last decade and as recently as 2011.

Flights

Wichita Airport Passengers, Monthly, Compared to National, through April 2014
Wichita Airport Passengers, Monthly, Compared to National, through April 2014
Wichita Airport Monthly Departures, through April 2014
Wichita Airport Monthly Departures, through April 2014
Wichita Airport Monthly Departures, Weekdays Only, through April 2014
Wichita Airport Monthly Departures, Weekdays Only, through April 2014
Considering the number of flights leaving the Wichita airport, the recent trend is up. This is a departure from recent trends. Although the number of available flights nationally has been slowly falling, it was falling faster for Wichita. That trend, for now, is reversed, although the number of flights in Wichita is far below the level of a decade ago.

The number of flights is an important statistic. Greater attention is given to fares, but for many travelers, especially business travelers, an available flight at any price is paramount. Last year at this time I wrote “A program designed to bring low air fares to Wichita appears to meet that goal, but the unintended and inevitable consequences of the program are not being recognized. In particular, the number of flights available at the Wichita airport continues to decline.” So it is good news that the number of flights has risen.

Wichita compared to the nation

Wichita Airport Statistics, through 2013
Wichita Airport Statistics, through 2013
Looking at passengers through the end of 2013, Wichita has now experienced an uptick. Passenger traffic in Wichita had been relatively level at a time that national traffic was rising. The number of available seats on flights has started to rise in Wichita, while nationally the trend has been level the past several years.

Load factor — the percent of available seats that were sold — is rising in Wichita, as it is nationally.

The last set of four charts is from an interactive visualization I prepared using data from the Bureau of Transportation Statistics. Click here to open the visualization in a new window. You may select any number of airports for display on the charts.

Southwest profits

Recently Southwest reported record high profits for the quarter ending in June. The company said that net income was $485 million, which it said represented the fifth consecutive quarter of record profits.

We might ask this question: Why do Kansans across the state pay taxes, including sales tax on food, to fund millions in subsidy to a company that is experiencing a sustained streak of record profits?

Voice for Liberty radio logo for featured posts 01

Voice for Liberty Radio: Hydraulic fracturing: A conjured-up controversy?

Voice for Liberty Radio 150x150

Dwight D. Keen at Wichita Pachyderm Club, August 8, 2014
Dwight D. Keen at Wichita Pachyderm Club, August 8, 2014
In this episode of Voice for Liberty Radio: Dwight D. Keen is former chairman of the Kansas Independent Oil and Gas Association. He spoke to the Wichita Pachyderm Club on the topic “Hydraulic Fracturing: A Conjured-up Controversy” on August 8, 2014. In the shownotes for this episode you can find the link to the short video that was shown as part of his talk. Also, you will find links to the handouts he distributed.

Here’s Dwight Keen at the Wichita Pachyderm Club on August 8, 2014.

Shownotes

Link to video shown during the presentation: Hydraulic Fracturing
Handout: A fluid situation: Typical solution used in hydraulic facturing
Handout: Gasland debunked
Wichita Pachyderm Club

Wichita City Hall 2014-08-05 11

What the Wichita city council could do

While the proposed Wichita city sales tax is a bad idea, the city could do a few things that would not only improve its chance of passage, but also improve local government.

This week the Wichita City Council passed an ordinance that starts the process of placing a sales tax measure on the November ballot. The one cent per dollar tax will be used for several initiatives, including an economic development jobs fund.

The city will need to gain the trust of citizens if the measure is to have any chance of passage. While I am personally opposed to the sales tax for some very good reasons, I nonetheless offer this advice to the city on what it could do to help pass the sales tax.

Oversight commissions

Presentations made by city hall state that the city council will appoint a private-sector led jobs commission. It would examine potential projects and make recommendations to the council. There will also be a citizens oversight committee and a jobs commission audit committee.

Wichita Investing in Jobs, How it WorksThe problem is that committees like these are usually stacked with city hall insiders, with people who want to personally gain from cronyism, and with people the city believes will be quietly compliant with what the city wants to do.

As an example, consider my appointment to the Wichita Airport Advisory Board last year. I had to be confirmed by the city council. I’ve been critical of the subsidy paid to airlines at the Wichita airport. I’ve researched airfares, air traffic, and the like. I’ve presented findings to the city council that were contrary to the city’s official position and that discovered a possible negative effect of the subsidy effort. Because of that, the council would not confirm my appointment. The city was not willing to have even one person on the airport board who might say wait, let’s take a look at this in a different way, and would have facts to support an alternative.

At Tuesday’s meeting the council assured citizens that it would not be the same group of city hall insiders serving on these boards. According to meeting minutes, council member James Clendenin (district 3, southeast and south Wichita) said “Over the next few months there is going to be a lot more detail given to the public so that they can make an informed decision at the time this comes up to a vote in November.”

If the council is serious about this it could take a simple step: Appoint the members of these boards well in advance of the November election. Also, define the structure of the boards, such as the number of members, how appointed, term of appointment, and other details.

Transparency

The city says that the operations of the committees and the jobs fund will be transparent. But the city’s record in transparency is poor. For many years the city’s quasi-independent agencies have refused to release spending records. Many, such as I, believe this is contrary to not only the spirit, but the actual language of the Kansas Open Records Act. There is nothing the city has said that would lead us to believe that the city plans to change its stance towards the citizens’ right to know.

If the city wants to convince citizens that it has changed its attitude towards government transparency and citizens’ right to know how tax money is spent, it could positively respond to the records requests made by myself and Kansas Policy Institute.

The city is also likely to engage in an educational and informational campaign on its cable television channel. If it does, a welcome gesture would be to offer time on the channel for citizen groups to present their side of the issues. The city’s cable channel is supposed to be a public access channel, but as of now, citizens have no ability to produce content for that channel.

In presentations to the council, reports released by the Texas Enterprise Fund have been used as examples of what Wichita might do to inform citizens on the economic development activities funded by the sales tax. But many in Texas are critical of the information provided about the fund’s operation.

Even when information is provided, it is subject to different interpretations by self-interested parties. On the Texas Emerging Technology Fund, the Houston Chronicle recently reported “Whether or not the fund has lost taxpayer money depends on which accounting method is applied. The Associated Press says a method common to government entities placed the fund’s value at $175 million, with a loss of $30 million. The governor’s office uses a private accounting standard that places the fund’s value at $230 million, a $25 million profit.”

In 2011 the Wall Street Journal reported on how job creation numbers can be stretched far beyond any sense of reason:

In Texas, Mr. Perry in a 2011 report to the legislature credited the Texas A&M Institute for Genomic Medicine with already producing more than 12,000 additional jobs. That’s ahead of the 5,000 promised by 2015.

According to the institute’s director, however, 10 people currently work in its new building. A Houston-area biotech firm that agreed to produce about 1,600 of the project’s jobs has instead cut its Texas staff by almost 400 people, and currently employs 220 people in the state.

What accounts for the discrepancy? To reach their estimate of 12,000-plus jobs created by the project, officials included every position added in Texas since 2005 in fields related sometimes only tangentially to biotechnology, according to state officials and documents provided by Texas A&M. They include jobs in things ike dental equipment, fertilizer manufacturing and medical imaging.

