Spending by the Wichita public school district, adjusted for inflation and enrollment.
Has spending by the Wichita public school district risen or fallen? A nearby chart shows recent spending figures. These figures are expressed on a per-student basis using full-time equivalent enrollment, adjusted to reflect changes in the consumer price index.
(Current expenditures do not include facility acquisition and construction service, debt principal retirement, interest expense, and other expense. Over the past ten years, total expenditures per student have averaged $2,219 per year more than current expenditures.)
Should anyone want to politicize these figures, note that the years of decline were under a Democratic governor and a one cent per dollar sales tax increase. For the past three years, these three measurements of spending have risen each year.
Spending data is from USD 259 Comprehensive Annual Financial Report for 2015, Miscellaneous Statistics, page 122.
Enrollment data from Kansas State Department of Education, available at http://www.ksde.org/Portals/0/School%20Finance/data_warehouse/total_expenditures/d0259exp.pdf.
Data adjusted for inflation using Consumer Price Index for All Urban Consumers, U.S. Bureau of Labor Statistics.
Could the Wichita public school district reduce spending on administration to previous levels?
In fiscal 2006 (the school year ending in 2006), the Wichita public school district spent $32,799,723 on administration. The amount rose and fell and rose again, with the district spending $42,353,120 in 2015.
If we express these figures on a per-student basis and adjust them for inflation, the district spent $851 in 2006, and $896 in 2015. Like spending in total dollars, that figure rose, then fell, and then rose again.
Could the Wichita public school district cut administration spending to 2006 levels, on a per-student, inflation-adjusted basis?
If the district could do this, that would reduce costs by $45 per student. With FTE enrollment for 2015 at 47,254.4, the district could save $2,126,448. Or it could use those savings to offset reductions in spending in other areas.
It’s up to the Wichita school district to decide.
Spending data is from USD 259 Comprehensive Annual Financial Report for 2015, Miscellaneous Statistics, page 122.
Enrollment data from Kansas State Department of Education, available at http://www.ksde.org/Portals/0/School%20Finance/data_warehouse/total_expenditures/d0259exp.pdf.
Data adjusted for inflation using Consumer Price Index for All Urban Consumers, U.S. Bureau of Labor Statistics.
Despite years of purported budget cuts, the Wichita public school district has been able to improve its student/teacher ratios.
When discussing school funding, there is controversy over how spending should be measured. What funds are included? Is KPERS included? Should we adjust for enrollment and inflation? What about bond and interest funds and capital outlay?
The largest expenditures of schools — some 80 percent nationwide — is personnel costs. In Kansas, and Wichita in particular, we’re told that budget cuts are causing school class sizes to increase.
When we look at numbers, we see that the Wichita school district has been able to reduce its student/teacher ratios substantially over the last ten years. (Student/teacher ratio is not the same statistic as class size.) There have been a few ups and downs along the way, but for all three school levels, the ratios are lower than they were ten years ago, and by substantial margins.
This means that Wichita schools have been able to increase employment of teachers at a faster rate than enrollment has risen.
So however spending is categorized in funds, whether KPERS contributions are included or not, whether the funding comes from state or local sources, whether spending is adjusted for inflation, the Wichita school district has been able to improve its student/teacher ratios.
Data is from USD 259 Comprehensive Annual Financial Report for 2015, Miscellaneous Statistics, page 122.
On Friday May 20, 2016, Professor Chapman Rackaway of Fort Hays State University briefed members and guests of the Wichita Pachyderm Club on the August primary elections. Two surprises: Will Jerry Moran have a Republican challenger, and who does Dr. Rackaway believe Donald Trump should select for a running mate? This is an audio presentation. Accompanying visual aids are here.
District 9 Kansas State School Board member Jim Porter published the following piece outlining what he considers to be deceptive statements about school funding and state taxes. He urges political leaders to “tell the whole story” but doesn’t practice what he preaches, as we found a dozen deceptive statements in his piece.
We are consistently hearing from those political leaders who are resisting what many of us consider to be the adequate funding of education that Schools are receiving more state support than ever and that support is increasing every year. Typically they say that people need to know the facts. Well, that is part of the story and although not a false statement it is certainly deceptive. I will make an attempt to explain the part of the story that they are not telling.
Kansas law requires publication of certain notices in newspapers, but cities like Wichita could also make them available in other ways that are easier to use.
Do you read the legal publications in your local newspaper? Often they are lengthy. Many pertain to just one person or company. All are supplied using ink expressed as fine print on the chemically processed flesh of dead trees.
But some legal publications are important and of interest to the general public.
Kansas law requires that many legal notices must be printed on a newspaper. That law needs to be changed. As you might imagine, newspapers resist this reform, as it might mean a loss of revenue for them. (That’s right. Newspapers don’t print these notices as a public service.)
Although the law requires publishing notices in a newspaper, it doesn’t prohibit publishing them in electronic form. If governmental agencies would make their legal publications available in ways other than the newspaper, citizens would be better served.
