Category Archives: Kansas state government

Private sector employment growth in the states, year-over-year change, Kansas highlighted. Click for larger version.

Job growth in the states and Kansas

Let’s ask critics of current Kansas economic policy if they’re satisfied with the Kansas of recent decades.

Critics of Kansas Governor Sam Brownback and his economic policies have pounced on slow job growth in Kansas as compared to other states.

Private sector employment growth in the states, Kansas highlighted. Click for larger version.
Private sector employment growth in the states, Kansas highlighted. Click for larger version.
The nearby illustration shows private sector job growth in the states during the period of the Graves/Sebelius/Parkinson regimes. This trio occupied the governor’s office from 1994 to 2011. Kansas is the dark line.

At the end of this period, Kansas is just about in the middle of the states. But notice that early in this period, the line for Kansas is noticeably nearer the top than the bottom. As time goes on, however, more states move above Kansas in private sector job creation.

Private sector employment growth in the states, year-over-year change, Kansas highlighted. Click for larger version.
Private sector employment growth in the states, year-over-year change, Kansas highlighted. Click for larger version.
The second illustration shows the one-year change in private sector job growth, Kansas again highlighted. Note there are some years during the first decade of this century where Kansas was very near the bottom of the states in this measure.

Some Kansas newspaper editorialists and candidates for office advocate for a return to the policies of Graves/Sebelius/Parkinson. Let’s ask them these questions: First, are you aware of the poor record of Kansas? Second, do you want to return to job growth like this?

How to use the visualization.
How to use the visualization.
I’ve gathered and prepared jobs data in an interactive visualization. You may click here to open the visualization in a new window and use it yourself. Data is from Bureau of Labor Statistics, U.S. Department of Labor. This data series is the Current Employment Statistics (CES), which is designed to measure employment, hours, and earnings with significant industrial and geographic detail. More information about his data series is at Understanding the employment measures from the CPS and CES survey.

Kansas Farm Scenic Sky Clouds Wheat Farmland kansas-243079_1280

Third annual Kansas Freedom Index released

From Kansas Policy Institute.

3rd Annual Kansas Freedom Index Released

Support of Freedom About More Than Politics, IDs Role of Government and Freedom of Citizens

July 1, 2014 — Wichita — Kansas Policy Institute released a new scorecard tracking votes from the 2014 legislative session. The third annual Kansas Freedom Index takes a broad look at voting records and establishes how supportive state legislators are regarding economic freedom, student-focused education, limited government, and individual liberty. The Index is intended to provide educational information to the public about broad economic and education freedom issues that are important to the citizens of our State. It is the product of nonpartisan analysis, study, and research and is not intended to directly or indirectly endorse or oppose any candidate for public office.

“An informed citizenry is an essential element of maintaining a free society. Having a deeper understanding of how legislation impacts education freedom, economic freedom and the constitutional principles of individual liberty and limited government allows citizens to better understand the known and often unknown consequences of legislative issues,” said KPI president Dave Trabert.”

A Freedom Percentage is calculated for each legislator, representing the relative position of a legislator’s raw score on a number line of the minimum and maximum score, with the percentage indicating proximity to the maximum score.

A positive cumulative score (or a Freedom Percentage above 50%) indicates that a legislator generally supported economic and education freedom, while a negative cumulative score (or Freedom Percentage below 50%) indicates that a legislator was generally opposed. A score of zero or a Freedom Percentage of 50% indicates that a legislator was generally neutral. The cumulative score only pertains to the specific votes included in the Kansas Freedom Index and should not be interpreted otherwise. A different set of issues and/or a different set of circumstances could result in different cumulative scores.

Trabert continued, “Each year it has been clear that support of economic freedom isn’t an issue of political affiliation. Republicans represented at least 70 percent of all House members and all Senate members since 2012. Those counts would produce fairly strong results one way or the other if economic freedom was a partisan issue, but instead, the overall score of both chambers was very near neutral.”