William Hoyt, an economics professor at the University of Kentucky who studies state economic-incentive programs across the U.S., said similar efforts elsewhere have been dogged by controversy over how many jobs they actually created. Even so, Mr. Hoyt said he hasn’t come across a definition as broad as that employed by Texas. “It’s hard to see jobs in dental supplies in El Paso being related to a genome clinic in College Station,” where Texas A&M’s main campus is located, he said.

A spokeswoman for Mr. Perry’s office in Austin, Texas, said the job totals for the A&M project were provided by the grant recipients, using figures compiled by the Texas Workforce Commission, the state’s labor agency, and hadn’t yet been “verified.” (Behind Perry’s Jobs Success, Numbers Draw New Scrutiny, October 11, 2011)

Locally, Wichita has had difficulty making information available. Last year the Wichita Eagle reported on the problems.

The Eagle asked the city last week for an accounting of the jobs created over the past decade by the tax abatements, a research project that urban development staffers have yet to complete.

“It will take us some time to pull together all the agenda reports on the five-year reviews going back to 2003. That same research will also reveal any abatements that were ‘retooled’ as a result of the five-year reviews,” city urban development director Allen Bell said. “I can tell you that none of the abatements were terminated.” (Wichita doubles property tax exemptions for businesses, October 20, 2013)

wichita-economic-developmentOne might have thought that the city was keeping records on the number of jobs created on at least an annual basis for management purposes, and would have these figures ready for immediate review. But apparently that isn’t the case.

We need to recognize that because the city does not have at its immediate disposal the statistics about job creation, it is evident that the city is not managing this effort. Or, maybe it just doesn’t care. This is a management problem at the highest level.

gwedc-office-operations

In fact, the city and its economic development agencies don’t even keep promotional websites current. GWEDC — that’s the Greater Wichita Economic Development Coalition credited with recruiting a company named InfoNXX to Wichita — doesn’t update its website to reflect current conditions. InfoNXX closed its facility in Wichita in 2012. When I looked at GWEDC’s website in October 2013, I found this on a page titled Office Operations:

Wichita hosts over a dozen customer service and processing centers — including a USPS Remote Encoding Center (985 employees), InfoNXX (950), T-Mobile (900), Royal Caribbean (700), Convergys (600), Protection One (540), Bank of America (315) and Cox Communications (230.) (emphasis added)

Observe that the official Wichita-area economic development agency touted the existence of a company that no longer exists in Wichita, and claims a job count that the company never achieved. Also, at that time the USPS facility was in the process of closing and eliminating all Wichita jobs.

What is Wichita doing to convince citizens that it has moved beyond this level of negligence?

WichitaLiberty.TV July 2, 2014

WichitaLiberty.TV: Primary election results, and a look forward

In this episode of WichitaLiberty.TV: We’ll take a look at some of the primary elections results this week. What did voters say, and what should we look for in the November general election and the future past that? View below, or click here to view at YouTube. Episode 54, broadcast August 10, 2014.

Sedgwick County Courthouse 2014-03-23

Sedgwick County elections: Commissioners

In Sedgwick County, two fiscally conservative commission candidates prevailed.

This year three of the five positions on the Sedgwick County Board of Commissioners are up for election. Unlike the Wichita city Council, Sedgwick County commissioners run as members of a party, and compete in both primary and general elections. There can be independent and third-party candidates too. This year for one of the Sedgwick County commission districts the incumbent Republican ran unopposed. But in two other districts, there were spirited contests.

Sedgwick County Commission, district 4In district four, which covers north-central and northwest Wichita, Maize, Valley Center, and Park City, incumbent Richard Ranzau was challenged by Carolyn McGinn. She had held this position in the past, and then served in the Kansas Senate, an office she still holds. Ranzau is well known — notorious, we might say — for his tough line on spending taxpayer dollars. The McGinn campaign had about twice as much money to spend. A lot of that came from the people we know as Wichita’s crony capitalists, that is, people and companies who actively seek handouts from government. The Wichita Metro Chamber of Commerce endorsed McGinn. Now, you may think of your local chamber of commerce as pro-business. And, the chamber is pro-business, no doubt about it. But pro-business is not the same as pro-capitalism. Being pro-business is not the same as being in favor of economic freedom. Being pro-business is not the same as supporting a limited, constitutional, government that protects our freedoms and property rights.

I want to stress this point. Just this week Wichita’s own Charles Koch wrote an op-ed for USA Today. After expressing concern for the weak economy and its effect on workers, he offered a plan forward. He wrote “First, we need to encourage principled entrepreneurship. Companies should earn profits by creating value for customers and acting with integrity, the opposite of today’s rampant cronyism.”

Concluding his article, Koch wrote: “Our government’s decades-long, top-down approach to job creation has failed. Its policies have made our problems worse, leaving tens of millions chronically un- or underemployed, millions of whom have given up ever finding meaningful work. In doing so, our government has not only thwarted real job creation, it also has reduced the supply and quality of goods and services that make people’s lives better and undermined the culture required to sustain a free society. When it comes to creating opportunities for all, we can do much better. It’s time to let people seek opportunities that best suit their talents, for businesses to forsake cronyism, and for government to get out of the way.”

While Charles Koch was writing primarily about the United States government, the same principles apply to local government. And Wichita’s cronies — those who seek profits through politicians and bureaucrats rather than customers — they lined up behind Carolyn McGinn in a big way. By using their generous funding, she ran a negative campaign against Richard Ranzau. He forcefully and truthfully responded to her negative ads, and I’m pleased to say that I helped in that effort.

What was the result of the election? Ranzau won with 54 percent of the vote. He now moves on to face Democrat Melody McRae-Miller in the November general election. She held this county commission seat before McGinn, and she also served in the Kansas legislature, in the House of Representatives.

Sedgwick County Commission, district 5There was also a contest in district 5, which is Derby and parts of southeast Wichita. The one-term incumbent Jim Skelton declined to run for re-election. The two Republican candidates were Jim Howell and Dion Avello. Howell has represented parts of Derby in the Kansas House of Representatives for four years. Avello has been mayor of Derby for many years. The Wichita Chamber endorsed Howell in this race. Campaign funds were close in this race, with Howell having a small edge. The result of the election was Howell winning with 63 percent of the vote. He moves on to face the Democrat in the general election, former Rose Hill Mayor Richard Young.

22-CommissionWhat do the results of these elections mean? First, there may be a shift of power on the Sedgwick County commission. Currently, commissioners Ranzau and Karl Peterjohn are often in a minority of two against the other three commissioners. It’s thought that it Howell is elected, he would often join Ranzau and Peterjohn to form a working majority of three. That could cause a change in policy at the County commission, and that’s something that the Wichita chamber and Wichita’s cronies don’t want. It will be interesting to see who the chamber and the cronies support in the general election, Ranzau or the Democrat. In 2008, when Peterjohn ran for his first term, the Wichita chamber campaigned against him, making it their most important priority in that election.

For this shift to materialize, both Ranzau and Howell must win their November elections.