The City of Wichita does some posting of legal notices on its website. Under the City Clerk section, there is a page titled “Legal Notices” that holds notices of bidding opportunities. (Curiously, that page isn’t found when you search for “legal notices” on the city’s site.) So this is good, but the notices that are important to most people are not on the city’s website.
Posting all city legal notices on the city’s website would be easy to do. It would be quite inexpensive. The material is already in electronic form. The notices would become searchable through Google and other methods. Government transparency would increase. Interested parties could capture and store notices this material for their own use. Once people get used to this method of publication, it will make it easier to get state law changed.
So why doesn’t the City of Wichita post its legal notices on its website?
Another Wichita company that paid to persuade you to vote for higher taxes now seeks to avoid paying those taxes.
Next week the Wichita City Council will consider issuing industrial revenue bonds to benefit a local company. In Kansas, IRBs are not a loan of money from government. Instead, the bonds are a vehicle for conveying property tax abatements, and often sales tax exemptions. 1 The applicant company is Hijos, LLC/JR Custom Metal Products, Inc.
City documents give the value of abated taxes at $44,900 for the first year. Following years will probably be similar.
Besides property tax breaks, industrial revenue bonds can convey an exemption from paying sales taxes on purchases. City documents don’t state the amount of sales tax the company might avoid paying. But documents state the bonds will be used to fund capital equipment in the amount of $2,686,000. Sales tax on that is $201,450.
City documents also state this expansion will add 13 new jobs over the next five years at an average wage of $41,995.
Like several other companies that have received an exemption on paying sales tax on their purchases, 2345 JR Custom Metals advocated for you to pay more sales tax. During the campaign for the one cent per dollar Wichita sales tax in 2014, this company contributed $1,000 to persuade voters to approve the tax.
But now it seeks to avoid paying all sales tax on these purchases. It has done this several times in the recent past.
The jobs are welcome. But this incident and many others like it reveal a capacity problem, which is this: We need to be creating nine jobs every day in order to make any significant progress in economic growth. 6 If it takes this much effort and the forgiveness of hundreds of thousands of dollars in taxes to create 13 jobs over five years, how much effort and subsidy will it take to create the many thousands of jobs we need to create every year?
A computation of job growth in cities produces familiar results for Wichita.
NewGeography.com has released its Best Cities for Job Growth rankings for 2016. It is described as a “performance measure of job growth over the recent, medium, and longer term.” MSAs are assigned an index value calculated from job growth rates measured several ways.
Of 98 midsized MSAs, Wichita ranked 78 out of 98. That’s five spots higher in ranking from the year before. Considering all 421 MSAs, Wichita ranked 298.
Wichita’s economic development efforts need reform. The city has taken several initiatives such as forgoing cash incentives, taking a regional approach, and reorganizing its economic development agencies. In some cases, these reforms are merely window dressing. For others, the same groups of politicians, bureaucrats, and civic leaders are still in charge. We hope, somehow, that the same policies and people will produce something other than what has earned Wichita’s low ranking.
This site recently published an extensive critique of HB 2615, a bill that would protect doctors and health care professionals providing free charity care and reward them with a minor licensing incentive, and the author encouraged Gov. Brownback to veto the bill. Mr. Weeks has graciously allowed me, as a supporter who worked on behalf of HB 2615, to issue a response to his article. I truly appreciate the opportunity to present another side.
I agree that we do need to reconsider and reform occupational licensure across the board and we absolutely should expect medical professionals to stay current in their field. And while Continuing Medical Education credits are one way, they aren’t the only way to achieve that goal. In fact, Kansas already allows doctors to receive CME credits for a range of non-educational activities.
What’s more important though is the stifling effects abusive medical malpractice lawsuits which often benefit lawyers more than patients can have on the amount of free care doctors and health care professionals are willing to give. This means doctors and others offer less charity than they otherwise would while our low-income neighbors struggle to get access to the health care services they need. HB 2615 seeks to change this by reducing government barriers and freeing medical professionals to provide high-quality care to those who need it most.
HB 2615 doesn’t increase regulations on medical professionals, but eases the burden of existing continuing education regulations and rewards them for giving their time and talents to voluntarily serve those who can’t afford care. It also extends liability protections provided by the Kansas Tort Claims Act to medical professionals who choose to volunteer serving those in need so that the fear of a frivolous lawsuit doesn’t stand in the way of doing good.
Although Kansas currently requires physicians to participate in 50 hours of continuing medical education annually (which they often pay for out of their own pockets), the law divides continuing education hours into two categories.
Category I hours are the kind we typically think of when it comes to continuing education — the structured, academic lectures or workshops where physicians get up to speed on the latest medical research and techniques. 1 Every Kansas physician is required to earn 20 hours of Category I credit each year. 2 This doesn’t change with HB 2615.
The remaining 30 hours, then, may be earned from Category II, which is considerably more flexible. 3 A physician can earn Category II hours in a number of ways like “participating in journal clubs,” having “patient-centered discussions with other health care practitioners,” and (my personal favorite) “using searchable electronic databases in connection with patient care activities.” 4 The hours that physicians would earn for charitable care provided under HB 2615 fall under Category II, meaning that they will still have to earn the same 20 hours of critical Category I hours in order to maintain licensure. If we allow physicians to earn Category II credits for writing journal articles or Googling a patient’s symptoms, why shouldn’t we reward them with a few Category II hours for voluntarily providing a child with an inhaler to provide relief from his asthma symptoms, or treating a mother’s high blood pressure?