Trabert concluded, “Too often votes come down to parochial or personal issues and the idea of freedom is left on the legislature’s cutting room floor. Hopefully, the Kansas Freedom Index can start to recalibrate citizens and legislators towards supporting the freedoms of everyday Kansans and not be driven by politics.”

2014 Freedom Index by the Numbers
State and local direct general expenditures, per capita, growth since 1991. Kansas is the dark line.

Kansas expenditures, compared to others

Spending by Kansas state and local governments has grown faster than in most other states.

State and local direct general expenditures, per capita, growth since 1991. Kansas is the dark line.
State and local direct general expenditures, per capita, growth since 1991. Kansas is the dark line.
Using data gathered by Tax Policy Center at Brookings Institution, I’ve prepared an interactive visualization of state spending trends over time. Click here to open the visualization in a new window. You may click on any number of states to highlight them. (Use Ctrl+click to add states after the first.) You may also choose “in or out” of the set of states near Kansas. Finally, you can select a range of years. This data is indexed, meaning that states start at the same level, so that relative changes in spending may be seen.

Data is from State & Local Government Finance Data Query System. http://slfdqs.taxpolicycenter.org/pages.cfm. The Urban Institute-Brookings Institution Tax Policy Center. Data from U.S. Census Bureau, Annual Survey of State and Local Government Finances, Government Finances, Volume 4, and Census of Governments (1977-2011). Date of Access: (29-Jul-2013).

Kansas political signs are okay, despite covenants

Kansas law overrides neighborhood covenants that prohibit political yard signs before elections.

Some neighborhoods have restrictive covenants that prohibit homeowners from placing any signs in their yard except signs advertising homes for sale. But a 2008 Kansas law overrides these restrictive covenants to allow for the placement of small political yard signs starting 45 days before an election. Still, residents of covenant neighborhoods may want to observe their neighborhood’s restrictions.

For the August 5, 2014 primary election, the 45 day period in which signs are allowed started on June 21. (Although I could be off by a day. Sometimes lawyers count days in strange ways.)

The bill was the product of then-Senator Phil Journey of Haysville. The bill passed unanimously in both the Kansas House and Senate.

According to the First Amendment Center, some 50 million people live in neighborhoods with homeowners associations. And laws like the 2008 Kansas law are not without controversy, despite the unanimous vote in the Kansas Legislature.

While the U.S. Supreme Court has ruled that governmental entities like cities can’t stop homeowners from displaying political yard signs, a homeowners association is not a government. Instead, it is a group that people voluntarily enter. Generally, when prospective homeowners purchase a home in a neighborhood with restrictive covenants, they are asked to sign a document pledging to comply with the provisions in the covenants. If those covenants prohibit political yard signs, but a Kansas law says these covenants do not apply, what should a homeowner do? Should state law trump private contracts in cases like this?

Practically: Should you display signs in your yard?

While Kansas law makes it legal for those living in communities with covenants that prohibit political yard signs, residents may want to observe these convents. Here’s why: If neighbors are not aware of this new Kansas law and therefore wrongfully believe that the yard signs are not allowed in your neighborhood, they may think residents with signs in their yards are violating the covenants. By extension, this could reflect poorly on the candidates that are being promoted.

Those who are not aware of the law allowing yard signs are uninformed. Or, they may be aware of the law but disagree with it and wish their neighbors would not display political yard signs. These people, of course, may vote and influence others how to vote. Whether to display yard signs in a covenant neighborhood is a judgment that each person will have to make for themselves.

The Kansas statute

K.S.A. 58-3820. Restrictive covenants; political yard signs; limitations. (a) On and after the effective date of this act, any provision of a restrictive covenant which prohibits the display of political yard signs, which are less than six square feet, during a period commencing 45 days before an election and ending two days after the election is hereby declared to be against public policy and such provision shall be void and unenforceable.

(b) The provisions of this section shall apply to any restrictive covenant in existence on the effective date of this act.

Or, as described in the 2008 Summary of Legislation: “The bill invalidates any provision of a restrictive covenant prohibiting the display of political yard signs, which are less than six square feet, 45 days before an election or two days after the election.”