Wichita Chamber of Commerce 2013-07-09 004Ranzau’s victory is a defeat for the Wichita Chamber of Commerce. Besides endorsing McGinn, it made independent expenditures in her favor. This has broader implications than just one county commission district. This week the Wichita City Council voted in favor of placing a sales tax issue on the November ballot. The Wichita Chamber is strongly behind the sales tax in Wichita, and I would expect to see the chamber devote a lot of resources campaigning for its passage. Richard Ranzau is opposed to the sales tax increase. While his county commission district encompasses a lot of territory that is outside the City of Wichita, and it is only Wichita voters who will decide the sales tax issue, I think we can safely conclude that his victory paints a gloomy forecast for approval of a sales tax.

Looking even farther to the future. Ranzau’s county commission district overlaps part of Wichita city council district 5. That is currently represented by Jeff Longwell. He can’t run again because of term limits. Longwell is firmly in the grasp of Wichita’s cronies. Could Ranzau’s victory pave the way for a fiscally conservative city council candidate in district 5? That election will be next spring.

Also next spring Wichita will elect a new mayor. There are many names mentioned as candidates, including Longwell. What do the victories of Ranzau and Howell mean? What impact will the sales tax campaign and election result have on the spring elections?

24-Carolyn McGinn Key Construction 2014-07-02 01bThe Wichita Chamber and the Wichita cronies campaigned hard for Carolyn McGinn against Richard Ranzau. Well, I should clarify: They spent a lot of money on the campaign. Richard himself, his family, and his volunteers worked hard. The desire for economic freedom by Richard Ranzau and his volunteers was a more powerful force than the greed of the Wichita Chamber of Commerce, Key Construction, David Burk, and Bill Warren.

Keep this in mind. The Sedgwick County Commission has very little power to initiate the type of economic development incentives that the Wichita Chamber and the cronies want. That power rests almost totally at the Wichita City Council and the Kansas Department of Commerce. Also, the county commission has limited power to stop or object to incentives. Their main voice is the ability to cancel the formation of a tax increment financing district.

So if the Wichita Chamber and the cronies are willing to intervene to such extent in the campaign for county commissioner, think what they will be willing to do in city council or mayoral contests, if they see that their grip on the really big cookie jar might be in doubt. Since the departure of Michael O’Donnell for the Kansas Senate there has been no one on the Wichita city council who questions anything the Chamber and the cronies want. Not in any serious manner, that is. We see council members making false displays of pretense now and then, but that’s all they do.

United States Capitol, July 2011

Elections in Kansas: Federal offices

Kansas Republican primary voters made two good decisions this week.

Kansas held primary elections this week. The primary election, of course, does not determine who wins the office; it only selects one Democratic and one Republican candidate to move forward to the November general election. But in many cases, the primary is the election, at least the one that really makes a difference. That’s because in Kansas, often there may be no Democratic Party candidate. Or if there is a Democrat, that candidate may have little money available to campaign in a district with a large Republican voter registration advantage.

It’s important to note that some candidates who will appear on the general election ballot in November did not appear on any primary election ballot. That’s because parties other than Democratic and Republican select their candidates in a convention. In particular, there are two prominent candidates in this category. One is Keen Umbehr, the Libertarian Party candidate for governor. The other is independent candidate Greg Orman, who is running for United States senator. Both are serious candidates that deserve consideration from voters.

Let’s take a look at a few results from the primary election.

United States Senate

United States Senate Primary, 2014
In the contest for the Republican Party nomination for United States Senate, Pat Roberts won, receiving 48 percent of the vote. He moves on to face not only the Democratic nominee, but also an independent candidate who is already advertising on television. The problem Roberts faces going forward is the fallout from his scorched-earth campaign. He went negative against Milton Wolf from the start, focusing on issues that are worth considering, but quite trivial considering the big picture.

Pat Roberts millions on negative ads
Roberts ran an advertisement near the end of the campaign that took Wolf’s words grossly out of context, and Roberts should be ashamed for stooping to that level. Another thing Roberts can be ashamed of is his refusal to debate opponents. He said he would debate. He should debate. It’s a civic obligation. He also largely avoided news media.

Pat Roberts StarKistDuring the campaign, I was critical of Roberts. I looked at votes he had taken while in the Senate. I looked at the way he ran his campaign. I was critical. I hope that I kept my criticism based on — and focused on — facts and issues. But another problem Roberts has is the behavior of his supporters, both official and unofficial. They too ran a scorched-earth campaign.

Tweet about Milton Wolf I’d like to show you some of the posts made on Facebook and Twitter about Wolf and his supporters, but this is a family-oriented blog. Roberts will need the support of all Kansas Republicans in the general election. He needs to hope that they don’t peel off to the Democrat or Independent candidates. Roberts needs all Kansas Republicans to vote, and vote for him. But the behavior of his campaign and its supporters has harmed Republican party unity. What’s curious to me is that I don’t think they realize the harm they have caused.

United States House of Representatives, district 4

United States House, District 4For United States House, fourth district, which is Wichita and the surrounding area, incumbent Mike Pompeo won over Todd Tiahrt, 63 percent to 37 percent. This contest was curious for a number of reasons, such as the former holder of the office seeking it again, and running against a man he endorsed twice. It attracted national attention for that reason, but also for something more important: Tiahrt was advocating for a return to the practice of earmarking federal spending. Tiahrt concentrated a few issues in a campaign that was negative from the start.

Tiahrt claimed that Pompeo voted to support Obamacare seven times. But everyone who examined that claim, including several political science professors, said it was unfounded, going as far as saying it broke the truth entirely. The Tiahrt campaign also took a speech Pompeo had made on the floor of the House of Representatives and used just one sentence of it in a deceptive manner. The campaign also took a bill that Pompeo introduced — having to do with GMOs — and twisted its meaning in order to claim that Pompeo doesn’t want you to know the ingredients used in food. Tiahrt criticized Pompeo for missing some votes during the campaign, even though Tiahrt had missed many votes during his own campaign four years ago.

In the face of these negative ads, Pompeo remained largely positive. He released one television ad that rebutted the claims that Tiahrt had made. Is it negative campaigning to rebut the false accusations of your opponent? Pompeo had one ad that mentioned “goofy accusations” made by his opponent, which hardly qualifies as negative. Other than that, the Pompeo campaign remained largely positive. That is quite an accomplishment in today’s political environment.

This campaign was also marred by vitriol among supporters. In my opinion, based on my observations, the Tiahrt supporters that engaged in this behavior have some apologies to make. Pompeo goes on to face a relatively unknown Democrat in the heavily Republican fourth district.

United States House of Representatives, district 1

United States House, District 1For United States House, first district, which is western Kansas, although the district extends east enough to include Emporia and Manhattan, incumbent Tim Huelskamp was challenged by Alan LaPolice. Huelskamp won with 55 percent of the vote. Huelskamp had faced criticism for not being supportive of various subsidy programs that benefit farmers, most notably for ethanol. Outside groups joined the race, running ads critical of Huelskamp for that reason. Some ads were critical of Huelskamp for being removed from the House Agriculture committee, that move seen as retaliation for not supporting Speaker of the House John Boehner. Huelskamp now moves on to face a Kansas State University history professor who was also the mayor of Manhattan.