HB 2615 is a proven bi-partisan solution that works to provide care to our friends and neighbors in need by reducing regulatory barriers and unleashing the power of charity to immediately improve access to quality medical care. In 1993, the state of Florida instituted the nation’s first volunteer health services program, which served as the model for HB 2615. Since that time, volunteers in the Sunshine State have provided more than $2.8 BILLION in care to those in need. Each year, nearly 500,000 free patient visits are provided by the state’s top medical professionals valued at more than $300 million. 5 All this happened not through a government program, but because the government recognized that the local community was better equipped to handle a problem, so it got out of the way.
While the data is impressive, HB 2615 is about changing lives. Recently, I had the privilege of speaking with a doctor in Orlando who has dedicated her career to providing volunteer medical services. She told me a powerful story of a truck driver who lost his job because of severe diabetes. Since he was unable to work, he did not have insurance to get the care he needed to get his diabetes under control. Fortunately, he lived in the community where this doctor worked and he was able to get the treatment and care he needed. Eventually, his health improved, which allowed him to go back to work. Thanks to the efforts of this doctor and the volunteer health services program, this man is now working, providing for his family, and has health insurance coverage so that he can stay healthy and working. HB 2615 would bring more stories like this to Kansas.
If Governor Brownback wants to chalk up another win for individual liberty, signing HB 2615 is the best way to do it. This action would send a message that Kansas not only trusts its medical professionals to care for the needs of medically indigent citizens, but that they are better able to provide this care than any government program or insurance company could ever dream.
Some citizen activists and Wichita city council members believe that a single $500 campaign contribution from a corporation has a corrupting influence. But stacking dozens of the same $500 contributions from executives and spouses of the same corporation? Not a problem.
On December 1, 2015 the Wichita City Council considered an ordinance regarding campaign finance for city elections. A Wichita Eagle article on the topic started with: “A proposed change in city ordinance would allow corporations, labor unions and political action committees to have a greater influence on Wichita politics. For years, city elections have remained insulated from the power of those groups, unlike national and state elections, because Wichita ordinance specifically forbids them from contributing to local campaigns.” 1
The city believed the proposed action was necessary to comply with recent court rulings. Under the proposed ordinance — which was passed by the council — corporations, labor unions, and political action committees would be able to make a single campaign contribution per election cycle of up to $500, the same limit as for individuals.
During the council meeting, citizens testified as to the terrible consequences should the council pass this ordinance. Here are a few excerpts taken from the minutes of the meeting:
“Citizens United has unleashed Frankenstein monsters purchasing our government with their pocket money.”
“Stated corruption and conflicts of interest have become institutionalized and what City legal counsel suggests will sell the Council and the City of Wichita to the highest bidder.”
“Stated according to a lengthy report last week, by the Pew Research Center, across party lines people are distrustful and concerned about big money in politics.”
“Stated big money does not donate, it invests and buys democracy. Stated she is asking the City Council to keep big money out of the City Council elections.”
“Allowing big money into City elections is a concern.”
“Stated the City has been independent and has a freedom from influence that the state and the nation do not enjoy. Stated you will then be under the thumb of people who want to control you. which is scary to those of them who are highly opposed to this situation and hopes that the Council will think of them and how this vote will benefit them.”
“Stated the League [of Women Voters] has studied campaign finance over the years at all three levels. Stated they are currently involved in the study of money and politics and their position currently reads that they want to improve the methods of financing political campaigns in order to ensure the public’s right to know and combat corruption and undue influence, which is their biggest concern.”
In its reporting after the meeting, the Eagle reported more concern: 2
But those who oppose the measure said they were concerned about opening up local elections to party-affiliated groups like PACs and about transparency since PACs do not have to report their individual donors.
“Individuals should decide elections, not corporations,” Frye said.
Several members of the public spoke against the changes.
“People in the shadows are going to be pulling your strings,” said Russ Pataki.
“It’s very worrisome what big money has done to state and national politics. The city has been independent (of that),” said Lynn Stephan to the council before the vote. “You have a freedom from influence the state and nation don’t enjoy.”
So, people are concerned about the corrupting influence of political campaign donations from corporations and political action committees. Citizens — and the Wichita Eagle — believe that currently the city council is free from this influence.
But the reality of city council campaign financing is different.
In my testimony at the December 1 meeting, I explained that there are a few corporations that stack campaign contributions in a way that circumvents prohibitions. Although I did not mention it at the meeting, sometimes campaign finance reporting laws allowed this to happen without disclosure until after relevant action had happened. To illustrate, here is a timeline of events involving just one company and its campaign contributions.
2008 and 2009
Executives of Key Construction and their spouses make six contributions to the Lavonta Williams campaign, totaling $3,000.
2010 and 2011
Executives of Key Construction and their spouses make eight contributions to the Carl Brewer campaign, totaling $4,000. Brewer was Wichita mayor running for re-election in 2011.