Kauffman Index of Entrepreneurial Activity, showing Kansas highlighted against neighboring states. Click for larger version.

Kauffman index of entrepreneurial activity

The performance of Kansas in entrepreneurial activity is not high, compared to other states.

The Ewing Marion Kauffman Foundation prepares the Kauffman Index of Entrepreneurial Activity. According to the Foundation, “The Kauffman Index of Entrepreneurial Activity is a leading indicator of new business creation in the United States. Capturing new business owners in their first month of significant business activity, this measure provides the earliest documentation of new business development across the country.”

Kauffman Index of Entrepreneurial Activity, showing Kansas highlighted against neighboring states. Click for larger version.
Kauffman Index of Entrepreneurial Activity, showing Kansas highlighted against neighboring states. Click for larger version.
As shown by the data, Kansas ranks low in entrepreneurial activity. This is true when Kansas is compared to the nation, and also when compared to a group of nearby states.

I’ve prepared two visualizations that present this data. One holds data for all states. Click here to open it in a new window.

Instructions for using the visualization of Kauffman data. Click for larger version.
Instructions for using the visualization of Kauffman data. Click for larger version.
A second visualization presents the data for Kansas and some nearby states. Click here to open it in a new window.

Visualization created using Tableau Public.

real-gdp-state-2014-05-19-instructions

Kansas economy has been lagging for some time

Critics of tax reform in Kansas point to recent substandard performance of the state’s economy. The recent trend, however, is much the same as the past.

real-gdp-state-2014-05-19There are a number of ways to measure the performance of an economy. Often the growth of jobs is used. That’s fine. Here I present an alternative: the gross domestic product for a state. As with job growth, it is not the only measure of a state’s economy. It is a comprehensive measure, encompassing changes in population, employment, and productivity. The nearby static illustration from an interactive visualization shows Kansas (highlighted in blue) compared to some neighboring states.

real-gdp-state-2014-05-19-instructionsThe visualization holds data from the U.S. Bureau of Economic Analysis. You may click on a state’s name to highlight it. You may choose different industry sectors, such as government or private industry.

Use the visualization below, or click here to open it in a new window, which may work best. Visualization created using Tableau Public.

Debunking CBPP on tax reform and school funding — Part 4

From Kansas Policy Institute.

Debunking CBPP on tax reform and school funding — Part 4

By Dave Trabert

kansas-policy-institute-logoWe continue our debunking of the Center on Budget and Policy Priorities (CBPP) latest report entitled “Lessons for Other States from Kansas’ Massive Tax Cuts.” Part 1 dealt with state revenues. Part 2 covered state spending in general and school funding in particular. Part 3 addressed claims that that tax reform hasn’t boosted the economy. Today we tackle their assertion that tax cuts won’t lead to economic growth.

CBPP claim #4 — Little Evidence to Suggest That Tax Cuts Will Improve Kansas’ Economy in the Future

Actually, there is a lot of evidence; CBPP just conveniently avoids it. Instead, they substitute their opinion and employ their standard tactic of making claims without disclosing supporting data; they also reference predictions that Kansas will trail the nation next year in some economic indicators.

We’ll start the debunking with a brief history lesson. Private sector job growth in Kansas trailed the national average in ten of the last fifteen years (1998-2013). Kansas’ private sector gross domestic product trailed eight times (1997-2012) and personal income trailed eleven of the last fifteen years (1998-2013). Indeed, Kansas’ history of economic stagnation was the impetus for tax reform. As we explained in Part 3, the full economic impact of tax reform will take years to unfold. It’s intellectually dishonest of CBPP to imply that tax reform isn’t working because a long term negative trend hasn’t suddenly created tremendous gains.

Now let’s look at the evidence. The adjacent table compares the performance of the ten states with the lowest state and local tax burdens with the ten states with the highest burdens, based on the most recent rankings from the Tax Foundation. The low-burden states are Wyoming, Alaska, South Dakota, Texas, Louisiana, Tennessee, New Hampshire, Nevada, South Carolina and Alabama. The high-burden states are New York, New Jersey, Connecticut, California, Wisconsin, Minnesota, Maryland, Rhode Island, Vermont and Pennsylvania.