The meaning of these results

What do these results mean? These three elections — Senate and two House contests — attracted national attention. The Friday before the election, Kimberly Strassel wrote in the Wall Street Journal of the importance of the fourth district contest. She wrote:

A big decision comes Tuesday in the Kansas GOP primary. The Sunflower State is in the throes of political upheaval, with most of the attention on the fortunes of Gov. Sam Brownback and Sen. Pat Roberts. But the race that may say far more about the direction of the GOP is taking place in Wichita, the state’s Fourth District, in the standoff between Rep. Mike Pompeo and challenger Todd Tiahrt.

Pompeo was elected in the 2010 tea party surge, with a particular focus on liberating private enterprise. He’s made a name for himself as a leader in the fight to end corporate welfare and pork, and to cut back on strangling regulations.

A Crony Capitalist Showdown

After detailing some legislative activity and accomplishment, Strassel noted the difficulty that fighters for economic freedom encounter: She wrote “Such principles are precisely what conservative voters claim to demand from their representatives. Yet the antisubsidy line has hardly been an easy one, even in conservative Kansas — which collects its share of federal largess. And Mr. Tiahrt knows it.”

Continuing, she wrote: “The choice voters fundamentally face on Tuesday is whether they want a congressman who works to get government smaller for everyone and to end corporate welfare, or a congressman who grabs what he can of big government to funnel to his district, and embraces crony capitalism. The latter is a return to the unreformed GOP, a groove plenty of Republicans would happily slide back into — if only voters gave the nod. We’ll see if Kansas conservatives do.”

There’s something there that bears repeating: “Such principles are precisely what conservative voters claim to demand from their representatives.” In the case of Huelskamp and Pompeo, voters supported two candidates who have these principals, and who follow them. In the United States Senate contest, that almost happened.

line-chart-01

Charles Koch: How to really turn the economy around

Writing in USA Today, Charles Koch offers insight into why our economy is sluggish, and how to make a positive change.

Charles Koch: How to really turn the economy around

For years, Washington politicians have said that our economy is turning the corner. They said it in 2011, in 2013 and again last week — every time they report a quarter with 4% economic growth. But each time, the economy has turned sluggish again.

Like most Americans, I am deeply concerned about our weak economic recovery and its effects on millions of families. Opportunity, especially for the young and disadvantaged, is declining. High underemployment has become our new norm.

The effects of underemployment are not just economic, they are also social and psychological. Real work is an important part of how we define ourselves. Meaningful work benefits both us and others. Those who lack real jobs often end up depressed, addicted or aggressive.

Today, opportunities for such work are not what they should be. We need a different approach, focused less on politics and more on basic principles.

Continue reading at Charles Koch: How to really turn the economy around.

In Kansas, hypocritical criticism of voting records

Kansas fourth district voters may want to be aware of voting record of a congressional challenger, and whether his criticism of his opponent for similar behavior is hypocritical.

Todd Tiahrt has criticized Congressman Mike Pompeo for missing recent votes. A Tiahrt campaign press release contained: “‘Mr. Pompeo’s job is not to raise money or have political events — his job is to vote.’ stated Todd Tiahrt.”

It’s not uncommon for officeholders to be absent during campaign season. Relevant to this is Tiahrt’s own voting record four years ago. At that time he was campaigning for the United States Senate while serving in the House of Representatives, and he missed a lot of votes.

Todd Tiahrt voting record from govtrack.us, showing missed votes during an election campaign. Click for larger version.
Todd Tiahrt voting record from govtrack.us, showing missed votes during an election campaign. Click for larger version.
From July to September 2010, Tiahrt missed 76 of 151 votes. That’s missing 50.3 percent, which placed him in the 99th percentile for missing votes during those months. Data is from govtrack.us.

So if missing votes during a campaign is relevant information that voters might use in making their decisions, voters might want to also be aware of Tiahrt’s record.

More importantly, voters might question a candidate who criticizes another for doing the same as he did. This is hypocrisy, that is, the practice of professing standards and beliefs that are contrary to one’s real character or actual behavior.

Wichita City Budget Cover, 2015

Wichita city budget to have public hearing

This week the Wichita City Council holds the public hearing for the budget. Following are several observations.

(To view the budget, click here to go to wichita.gov. The best document to read is Volume I. The most important parts to read are the City Manager’s Policy Message (eleven pages) and the Budget Issues section (seven pages). Don’t worry; there are lots of pictures to skip over.)

The mill levy

The city says — many times — that the mill levy has not risen for a long time: “The 2015 Proposed Budget is based on City Council policy direction. It will not require a mill levy rate increase, for the 21st consecutive year.” (page 21)

Wichita mill levy rates. This table holds only the taxes levied by the City of Wichita and not any overlapping jurisdictions.
Wichita mill levy rates. This table holds only the taxes levied by the City of Wichita and not any overlapping jurisdictions.
In 2002 the City of Wichita mill levy rate was 31.845. In 2013 it was 32.509, based on the city’s Comprehensive Annual Financial Report. That’s an increase of 0.664 mills, or 2.09 percent, since 2002. In one year the mill levy rate increased .038 mills, or 0.12 percent. (These are for taxes levied by the City of Wichita only, and do not include any overlapping jurisdictions.)

Recent Wichita mill levy rates.
Recent Wichita mill levy rates.
The Wichita City Council did not take explicit action to raise this rate. Instead, the rate is set by the county based on the city’s budgeted spending and the assessed value of taxable property subject to Wichita taxation.

Change in Wichita mill levy rates, year-to-year and cumulative.
Change in Wichita mill levy rates, year-to-year and cumulative.
While the city doesn’t have direct control over the assessed value of property, it does have control over the amount it decides to spend.

The city may dismiss small changes in the mill levy as the result of errors in estimating assessed value. If there are errors in estimation, we would expect the errors to be random. That is, in some years we would expect the city to have estimated that assessed values would be lower than the actual value. In those years, the mill levy could go down. But that happened for only one year since 2002.

No matter what the cause, the Wichita city mill levy today is 2.09 percent higher than in 2002. The city should recognize this in its budget documents.

Stewardship of assets

Wichita Pavement Condition Index, from the city's 2012 Performance Measure Report
Wichita Pavement Condition Index, from the city’s 2012 Performance Measure Report
While the city boasts that the mill levy has not risen, part of the reason why it is (relatively) low is the city has not been taking care of the assets that citizens purchased and trusted the city to maintain. For example: “Pavement condition has slowly deteriorated over the last decade in Wichita. New pavement strategies will enhance the effectiveness of City efforts; however, additional funds would expedite improvements to streets in poor condition and help to more rapidly stabilize overall pavement conditions in Wichita.” (page 33)

Earlier this year the council received a document from the Community Investments Plan Steering Committee. It measured the amount by which the city is behind in maintaining its assets: “Decades of under-investment in infrastructure maintenance … 38% of Wichita’s infrastructure is in ‘deficient/fair’ condition.”