Executives of Key Construction and their spouses make eight contributions to the Jeff Longwell campaign, totaling $4,000.
The City of Wichita is preparing to build a new airport terminal with a cost of around $100 million. Key Construction and Dondlinger and Sons Construction are two bidders. The contract is controversial. Dondlinger submitted a lower bid than Key, but it was alleged that Dondlinger’s bid did not meet certain requirements.
January 24, 2012
Executives of Key Construction and their spouses make six contributions to the James Clendenin campaign, totaling $3,000.
April 2, 2012
On this day and the next, executives of Key Construction and their spouses make eight contributions to the Jeff Longwell campaign for Sedgwick County Commission, totaling $4,000. At the time, Longwell was a Wichita city council member.
April 17, 2012
On this day and the next, executives of Key Construction and their spouses make eight contributions to the Lavonta Williams campaign, totaling $4,000.
July 16, 2012
An executive of a Michigan construction company and his wife contribute $1,000 to Longwell’s campaign for county commission. The company, Walbridge, is partnering with Wichita-based Key Construction to bid on the Wichita airport terminal contract.3
July 17, 2012
The Wichita city council votes in favor of Key Construction and Walbridge on a dispute over the airport terminal contract, adding over $2 million to its cost. Brewer, Longwell, Williams, and Clendenin participated in the meeting and voted. City documents state the job of the council this day was to determine whether the staff who made the decision in favor of Key Construction “abused their discretion or improperly applied the law.”4
July 20, 2012
An additional $2,250 in contributions from Walbridge executives to the Jeff Longwell campaign for Sedgwick County Commission campaign is reported.
Williams and Clendenin file campaign finance reports for the calendar year 2012. This is the first opportunity to learn of the campaign contributions from Key Construction executives and their spouses during 2012. For Williams, the Key Construction-related contributions were the only contributions received for the year. Clendenin received contributions from Key Construction-related individuals and parties associated with one other company during the year.
Is there a pattern? Yes. Key Construction uses its executives and their spouses to stack individual contributions, thereby bypassing the prohibition on campaign contributions from corporations. This has been going on for some time. It is exactly the type of corrupting influence that citizens are worried about. It has been taking place right under their eyes, if they knew how or cared to look. And Key Construction is not the only company to engage in this practice.
Just to summarize: The Wichita city council was charged to decide whether city officials had “abused their discretion or improperly applied the law.” That sounds almost like a judicial responsibility. How much confidence should we have in the justice of a decision if a majority of the judges have taken multiple campaign contributions from executives (and their spouses) of one of the parties?
In some ways, it is understandable that citizens might not be aware of this campaign contribution stacking. The campaign finance reports that council members file don’t contain the name of contributors’ employers. It takes a bit of investigation to uncover the linkage between contributors and the corporations that employ them. For citizens, that might be considered beyond the call of duty. But we should expect better from organizations like the League of Women Voters.
Certainly there is no excuse for the Wichita Eagle to miss or avoid things like this. Even worse, it is disgraceful that the Eagle would deny the problem, as it did in its November 23 article quoted above.
In summary, some citizen activists — most council members, too — believe that a single $500 campaign contribution from a corporation has a corrupting influence. But stacking dozens of the same $500 contributions from executives and spouses of the same corporation? Not a problem.
Political campaign contributions are a form of speech and should not be regulated. What we need are so-called pay-to-play laws, which regulate the linkage between campaign contributions and council member participation in matters that benefit donors.5
Either that, or we need council members with sufficient character to recognize when they should refrain from voting on a matter.
An op-ed written under the banner of a non-profit organization appears to violate the ban on electioneering.
In a recent Wichita Eagle op-ed, former state budget director and senior fellow at the Kansas Center for Economic Growth Duane Goosen offered some wise advice to Kansas voters: “Before voting, check out legislative candidates carefully.”1
But he then follows immediately with this: “If a candidate supported Brownback’s fiscal experiment and wants to stay the course, being a financially literate voter requires marking your ballot for somebody else.”
This seems to cross a line, that line being electioneering by non-profit organizations. KCEG itself is not a recognized non-profit organization. Instead, it is a side project of Kansas Action for Children, Inc., which is a section 501(c)(3) tax-exempt organization.
In exchange for their tax exempt status, these organizations face certain restrictions. In particular, the Internal Revenue Service says these organizations are “absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.”2
The IRS says voter education activities conducted in a non-partisan manner are allowed. But: “On the other hand, voter education or registration activities with evidence of bias that (a) would favor one candidate over another; (b) oppose a candidate in some manner; or (c) have the effect of favoring a candidate or group of candidates, will constitute prohibited participation or intervention.”3
The candidates Goossen recommends voting against, while not named in his op-ed, are a clearly-defined set. Their names appear in news stories, editorials, the Journal of the House of Representatives and other places. This is an example of “oppose a candidate in some manner,” and is where Goossen appears to cross the line from voter education to electioneering.
Explaining common economic development programs in Kansas.