The low-burden states increased jobs at twice the rate of high-burden states. Low-burden states have superior growth in Wages and Salaries and Private Sector Gross Domestic Product. Low-burden states have positive domestic migration while high-burden states have negative domestic migration. In other words, US residents are choosing to move to low-burden states and choosing to leave high-burden states.

Tax reform critics like to attribute the superior economic performance of low-burden states to weather and access to ports and natural resources. But you’ll notice that both groups have states with good weather, bad weather, coastal, land-locked and natural resources. But there is one category which really separates the two groups of states — spending. High-burden states spend 40 percent more per resident to provide the same basket of essential services. States with an income tax spend 49 percent more than those without an income tax.

The key to having low taxes is to keep spending under control by providing services at a better price. A state could be awash in oil revenue and still have a high tax burden if it spent more. Texas, by the way, gets less than 3 percent of revenue from oil; they have a low tax burden because they only spent $2,293 per resident to provide the same basic basket of services on which Kansas spent $3,409 (2012 actual per NASBO).

The moral of the story is pretty clear: states that spend less, tax less — and grow more.

Myth: The Kansas tax cuts haven’t boosted its economy

From Kansas Policy Institute.

Debunking CBPP on tax reform and school funding — Part 3

By Dave Trabert

kansas-policy-institute-logoWe continue our debunking of the Center on Budget and Policy Priorities (CBPP) latest report entitled “Lessons for Other States from Kansas’ Massive Tax Cuts.” Part 1 dealt with state revenues and Part 2 covered state spending in general and school funding in particular. Today we debunk their claims that tax reform hasn’t boosted the economy.

CBPP claim #3 – Kansas’ tax cuts haven’t boosted its economy.

While tax reform hasn’t produced the “shot of adrenaline” predicted by Governor Brownback, the problem is one of political enthusiasm rather than economics. Most elected officials are prone to effusive optimism for their ideas, just as opponents to their ideas can often be counted upon to distort and deliberately misstate information in pursuit of their own beliefs.

The data pretty clearly shows that states with lower tax burdens have much stronger economic growth and job creation over time; we’ll review the facts in Part 4. Today’s post covers some of the reasons why the benefits of Kansas’ tax reform will unfold over several years rather than overnight and explain a number of misleading claims by the Center on Budget and Policy Priorities (CBPP).

Many employers are also awareFirst of all, tax reform was implemented while coming out of a recession. It’s impossible to know the extent to which this impacts employers’ decision-making on adding jobs or relocating, but having run a few businesses, I can appreciate how the initial benefits of tax reform might be used to shore up the business while continuing to work through the recession.

Concurrent federal changes are also a factor. Pass-through income on LLCs, Subchapter S corps, partnerships and proprietorships was not subject to state income tax in 2013 but those employers were simultaneously hit with higher federal income taxes (marginal rates and on capital gains) and multiple changes related to Obamacare.

Predictability is an important element of tax policy, and some of the mixed signals coming out of Topeka over the last two years may also be prompting taxpayers to proceed cautiously. The 2012 tax reform legislation would have reduced income taxes by $4.5 billion over the first five years but changes implemented in 2013 took back about $700 million. While still a very positive net effect, the 2013 changes sent a number of mixed signals.

Many employers are also well aware that a majority of legislators and Governor Brownback have not yet made the necessary (and quite feasible) spending reductions that will be required to fully implement tax reform. Kansas’ General Fund budget in 2012 was 25 percent more per-resident than states with no income taxtotal budgeted spending was 39 percent higher on a per-resident basis. Every state provides the same basic services – public education, highways, social services programs, etc. — but some states provide those services at a much better price and keep taxes low.

The fiscal year 2015 General Fund budget of $6.273 billion is a new record for Kansas and is 2.9 percent higher than the 2012 budget. Until government is made to operate more efficiently, taxpayers must consider the possibility of further modifications to the tax plan — and that uncertainty will continue to impact economic growth.