The cost to remedy this lack of maintenance is substantial. The document says that on an annual basis, Wichita needs to spend $180 million on infrastructure depreciation/replacement costs. Currently the city spends $78 million on this, the presentation indicates. The “cost to bring existing deficient infrastructure up to standards” is given as an additional $45 to $55 million per year.

This is spending that the city has deferred to future years. The city knows this, too. The Wichita Eagle recently quoted Wichita Mayor Carl Brewer: “We’ve put them off for too long. We didn’t want the challenges. We didn’t want the tax bills. But now, to maintain our quality of life, we’ve got to catch up.”

The question is this: Does this budget make plans for correcting this maintenance deficit? The answer is: Yes, it does something, as described by the city: “In 2012, staff developed a new model to determine the impact of street treatment options. This model focuses on maximizing the return on investment of each treatment option. This method attempts to match the timing and method of treatment with the projected remaining service life (RSL) and value of the street network to ensure treatments maximize Wichita’s return on investment (ROI).” (page 34)

But this change is tiny compared to the magnitude of the problem. The budget talks about the proposed one cent per dollar sales tax that voters may be asked to approve. Of the nearly $80 million per year the sales tax might raise, only $5.5 million per year is allocated towards maintenance of infrastructure, in this case additional street maintenance. Remember, the city believes it needs to spend an additional $45 to $55 million per year “to bring existing deficient infrastructure up to standards.”

Outsourcing

The budget lists the areas in which Wichita has made use of outsourcing, which are the mowing of parks and security screening at city hall. The budget says that in 2015 the intergovernmental relations function will be outsourced. Also, the city will contract with private firms to supplement snow removal, and the removal of dead trees. The city is also soliciting proposals for some street maintenance activities.

But if this is all the city is doing regarding outsourcing, Wichita is missing out on many opportunities to improve service to citizens and reduce costs.

There’s a difference between government and business. As an example, consider city golf courses. Recently an advisory board recommended that the city improve customer service and salesmanship through training of golf staff and management. Successful businesses know that customer service and salesmanship are what business is all about, especially in a service-oriented product like golf. Businesses seek to provide good customer service because that is how they earn profit. But too often government sees customers as a burden, not an asset.

Outsourcing changes city services from being a burden placed on government employees, to something that a company actually wants to do.

Waste

Street lights in downtown Wichita, July 22, 2014.
Street lights in downtown Wichita, July 22, 2014.
I’ve illustrated many instances where the city is using electricity to light streetlights during the day. If the city seems unconcerned about such blatant and visible waste that surely must be easy to avoid, what does that tell us about waste that is not easily seen?

U.S. Capitol Dome us-capitol-325341_1280

In Kansas fourth district, fundamental issues of governance arise

The contest in the Kansas fourth district is a choice between principle and political expediency, and between economic freedom and cronyism.

While some news articles and political columns have described the contest for Republican Party nomination for United States House of Representatives between Todd Tiahrt and Mike Pompeo as a yawner, as between two candidates with few and only minor distinguishing positions — there are important differences. The press is starting to notice.

A Crony Capitalist Showdown

In the Wall Street Journal columnist Kimberly Strassel made the case for this contest’s importance as a bellwether of Republican sentiment:

A big decision comes Tuesday in the Kansas GOP primary. The Sunflower State is in the throes of political upheaval, with most of the attention on the fortunes of Gov. Sam Brownback and Sen. Pat Roberts. But the race that may say far more about the direction of the GOP is taking place in Wichita, the state’s Fourth District, in the standoff between Rep. Mike Pompeo and challenger Todd Tiahrt.

The 50-year-old Mr. Pompeo — an Army veteran, Harvard Law grad and businessman — was elected in the 2010 tea party surge, with a particular focus on liberating private enterprise. He’s made a name for himself as a leader in the fight to end corporate welfare and pork, and to cut back on strangling regulations. (Potomac Watch: A Crony Capitalism Showdown, August 1, 2014)

(If the above link does not work for you because you don’t have a subscription to the Wall Street Journal, click here.)

Such principles are preciselyAfter detailing some legislative activity and accomplishment, Strassel notes the difficulty that fighters for economic freedom encounter: “Such principles are precisely what conservative voters claim to demand from their representatives. Yet the antisubsidy line has hardly been an easy one, even in conservative Kansas — which collects its share of federal largess. And Mr. Tiahrt knows it.”

Concluding her column, Strassel outlines the choice that so many writers have failed to realize:

The choice voters fundamentally face on Tuesday is whether they want a congressman who works to get government smaller for everyone and to end corporate welfare, or a congressman who grabs what he can of big government to funnel to his district, and embraces crony capitalism. The latter is a return to the unreformed GOP, a groove plenty of Republicans would happily slide back into — if only voters gave the nod. We’ll see if Kansas conservatives do.

Another example of the difference between the two candidates is the Export-Import Bank. Conservative groups are urging that Congress not reauthorize the bank, a vote that will happen soon. The most common argument is that it harms American jobs, and there are allegations of corruption in its operations.

While in Congress, Pompeo voted against the reauthorization of the bank. He has said he would vote against its reauthorization again unless there is significant reform. Tiahrt, on the other hand, voted in favor of the Export-Import Bank. It’s representative of the type of cronyism he has supported while in office, and would likely support again, especially as his positions tack to the political left.

Finally, Tiahrt has recently criticized Charles Koch and Americans for Prosperity, leading us to wonder if Tiahrt understands or embraces the principles of economic freedom and free markets.

Kansas Capitol

McGinn, as committee chair, was not for performance measures

A 2011 Kansas bill could have increased the accountability of state government, but committee chair Carolyn McGinn wasn’t in favor.

In the 2011 session of the Kansas Legislature, several bills were proposed that would streamline government and investigate opportunities for privatization.

Another proposed bill in 2011 was HB 2158, which would have created performance measures for state agencies and reported that information to the public. The supplemental note says that the bill “as amended, would institute a new process for modifying current performance measures and establishing new standardized performance measures to be used by all state agencies in support of the annual budget requests. State agencies would be required to consult with representatives of the Director of the Budget and the Legislative Research Department to modify each agency’s current performance measures, to standardize such performance measures, and to utilize best practices in all state agencies.” Results of the performance measures would be posted on a public website.

This bill passed the House of Representatives by a nearly unanimous vote of 119 to 2. But in the Senate, this bill was victim of a “gut-and-go” maneuver in a committee chaired by Carolyn McGinn. In effect, the bill died and was not considered by the entire Senate.

This bill proposed to spend modest amounts increasing the manageability of government, not the actual range and scope of government itself. It, along with the other two, would have started Kansas on a path towards spending responsibly.

As it turns out, many in the legislature — this includes Senate Republicans who initiated or went along with the legislative maneuvers that killed these bills — are happy with the operations of state government remaining in the shadows.

United States Capitol, July 2011

Pat Roberts, senator for corporate welfare

Two years ago United States Senator Pat Roberts voted in committee with liberals like John Kerry, Chuck Schumer, and Debbie Stabenow to pass a bill loaded with wasteful corporate welfare.