TIF projects: Some background
Tax increment financing disrupts the usual flow of tax dollars, routing funds away from cash-strapped cities, counties, and schools back to the TIF-financed development. TIF creates distortions in the way cities develop, and researchers find that the use of TIF means lower economic growth. Click here.
STAR bonds in Kansas
The Kansas STAR bonds program provides a mechanism for spending by autopilot, without specific appropriation by the legislature. Click here.
Industrial Revenue Bonds in Kansas
Industrial Revenue Bonds are a mechanism that Kansas cities and counties use to allow companies to avoid paying property and sales taxes. Click here.
Community Improvement Districts in Kansas
In Kansas Community Improvement Districts, merchants charge additional sales tax for the benefit of the property owners, instead of the general public. Click here.
In Kansas, PEAK has a leak
A Kansas economic development incentive program is pitched as being self-funded, but is probably a drain on the state treasure nonetheless. Click here.
Government intervention may produce unwanted incentives
A Kansas economic development incentive program has the potential to alter hiring practices for reasons not related to applicants’ job qualifications. Click here.
City of Wichita
City of Wichita’s economic development page is here. The Sedgwick County/City of Wichita Economic Development Policy is here.
State of Kansas
A page at the Kansas Department of Commerce with incentive programs is here.
Kansas Governor Sam Brownback has another opportunity to promote and protect individual liberty by blocking expansion of an ever-growing regulatory state.
It took a bit of legislative wrangling, but on Sunday May 1 HB 2615 passed the Kansas Senate by a vote of 40 to zero, and the Kansas House of Representatives by 115 to seven. In its final form, the bill allows physicians and dentists to satisfy a portion of their continuing education requirements by providing charity care to medically indigent persons.1
This bill provides an opportunity to examine and reconsider the purpose of occupational licensure. Most fundamentally: In the case of physicians and dentists, we trust them with our health, our very lives. Can’t we trust them to do whatever they believe is necessary to stay up-to-date in their field without the government requiring a specific number of hours of continuing education? By the way, how does the state of Kansas know how many hours of continuing education are necessary to stay current? Is it the same in all branches of medicine and dentistry? That’s what the Kansas regulations imply.
In Kansas, physicians must participate in 50 hours of continuing medical education annually. This education requirement is satisfied by participating in “activity designed to maintain, develop, or increase the knowledge, skills, and professional performance of persons licensed to practice a branch of the healing arts.”2
But HB 2615 will let physicians satisfy 20 hours of this requirement by providing 40 hours of health care to needy people. Having doctors perform routine medical care — doing their daily job, in other words — doesn’t seem likely to advance the “knowledge, skills, and professional performance” of doctors, which is the stated goal of the regulation.
We have, therefore, a regulation that has a plausibly reasonable purpose — ensuring that physicians and dentists are up-to-date in professional knowledge — instead being used by the state to “encourage” them to provide free labor.
Charity is good. It’s wonderful. It’s why I regularly engage in charitable activity. But it isn’t charity when government is forcing you to do something. I have a feeling that many healthcare professionals already provide much charitable care. But now Kansas wants them to enter into an agreement with the Secretary of Health and Environment to provide gratuitous services if they want credit for performing care as a way to avoid continuing education requirements. Again: If continuing medical education is necessary, why let it be avoided by providing charity care? By allowing the performance of routine medical care to substitute for continuing education, isn’t the state creating a risk to physicians’ regular patients?
Governor Brownback has shown by his veto of SB 338 this year that he has the capacity to appreciate individual rights. In 2012 his veto of SB 353 shows he has an appreciation of the harm of burdensome regulation.
Now, Governor Brownback has another opportunity to promote individual liberty and block the expansion of an ever-growing regulatory state.
“The bill would allow charitable healthcare providers and dentists to fulfill one hour of continuing education credit for performance of two hours of gratuitous service to medically indigent persons if the provider signs an agreement with the Secretary of Health and Environment (Secretary) to provide gratuitous services. Healthcare providers would be allowed to fulfill a maximum of 20 continuing educational credits through gratuitous service per licensure period, and dentists would be allowed to fulfill a maximum of 6 continuing educational credits through gratuitous service per licensure period.” Kansas Legislature. HB 2615, Fourth conference committee report brief, May 1, 2016. Available at www.kslegislature.org/li/b2015_16/measures/documents/ccrb_hb2615_03_may1.pdf. ↩
In this episode of WichitaLiberty.TV: Author John Chisholm talks about entrepreneurship, regulation, economics, and education. View below, or click here to view at YouTube. Episode 119, broadcast May 8, 2016.
John Chisholm’s new book Unleash Your Inner Company: Use Passion and Perseverance to Build Your Ideal Business at Amazon and its own website.
Wichita’s mayor pens an op-ed that is counter to facts that he knows, or should know.
In the pages of the Wichita EagleWichita Mayor Jeff Longwell wrote: “The city of Wichita has held its mill levy steady for the past 22 years.”1
That’s the mayor’s opinion. The facts, as can be easily found in government documents, are that the Wichita mill levy rises nearly every year.2 Since 2005 it has risen every year.