Relocating a business is also not something that happens quickly. For starters, leases might have several years to run before a move is feasible.

CBPP uses a combination of unsubstantiated claims, fails to put a lot of information in context and exploits the unrealistic notion that tax reform would have an immediate, explosive impact on the state’s economy. “Data from” is not how intellectually honest people substantiate a position; they show you all their data or at least tell you exactly what data they used and where to find it. Claiming that a one-year change in jobs or earnings is proof that something as complex as major tax reform failed is just a political statement; it is certainly not an intellectually honest economic analysis.

Yes, private sector job grew a little slower in 2013 than in 2012, but that was not a Kansas phenomenon. In fact, private sector job growth nationwide in 2012 was 2.2% but dipped to 2.1% in 2013.[1] This is a good example of CBPP ignoring context.

It’s also important to examine the underlying factors that contribute to a state average. The adjacent table shows that Kansas did better than all but one adjacent state in 2013. Colorado did better, but then Colorado has historically had a better tax structure than Kansas and also did a better job of controlling spending. Less favorable tax and spending policy has been introduced in Colorado over the last few years but, just as it takes time for upward momentum to build, it does as well for the full measure of bad policy to be seen.

Digging deeper, we find that the Kansas City, Kansas metro area not only outperformed the national average but also grew at five times the rate of the Kansas City, Missouri metro area. The Wichita metro lost jobs in aerospace but that is a reflection of the global economy; the balance of the Wichita metro was almost at the national average.

CBPP dismisses the increase in new business filings but if history is any guide, these gains are quite significant. Research conducted by the Center for Applied Economics at the University of Kansas found that, if not for jobs created by new startups in their first year of existence, Kansas would have only had two years of net job growth between 1997 and 2010.

Dr. Arthur Hall, who conducted the research at KU, says “Economic development is a numbers game. The more that an economic environment motivates entrepreneurs to try new business ideas, the more likely a gazelle will be born.” Dr. Hall cites Garmin Industries as an example of what he calls a “gazelle” — a company founded by two people in Lenexa, Kansas in 1989 that is now a multi-billion dollar company.

Hall’s views are similar to those of Carl Schramm, former CEO of the Ewing Marion Kauffman Foundation, a leading entrepreneurial think tank in Kansas City. In 2010, Schramm told Forbes Magazine “The single most important contributor to a nation’s economic growth is the number of startups that grow to a billion dollars in revenue within 20 years.”[3]

The initial economic signs are encouraging but the true economic impact of tax reform won’t be known for several years. Snap judgments based on partial one-year data are the hallmark of politicians and special interest groups looking for justification to support their beliefs — whether in support of or opposition to tax reform.

[1] Bureau of Labor Statistics, average annual private sector employment not seasonally adjusted.

[2] The Kansas City, Kansas metro is comprised of Franklin, Johnson, Leavenworth, Linn, Miami and Wyandotte counties.  The Kansas City, Missouri metro is comprised of Bates, Caldwell, Cass, Clay, Clinton, Jackson, Lafayette, Platte and Ray counties.

[3] “What Grows an Economy,” Forbes Magazine.

Kansas wind turbines

Renewables portfolio standard bad for Kansas economy, people

Kansas wind turbinesA law that forces Kansans to buy expensive electricity is not good for the state and its people.

A report submitted to the Kansas House Standing Committee on Energy and Environment in 2013 claims the Kansas economy benefits from the state’s Renewables Portfolio Standard, but an economist presented testimony rebutting the key points in the report.

RPS is a law that requires the state’s electricity utilities to generate or purchase a certain portion of their electricity from renewable sources, which in Kansas is almost all wind. An argument in favor of wind energy requirementy from the Polsinelli Shugart law firm is at The Economic Benefits of Kansas Wind Energy.

Michael Head, a Research Economist at Beacon Hill Institute presented a paper that examined each of Polsinell’s key findings. The paper may be read at The Economic Impact of the Kansas Renewable Portfolio Standard and Review of “The Economic Benefits of Kansas Wind Energy” or at the end of this article. An audio recording of Head speaking on this topic is nearby.