The Wall Street Journal noticed a vote made by Senator Roberts in committee that lead to the fiscal cliff bill . The newspaper explained the harm of this bill in its editorial:

The great joke here is that Washington pretends to want to pass “comprehensive tax reform,” even as each year it adds more tax giveaways that distort the tax code and keep tax rates higher than they have to be. Even as he praised the bill full of this stuff, Mr. Obama called Tuesday night for “further reforms to our tax code so that the wealthiest corporations and individuals can’t take advantage of loopholes and deductions that aren’t available to most Americans.”

One of Mr. Obama’s political gifts is that he can sound so plausible describing the opposite of his real intentions.

Senator for Corporate WelfareThe costs of all this are far greater than the estimates conjured by the Joint Tax Committee. They include slower economic growth from misallocated capital, lower revenues for the Treasury and thus more pressure to raise rates on everyone, and greater public cynicism that government mainly serves the powerful.

Republicans who are looking for a new populist message have one waiting here, and they could start by repudiating the corporate welfare in this New Year disgrace. (Crony Capitalist Blowout: A tax increase for everyone but the favored wealthy few. January 4, 2013)

The Journal took the rare measure of calling out the senators who voted for this bill in committee, as shown in its nearby graphic. There it is: Pat Roberts voting in concert with the likes of John Kerry, Chuck Schumer, and Debbie Stabenow.

If Tom Coburn of Oklahoma could vote against this bill in committee, then so could have Pat Roberts. But he didn’t.

Wolf investigation, political to the extreme

The investigation of a candidate for United States Senator by an appointed board in Kansas raises questions of propriety, and Senator Pat Roberts’ use of it in advertising is shameful.

If you’ve paid attention to television advertisements in Kansas, you probably are aware that United States Senate Candidate Dr. Milton Wolf has come under investigation by the Kansas Board of Healing Arts. His act that lead to this investigation was posting anonymous X-rays on Facebook.

The campaign of Pat Roberts is spending mightily to make sure Kansans are aware of the investigation, which was launched just two seeks for an election. That is more than a little troubling. That’s because Roberts’ campaign manager is a former journalism professor, Leroy Towns. I’m sure he knows that “being under investigation” and “found in violation” are two very different things. He probably taught that to his journalism students in North Carolina. But as executive campaign manager for Pat Roberts — well, it seems a different standard applies.

(For what it’s worth, after serving in the United States Marines, Pat Roberts was a newspaper publisher in Arizona before he moved to Washington. I guess that’s sort of like a journalist.)

This matter is especially important because the investigation of Dr. Wolf is political to the extreme. It was announced two weeks before the election.

I received an email message from a Kansas political observer that explains. The Anne Hodgdon mentioned below describes herself as a “political strategist and advocate” and is a major campaign donor to Roberts.

Bob, I’m sure you probably know this, but in case you don’t: Did you know Anne Hodgden is on the Kansas Board of Healing Arts? I think the timing of the board’s decision to look into Wolf is pretty transparent.

Shouldn’t [Kansas Governor Sam] Brownback be held accountable for his appointees using boards’ power politically? It’s maddening.

It’s no wonder good candidates won’t or don’t run. They have to worry about people like Anne Hodgdon using their political power to ruin their careers. It’s despicable. I am repulsed that this sort of thing is acceptable.

I’m repulsed, too, and saddened that a senior United States Senator uses this tactic in his campaign.

ballot-296577_640

Women for Kansas voting guide should be read with caution

If voters are relying on a voter guide from Women for Kansas, they should consider the actual history of Kansas taxation and spending before voting.

A political advocacy group known as Women for Kansas has produced a voting guide, listing the candidates that it prefers for Kansas House of Representatives. But by reading its “Primer on the Issues,” we see that this group made its endorsements based on incorrect information.

One claim the group makes is this regarding taxes in Kansas: “Income taxes were reduced for many Kansans in 2012 and 2013, and eliminated entirely for some, with a corresponding increased reliance on sales taxes and local property taxes. This shifted the tax burden to the less affluent and from the state to counties, cities and school districts.”

This is a common theme heard in Kansas the past few years. But let’s unravel a few threads and look at what is actually happening. First, keep in mind that the lower tax rates took effect on January 1, 2013, just 1.5 years ago.

Then, Women for Kansas may be relying on information like this: A university professor who is a critic of Sam Brownback recently wrote in a newspaper column that “Property taxes are on track to increase by more than $400 million statewide during Gov. Sam Brownback’s term in office.”

Through correspondence with the author, Dave Trabert of Kansas Policy Institute found that this claim is based on increases of $300 million plus an estimated $100 million increase yet to come. Trabert noted that this amounts to an increase of 11 percent over four years. To place that in context, property taxes increased $767 million and 29 percent during the first term of Kathleen Sebelius. Inflation was about the same during these two periods. A more accurate claim would be that Kathleen Sebelius shifted taxes to counties, cities, and school districts, and that Sam Brownback’s administration has slowed the rate of local property tax increases compared to previous governors.

Another claim made by Women for Kansas concerns school spending: “Reflecting decreased revenues due to tax cuts, per-pupil spending is down, and both K-12 and higher education are facing further reductions in the immediate future.”

The allegations that per-pupil spending is down due to tax cuts is false. The nearby chart of Kansas school spending (per pupil, adjusted for inflation) shows that spending did fall, but under budgets prepared by the administrations of Kathleen Sebelius and Mark Parkinson. Since then, spending has been fairly level. (Remember, lower tax rates have been in effect for just 1.5 years.)

Kansas school spending, per student, from state, local, and federal sources, adjusted for inflation.
Kansas school spending, per student, from state, local, and federal sources, adjusted for inflation.

If we look at other measures of school support, such as pupil teacher ratios, we find that after falling during the administrations of previous governors, these ratios have rebounded in recent years.

When spending figures for the just-completed school year become available, it’s likely that they will show higher spending than the previous year. That’s been the trend.

If you’ve received or read the voter guide from Women for Kansas, please consider the actual history of Kansas taxation and spending before voting.

charles-koch-wall-street-journal-2014-04-03

For Tiahrt, economic freedom is not a good thing, it seems

Kansas congressional candidate Todd Tiahrt has criticized Charles Koch and Americans for Prosperity, leading us to wonder if Tiahrt understands or embraces the principles of economic freedom and free markets.

In a recent speech, candidate for United States House of Representatives Todd Tiahrt criticized Americans for Prosperity and Charles Koch, telling an audience “in general, they try to fight programs that they think are not good for Koch Industries.”

He also said that for Mike Pompeo, Tiahrt’s election opponent who is supported by Americans for Prosperity, they “think it’s all about the money.”

These allegations are contrary to positions and actions that Charles and David Koch have taken throughout their lives. As an example, in April of this year Charles Koch penned an op-ed for the Wall Street Journal. In the article, Koch explains his involvement in public affairs:

Far from trying to rig the system, I have spent decades opposing cronyism and all political favors, including mandates, subsidies and protective tariffs — even when we benefit from them. I believe that cronyism is nothing more than welfare for the rich and powerful, and should be abolished.