The mayor, city council, and bureaucrats say they have not taken action to raise the mill levy. They also say the mill levy is set by the county. All this is true.
But the county sets the mill levy based on two factors, one the city controls: The amount it decides to spend. The other factor, the assessed valuation of property, is not controlled by the city. So it is understandable that the mill levy may vary by small amounts from year to year when the two numbers are melded to form the actual mill levy. Some years the levy might rise, and in some years, it may fall. If it is a truly random matter, we should expect that over time the number of rising years and falling years should be equal, and that the overall change should be near zero.
But in Wichita, the mill levy rises nearly every year. And over time, since 1995, it has risen by 4.46 percent.
(Besides that, there has been a shift in the application of property tax revenue, with revenue was diverted from debt service to current spending. As recently as 2007 the city devoted 31 percent of property tax revenue to debt service. In 2015 it was 26 percent.)
What should concern Wichitans about their mayor’s op-ed is that he knows these facts. Or, at least he should. Despite the data that is readily available in the city’s comprehensive annual financial reports, Mayor Longwell has chosen to remain misinformed and/or uninformed, and to spread that to citizens.
Following are excerpts from the minutes of the August 7, 2012 council meeting, which Jeff Longwell attended as council member, and following that, video.
Wichita City Council, August 7, 2012
Bob Weeks 2451 Regency Lakes Court stated we say the City has not raised its mill levy in a long time and thinks it is true that this Council has not taken action to raise the mill levy, but it has increased. Stated in 2002 the City’s mill levy was 31.845 and last year 32.359, which is an increase of about half a mill or 1.6 percent. Stated we should also recognize that property tax revenue increased from about $83 million to $118 million dollars or 42 percent. Stated we did not experience anything near that in the rate of growth of population or inflation? even the two put together. Stated in the City sales tax collection for the same years, $41 million to about $55 million or 34 percent increase. Stated City revenues have increased quite a bit even though the Council has not taken explicit action to increase either the sales tax rate or the property tax rate. Stated another thing he is concerned about is shifting one mill of property tax revenue from the debt service fund to the general fund. Stated over the past years since 2007 there has been a shift of about 2.5 mills, which is more than the explicit policy of one mill, which will be ending over the next two years. Stated we have not delayed paying off debt in the sense that we have not made our scheduled bond payments but that 2.5 mills could have been used to retire debt instead of supporting current spending. Stated we could have repurchased some of our outstanding bonds or we could have used that money to pay for things that we borrowed for. Stated we need to realize that we have been not taking advantage of opportunities to retire longterm debt and had been redirecting that spending to current fund spending, which is where Cowtown and the Nature Center come from. Stated we need to be aware of these types of things as we make the policies going forward.
Mayor Brewer asked staff to explain the figures that Mr. Weeks was talking about.
Kelly Carpenter Finance Director stated regarding the mill levy, they started out at 10 mills in the capital improvement plan. Stated they reduced that down to 7.5 mills and now we are gradually increasing that mill levy back up in the debt service fund to 8.5 mills over the next two years.
Council Member O’Donnell stated he was referring that the mill levy has actually increased.
Kelly Carpenter Finance Director stated the overall mill levy has not increased within the last 19 years. Stated there has been a shift between the general fund and the debt service fund but the overall mill levy of the 32 mills has not increased.
Council Member O’Donnell asked Mr. Weeks to return to the podium and asked where his figures are from.
Bob Weeks stated from the 2011 Comprehensive Annual Financial Report, page H17. Stated they are the numbers that he extracted from that report. Stated it may not be that this Council took an action to raise the mill levy but somehow it did increase.
Council Member O’Donnell asked staff to answer that.
Mark Manning Finance Department the mill levy is set by the county and what they tell the Council each year is that the mill levy in the proposed budget is not changed from the mill levy certified by the county, the prior year. Stated they do not know what the mill levy will be for 2013 right now and will not know until November when the county finalizes its evaluation. Stated it may be slightly higher or lower and that is why you see those annual fluctuations. Stated Mr. Weeks is correct? some years it goes up and some years it goes down a little bit. Stated it does fluctuate and there is nothing we can do to control that but the general policy has been to keep it level for the last 19 years.
Wichita State University Associate Professor of History George Dehner presented an interesting program at the Wichita Pachyderm Club titled, “Academia and Professorate: Just What are They Doing Up in that Ivory Tower?” This is an audio presentation recorded on April 29, 2016.
Wichita’s largest employer asks to avoid paying millions in taxes, which increases the cost of government for everyone else, including young companies struggling to break through.
This week the Wichita City Council will consider offering Spirit Aerosystems economic development incentives that will allow the company to avoid paying some $45 million in taxes. This will be accomplished through the authorization of $280 million of Industrial Revenue Bonds. 1
Industrial Revenue Bonds are a vehicle for generating and conveying tax exemptions. 2 In the IRB program, government is not lending money, and Wichita taxpayers are not at risk if the bonds are not repaid. In fact, in the present case the applicant company plans to purchase the bonds itself, according to city documents. Instead, the purpose of the IRB process is to allow Spirit to escape paying property taxes and sales taxes.
Usually the agenda packet the city prepares for council members and the public contains the amount of tax expected to be foregone. For this item that summary is missing, and the sales tax exemption is not mentioned. I have prepared a table summarizing data from the analysis prepared for the city by the Center for Economic Development and Business Research at Wichita State University.
Of note, the share of the cost of the incentives born by the City of Wichita is small, slightly less than one percent. The bulk of the cost is born by the State of Kansas, with the Derby School District and Sedgwick County facing smaller shares of the cost.
Also, the city is forcing a decision on a neighboring jurisdiction that it would not accept for itself, unless it uses one of many exceptions or loopholes. This adverse decision is forced upon the Derby School District. It faces a benefit-cost ratio of 1.16 to 1, which is below the city’s standard of 1.30 to 1, unless an exception is cited. 3 The Derby School District is not involved in this action and has no ability to affect the issuance of these bonds, should it desire to.
Besides this, the granting of these tax breaks calls into question the validity of taxation. If a company can be excused from tens of millions of dollars in taxes, can we say there is equal treatment under law?
Effect on young companies
When large companies receive tax abatements and exemptions, others must pay the cost of government. In particular, small and young business firms are usually not eligible for incentive programs like that being offered to Spirit, and therefore must bear a disproportional share of the cost of government. This is an important consideration, as Wichita is relying on entrepreneurship as a principle method of growing its economy.
The cost of these tax abatements burdens a class of business firms that can’t afford additional cost and risk. These are young startup firms, the entrepreneurial firms that we need to nurture in order to have real and sustainable economic growth and jobs. This action — the award of incentives to an established company — is harmful to the Wichita economy for its strangling effect on entrepreneurship and young companies. As this company and others receive incentives and escape paying taxes, others have to pay.
There’s plenty of evidence that entrepreneurship, in particular young business firms, are the key to economic growth. But Wichita’s economic development policies, as evidenced by this action, are definitely stacked against the entrepreneur. As Wichita props up its established industries, it makes it more difficult for young firms to thrive.
Based on documents supplied by the city, Spirit will avoid paying $6,620,025 in sales tax through its participation in the IRB program. Kansans should be aware that our state has one of the highest sales taxes in the nation on groceries. The effect of this falls disproportionally on low-income households. 4
While Spirit seeks to avoid paying millions in sales tax, it campaigned for ordinary Wichitans to pay more sales tax. When Wichita placed a one cent city sales tax on the ballot in November 2014, Spirit Aerosystems contributed $10,000 to the group campaigning in favor of the sales tax. 5 Spirit’s immediate past president contributed $10,000 to the same effort.
This week American City Business Journals presented the results of a study of small business vitality in cities. 6 Wichita ranked at number 104 out of 106 cities studied. Awarding incentives to large companies places small business at a disadvantage. Not only must small business pay for the cost of government that incentivized companies avoid, small companies must also compete with subsidized companies for inputs such as capital and labor.
Finally, research has found that the pursuit of large companies doesn’t produce the desired growth: “The results show that large firms fail to produce significant net benefits for their host communities, calling into question the high-stakes bidding war over jobs and investment.” 7
The State of Kansas was ordered to take remedial action to correct material omissions in the state’s financial statements prepared under the leadership of Duane Goossen.
During the administration of Governor Mark Parkinson, the State of Kansas issued eight series of bonds raising $273 million. Regarding these, the U.S. Securities and Exchange Commission has determined that the state failed to adequately inform investors of significant, material, negative information.
In a nutshell, according to the SEC: The Kansas Public Employee Retirement System (KPERS) was in terrible financial condition compared to other states, and Kansas did not adequately disclose that to potential bond buyers. That violated the Securities Act. In 2011 Kansas implemented reforms to the SEC’s satisfaction.
Of interest to current Kansas public affairs is that the head of the Kansas Department of Administration at the time the SEC found these violations was Duane Goossen. In its findings, the SEC specifically criticized the Department of Administration for its preparation of financial statements included in bond offerings — statements that were missing materially important, and negative, information.
Since his departure from Kansas government, Goossen has remained active in shaping Kansas policy, first as vice president for fiscal and health policy at Kansas Health Institute. 1 In 2015 Goossen joined Kansas Center for Economic Growth as Senior Fellow. 2 In announcing Goossen’s appointment, KCEG executive director Annie McKay noted his “wealth of expertise and knowledge.”
KCEG advocates for more taxes on Kansans, with the Goossen announcement mentioning “unprecedented and unaffordable tax cuts.” Goossen added he was excited to continue “contributing to the conversation across Kansas about the importance of budget and tax policy and the consequences of drastic tax cuts on everyday investments critical to Kansans.”
It’s ironic that Goossen mentioned “investments,” as we now know that under his leadership Kansas violated Sections 17(a)(2) and 17(a)(3) of the Securities Act, materially misleading bond investors while other states made full disclosure.
While critics of current Kansas government — including Goossen 3 — use KPERS underfunding as evidence of failure, this incident shows that KPERS has had funding problems for a long time, under leadership of both parties, and of both conservatives and moderates.