Koch Industries was the only major producer in the ethanol industry to argue for the demise of the ethanol tax credit in 2011. That government handout (which cost taxpayers billions) needlessly drove up food and fuel prices as well as other costs for consumers — many of whom were poor or otherwise disadvantaged. Now the mandate needs to go, so that consumers and the marketplace are the ones who decide the future of ethanol. (Charles Koch: I’m Fighting to Restore a Free Society)

In an earlier Journal op-ed Koch wrote “Crony capitalism is much easier than competing in an open market. But it erodes our overall standard of living and stifles entrepreneurs by rewarding the politically favored rather than those who provide what consumers want.”

If it was “all about the money” as Tiahrt contends, Koch Industries would join the majority of American business firms that seek to rig the system in their favor. But Charles and David Koch, along with Americans for Prosperity, do not do that. Instead, they advocate for reform.

It’s not a recent conversion, either. Charles and David Koch have promoted free markets and economic freedom for many decades. Charles Koch and others founded what became the Cato Institute in 1977, almost four decades ago. Cato has been consistent in its advocacy of economic freedom.

Even earlier that that: An issue of Koch Industries Discovery newsletter contains a story titled “Don’t subsidize me.” Here’s an excerpt describing an event that must have taken place about 50 years ago:

When Charles Koch was in his 20s, he attended a business function hosted by his father. At that event, Fred Koch introduced Charles to a local oilman. When the independent oilman politely asked about the young man’s interests, Charles began talking about all he was doing to promote economic freedom. “Wow!” said the oilman, who was so impressed he wanted to introduce the young bachelor to his eligible daughter. But when Charles mentioned he was in favor of eliminating the government’s oil import quota, which subsidized domestic producers, the oilman exploded in rage. “Your father ought to lock you in a cell!” he yelled, jabbing his finger into Charles’ chest. “You’re worse than a Communist!”

It seems the oilman was all for the concept of free markets — unless it meant he had to compete on equal terms.

Under oath

For more than 50 years, Charles Koch has consistently promoted economic freedom, even when it was not in the company’s immediate financial interest. In the 1960s, Koch was willing to testify before a powerful Congressional committee that he was against the oil import quota — a very popular political measure at the time. “I think it’s fair to say my audience was less than receptive,” recalls Koch.

Years later, Koch warned an independent energy association about the dangers of subsidies and mandates. “We avoid the short-run temptation to impose regulatory burdens on competitors. We don’t lobby for subsidies that penalize taxpayers for our benefit. “This is our philosophy because we believe this will produce the most favorable conditions in the long run,” Koch said.

It seems that candidate Tiahrt doesn’t share these principles.

Following is a transcript provided to me of remarks by Todd Tiahrt on July 25, 2014.

The Americans for Prosperity is an organization that is primarily funded by Koch Industries and, in general, they try to fight programs that they think are not good for Koch Industries. And now they’re trying to support President, excuse me, they’re trying to support Mr. Pompeo. So, I guess because Mr. Pompeo is a Harvard lawyer and President Obama is a Harvard lawyer, sometimes I accidentally slip when I say “President Obama” when I really meant to say “Mr. Pompeo,” because they’re both Harvard lawyers.

Americans for Prosperity have done some good things in the past, but today they’re on the wrong side of the truth. … Mr. Pompeo and Koch Industries think it’s all about the money. You can out-vote Charles Koch if you get one other person to vote with you. Right here we have enough people to out-vote all of the billionaires in Kansas. Right here we have enough people to out-vote most of the millionaires, but they think that they can sway the outcome of this election by just putting more and more money into it. And forget about you! … They, in Washington, are all about the money, and it’s playing out right here in the Fourth District of Kansas.

Kansas Farm Scenic Sky Clouds Wheat Farmland kansas-243079_1280

For GMOs, a patchwork of state regulations would be a nightmare

A complicated regulatory landscape for genetically modified foods would shift power to large food producers at the expense of small companies and innovative startups.

Have you ever seen a product that displayed a label that states: “This product contains a chemical known to the State of California to cause cancer and birth defects or other reproductive harm.” And notifying you that you should wash your hands after handling it?

In my case, it was a cable attached to a computer peripheral.

How is that that the State of California “knows” this product is harmful, but none of the other states or the federal government have such knowledge? And why should I — here in Kansas — be discouraged by buying a product and then be scared to use it, just because California believes it is harmful?

The answer is that California has a list of about 900 chemicals that it believes are harmful. If you want to sell a product in California, and if your product contains one of these, you must provide a warning label on your product.

Now, can you imagine the confusion that would result if other states had their own list of chemicals that they believe are harmful. It’s quite likely that each state would have a different list. Complying with the multitude of different harmful lists and labeling requirements would be a burden. It might be impossible — or very costly — to comply.

Today, we have similar potential for regulatory complexity cropping up in the form of state-based label requirements for foods that contain GMOs (Genetically Modified Organisms). Dozens of states are considering their own labeling requirements for food sold within their borders. It’s quite likely that each state would have a different set of labeling requirements. The complexity of complying with such disjointed regulations is costly and forbidding.

To help in this situation, United States Representative Mike Pompeo has introduced legislation that would eliminate the ability of states to require labeling. The bill is H.R. 4432: Safe and Accurate Food Labeling Act of 2014.

The proposed law does not prohibit voluntarily labeling.

What’s interesting is that opponents say this bill will create a new federal bureaucracy to enforce GMO regulations. I suppose that’s true. But it’s either that, or 50 states with 50 sets of regulations, all different. Cities could add regulations, too, further complicating the regulatory landscape.

Another observation: Critics of this bill say its supporters have “sold out” to the large food producer companies, Monsanto being mentioned most prominently. But it is large companies like Monsanto that are best able to cope with complicated regulations. Large companies have fleets of lawyers and compliance officers that can deal with burdensome regulation. And being large, these companies can spread the cost of regulation over a large sales volume.

But small companies, start up companies, and innovators don’t have lots of lawyers and compliance officers. Being small, they can’t spread the cost of regulation over a large sales volume. These are the companies that are most harmed by regulations like those that H.R. 4432 is designed to squelch.

It’s in the interest of large companies to have regulations that create barriers to entry to markets by new competitors. We often see companies lobbying to create such regulations. But H.R. 4432 will create a uniform playing field that is easier and simpler to navigate and obey.

Finally, markets have a remarkable ability to provide the products and information that consumers want. If a food producer senses that consumers want information about the ingredients in a product, they’ll provide it. Their competitors — if they see themselves disadvantaged — will also provide the information that consumers demand. The alternative is relying on 50 sets of government bureaucrats operating in 50 state capitals, plus ambitious city bureaucrats.

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Roberts campaign manager was for debates until he was against them

For Pat Roberts executive campaign manager Leroy Towns, political debates are important. At least until your candidate doesn’t want to debate.

Are debates important to the political process? According to a former North Carolina University journalism professor, the answer is yes, debates are very important:

Leroy Towns, political journalism professor at UNC, said debates are very important in the political process.

“Debates give people a chance to look at candidates close up and see how they act under pressure situations,” Towns said. (Libertarian candidate Michael Beitler kept from debate, Daily Tarheel, September 13, 2010)

Fast forward four years. As executive campaign manager for Pat Roberts during his primary campaign for United States Senator, Towns now says Roberts won’t debate challengers.

You might think that a former journalism professor would be in favor of the voting public having greater access to candidates. Especially candidates when in pressure situations, as Towns advocated in 2010. This idea is congruent with Roberts’ campaign commercials. They portray the senator as tough and tested; a Marine who will stand up to anyone.

Roberts’ decision to skip a useful ritual of American politics may lessen his stress level and advance his personal political career, and the career of campaign manager Towns. But it disrespects Kansas voters.

For McGinn, a liberal voting record is a tradition

Based on votes made in the Kansas Senate, the advertising claims of Sedgwick County Commission candidate Carolyn McGinn don’t match her record.

Kansas CapitolIn a radio advertisement, Carolyn McGinn says she is conservative. In a mailer, she touts her “fiscal conservative leadership” in the Kansas Senate.

But voting records don’t match these claims.

Several voting scorecards in recent years show Senator McGinn ranking low in terms of voting for economic freedom issues. These issues generally concern taxation, wasteful spending, and unnecessary regulation. In recent years, a freedom index has been produced by Kansas Policy Institute. In 2012 the Kansas Economic Freedom Index was a joint product of Americans for Prosperity-Kansas, Kansas Policy Institute, and myself. In 2010 I produced an index by myself. All tabulations show McGinn rarely voting in favor of economic freedom.

In the 2014 formulation, McGinn scored 25.8 percent. Four senators (Kansas has 40 senators) had lower scores. Some Wichita-area legislators that had higher scores than McGinn include Senator Oletha Faust-Goudeau and Representatives Ponka-We Victors, Gail Finney, Jim Ward, Tom Sawyer, and Brandon Whipple. All these are Democrats, by the way, and they voted more in favor of economic freedom than did Carolyn McGinn.

In 2013, McGinn scored 40 percent. Eight senators had lower scores.

In 2012 the scores were calculated in a different manner. McGinn scored -6, with 16 senators scoring lower.

There was no index for 2011.

In 2010, on an index that I produced, McGinn scored seven percent. Three other senators had the same score, and one had a lower score.

At a recent forum, McGinn criticized the concept of a vote index, telling the audience: “The economic freedom index, I just find that interesting. Because it’s based on amendments after we’re out of session, so you can pick and choose what you want for who.”

She’s right, in a way. I don’t know what she meant by “amendments,” but the organizations that construct voting scorecards choose votes that they believe distinguish candidates along some axis. Usually the votes are chosen after they’re made, although sometimes organizations “key vote” an issue. That means they alert legislators in advance of a vote that the vote will be included on their scorecard.

There are organizations that are in favor of more spending, less accountability, and fewer choices for Kansas parents and schoolchildren. They produce scorecards, too. In particular, Kansas Association of School Boards found that McGinn never voted against their position from 2009 to 2012. Kansas National Education Association, while not making a scorecard public, recommended that its members vote for McGinn.

"Cash for Clunkers - Death Row" by 293.xx.xxx.xx - Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons.

For Rep. Tiahrt, Cash for Clunkers was a good spending program

When the Obama Administration needed additional funds for the Cash for Clunkers program, Todd Tiahrt was agreeable to funding this wasteful program.

As summarized by the Congressional Research Service: “Makes emergency supplemental appropriations of $2 billion for FY2009 and FY2010 to the National Highway Traffic Safety Administration (NHTSA) of the Department of Transportation (DOT) for the Consumer Assistance to Recycle and Save Program (Cash for Clunkers Program).”

This bill passed the House of Representatives by a vote of 316 to 109. Among House Republicans, the vote was 78 to 95 in favor of passage. Todd Tiahrt was one of the minority of Republicans that voted for Cash for Clunkers.

(When this bill was voted on in the Senate, then-Senator and present Kansas Governor Sam Brownback voted in favor, and Pat Roberts voted against.)

"Cash for Clunkers - Death Row" by 293.xx.xxx.xx - Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons.
Cash for Clunkers – Death Row” by 293.xx.xxx.xxOwn work. Licensed under CC BY-SA 3.0 via Wikimedia Commons.
You may remember the Cash for Clunkers program from 2009. An initiative of President Barack Obama, it paid subsidies to those who traded in their “clunker” for a new fuel-efficient car. The clunkers were destroyed and recycled. This is an example of a program that seems like a benefit for everyone. Take old fuel-wasting cars off the road and replace them with new cars. Save the environment and stimulate the economy, all at the same time. Some writers advocate programs like this as a way to reduce inequality of incomes.

But the Cash for Clunkers program has been widely and roundly criticized. Did it work as advertised? It all depends on the meaning of the word “work,” I suppose. To evaluate the program, we need to look at the marginal activity that was induced by the program. When we do, we find that the cost of moving the additional cars is astonishingly high.

An Edmunds.com article calculated the cost per car for the clunkers program in a different way than the government, and found this:

Nearly 690,000 vehicles were sold during the Cash for Clunkers program, officially known as the Car Allowance Rebate System (CARS), but Edmunds.com analysts indicate that only 125,000 of the sales were incremental. The rest of the sales would have happened anyway. Analysts divided three billion dollars by 125,000 vehicles to arrive at the average $24,000 per vehicle sold. The average transaction price in August was $26,915 minus an average cash rebate of $1,667.

This is just the latest evidence that the clunkers program didn’t really increase the well-being of our country. Writing at the Foundation for Economic Education, Bruce Yandle doubts the glowing assessment of effectiveness of the program:

The doubt arises for at least three reasons. First, the program was supported politically primarily for its much touted environmental benefits. Carbon emissions would be reduced. But the reduction costs are at least ten times higher than alternate ways of removing carbon. Second, there is Bastiat’s parable of the broken window to consider. And third, there is a serious matter of eroding social norms for conserving wealth. A crushed clunker with a frozen engine is lost capital. … The cost per ton of carbon reduced could reach $500 under a set of normal values for critical variables. The cost estimate was $237 per ton under best case conditions. The much celebrated Waxman-Markey cap-and-trade carbon-emission control legislation estimates the cost of reducing a ton of carbon to be $28 when done across U.S. industries. Yes, we are getting carbon-emission reductions by way of clunker reduction, but we are paying a pretty penny for it. … Before touting the total benefits of clunkers, we must take account of the destroyed vehicles and engines that represented part of the wealth of the nation. As Tony Liller, vice president for Goodwill, put it: “They’re crushing these cars, and they’re perfectly good. These are cars the poor need to buy.”

It’s very difficult for the government to intervene in the economy and produce a net positive result. Even if it could, the harmful effects of taking one person’s money and giving it to another so they can get a discount on a new car far outweigh the small economic benefit that might be realized.

WichitaLiberty.TV July 2, 2014

WichitaLiberty.TV: Waste, economic development, and water issues.

In this episode of WichitaLiberty.TV: Wichitans ought to ask city hall to stop blatant waste before it asks for more taxes. Then, a few questions about economic development incentives. Finally, how should we pay for a new water source, and is city hall open to outside ideas? View below, or click here to view at YouTube. Episode 53, broadcast July 27, 2014.

Individual liberty, limited government, economic freedom, and free markets in Wichita and Kansas