The SEC findings
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.” 4
The nature of the SEC’s inquiry involved “the disclosures surrounding eight bond offerings through which Kansas raised $273 million in 2009 and 2010.” 5
In its order, the SEC found: “The failure to disclose this material information in the Official Statements resulted from insufficient procedures and poor communications between KDFA and the Kansas Department of Administration (“KDA”), which provided information to KDFA for inclusion in the Official Statements, including preparing the State’s financial statements that were included as part of the Official Statements.” 6 (emphasis added)
The SEC also found that Kansas was an outlier among the states in failing to disclose negative information: “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.”
Prior to a new issue of bonds in November 2011, the SEC found that the State of Kansas instituted satisfactory policies and procedures regarding disclosure of material information.
SEC. Administrative proceeding file no. 3-16009. Order instituting cease-and desist proceedings pursuant to section 8a of the Securities Act of 1933, making findings, and imposing a cease-and-desist Order. Available at www.sec.gov/litigation/admin/2014/33-9629.pdf. ↩
Kansas Center for Economic Growth, often cited as an authority by Kansas news media and politicians, is not the independent and unbiased source it claims to be.
When supporters of more government spending and taxation in Kansas want to bolster their case, they often turn to Kansas Center for Economic Growth (KCEG). Portraying itself as a “nonprofit, nonpartisan organization,” KCEG says its mission is “to advance responsible policies by informing public discussion through credible, fact-based materials.” It says it conducts research and analysis to “promote balanced state policies.” 1
As it turns out, KCEG is not really the nonpartisan, independent think tank it pretends to be. Instead, as shown below, KCEG is a side project of Kansas Action for Children, Inc.. Both organizations are funded by and affiliated with well-known liberal organizations whose goals are always to expand the size and scope of government.
This is of interest to Kansans as groups that support low taxes, efficient government spending, and economic freedom are often maligned as being merely puppets of larger organizations that hide their purportedly nefarious goals. In particular, Kansas Policy Institute is often mentioned in this regard.
On its website KPI says it is “an independent think-tank that advocates for free market solutions and the protection of personal freedom for all Kansans.” 2 Also, KPI says it produces “objective research and creative ideas to promote a low-tax, pro-growth environment.”
Whenever KPI is mentioned, often condemnation of American Legislative Exchange Council follows, scorned for purportedly being a shadowy outfit that forces model legislation on unwitting legislators. But ALEC’s mission is quite clear and transparent. Its website says ALEC is “dedicated to the principles of limited government, free markets and federalism.” Economic freedom is also mentioned. ALEC says it provides a “toolkit for anyone who wants to increase the effectiveness and reduce the size, reach and cost of government.” 3
These mission statements plainly state the purposes of KPI and ALEC. Contrast them with the mission of Center on Budget and Policy Priorities, which is filled with material like this: “We pursue federal and state policies designed both to reduce poverty and inequality and to restore fiscal responsibility in equitable and effective ways.” 4 “Fiscal responsibility” can mean almost anything. To CBPP and its affiliates like KCEG, it means more taxes and more spending.
That dovetails cleanly with the preference of most Kansas newspapers. They — and most other news outlets — call for more spending and more taxation as the solution to all problems, state and local. They do so explicitly on their editorial pages, which is their right and privilege. In their news reporting, by using KCEG as an “objective” source, they rely on a source that isn’t being honest about its independence, its organizational status, and its ingrained policy preferences.
Who — or what — is Kansas Center for Economic Growth?
On its website, Kansas Center for Economic Growth (KCEG) says it is a “nonprofit, nonpartisan organization.” But no records exist for this entity at either the IRS or Kansas Secretary of State. Instead, KCEG uses Kansas Action for Children, Inc. (KAC) as its “fiscal agent” and funding source. KAC is a registered 501(c)(3) tax-exempt organization.
On its IRS form 990s, KAC lists a grant from AECF and SFAI, the purpose of which is supporting the type of work KCEG performs. AECF is Annie E. Casey Foundation, a non-profit with income of nearly $223 million and an endowment of $2.9 billion, according to most up-to-date IRS form 990 available. SFAI is State Priorities Partnership, originally founded as the State Fiscal Analysis Initiative (SFAI). It lists KCEG as a partner organization. 5 Both organizations promote solutions involving more government spending and taxation.
State Priorities Partnership, in turn, is coordinated by Center on Budget and Policy Priorities (CBPP). 6 CBPP promotes itself as pursuing “federal and state policies designed both to reduce poverty and inequality and to restore fiscal responsibility in equitable and effective ways.” 7 Its recommend policies nearly always call for more government spending and taxation.
In 2013 Bob Weeks was recognized by the Kansas Policy Institute with the John J. Ingalls Spirit of Freedom Award, given annually to a Kansan who uniquely supports the principles of individual liberty and economic freedom.
In this episode of WichitaLiberty.TV: Keen Umbehr is an attorney from Alma. Besides setting a precedent protecting free speech in the United States Supreme Court, he’s an advocate for criminal justice reform and a former candidate for governor. View below, or click here to view at YouTube. Episode 118, broadcast May 1, 2016.