Michael Head, Beacon Hill Institute

Here are the five key findings claimed to be economic benefits to the Kansas economy, and portions of Head’s responses.

Key Finding #1: “New Kansas wind generation is cost-effective when compared to other sources of new intermittent or peaking electricity generation.”

The first observation to make from this key finding is that if it were true the state RPS policy is not necessary. If wind power is truly cost-effective compared to other sources of energy, state mandates that wind power be used should be repealed, allowing wind power to compete with other technologies to provide low cost electricity in Kansas.

This point is obvious. The actions of the wind power industry — insisting on mandates and subsidies — lets us know that they don’t believe their own claim.

Key Finding #2: “Wind generation is an important part of a well-designed electricity generation portfolio, and provides a hedge against future cost volatility of fossil fuels.”

Hedging has been, and will continue to be, a useful tool for utilities, and benefits the consumer. But the Kansas state government should not engage in this level of industrial policy by regulating just how much utilities can hedge, all for the sake of requiring wind power production. This is not a benefit in itself. Utilities will attempt to maximize profits by consistently analyzing the energy market and making the best decisions, often through long term purchasing agreements. … In short, hedging is a valuable tool when left to the discretion of the utility, but by utilizing a heavy-handed mandate, state lawmakers are actually constraining the ability of the utilities to make sound business decisions.

Key Finding #3: “Wind generation has created a substantial number of jobs for Kansas citizens.”

This key finding fails to take into consideration opportunity costs, a concept that Bastiat explained in his 1850 essay, and is a prime example of the reviewed paper only considering benefits. If a shopkeeper has a window broken, this creates work for a glazer to replace the window. However, this classic “broken window” fallacy mistakes breaking windows as job creation policy. At this point “The Economic Benefits of Kansas Wind Energy” is correct, wind generation does create jobs, just as a broken window creates jobs. But the report stops at this point and fails to provide a complete analysis of the effect of wind generation on total employment in Kansas.

As Bastiat showed, a consideration must be made to the opportunity cost. How would the shopkeeper have spent his money if he did not need to replace his window? He could use the money on capital investment, further growing his business, hire another worker or make various other purchases. Regardless of what it was, they would have all brought him more benefit, than replacing his window. If not, he would have broken the window himself.

This is one of the most important points: By forcing Kansans to pay for more expensive electricity, we lose the opportunity to use money elsewhere.

Key Finding #4: “Wind generation has created significant positive impact for Kansas landowners and local economics.”

This key finding makes a common mistake by assuming transfer payments are a benefit, a fallacy. The transfers of money via lease payments or property tax payments are not benefits. This transfer of money is a cost to one party and a benefit on the other, and can be illustrated easily.

What if Kansas wind farms vastly overpaid for their land and lease payments were valued at $1 billion a year. This report would place the benefit of wind power leasing this land at $1 billion a year. But the project has not changed, where did these new benefits come from?

In fact, there would not be any change to the net benefit of the project. Landowners would amass benefits equal to $1 billion minus the land value and utilities would amass costs equal to $1 billion minus the land value. These costs would in turn be passed along to rate payers in the form of higher utility costs. This illustrates the point that this policy is industrial policy. By dispersing the costs of a project to all citizens in the state, small, but powerful, groups with strong lobbying efforts are able to gather the rewards.

Key Finding #5 “The Kansas Renewable Portfolio Standard is an important economic development tool for attracting new business to the state.”

This key finding is related closely with the analysis of the job benefits that wind power purportedly conveys. Of course, legally requiring that utilities use specific sources of electricity will attract new business in that sector to the state. But we need to see the whole picture. This policy has costs, which will be borne by state residents and businesses via higher utility prices.

In conclusion, Head asked the obvious question: “With all of these supposed benefits of wind power, why does it require a government mandate and taxpayer funding?”

CBPP misleading Kansans on revenue

From Kansas Policy Institute.

Debunking CBPP on tax reform and school funding (Part 1)

By Dave Trabert

If Ronald Reagan were alive and saw the latest piece from the Center on Budget and Policy Priorities (CBPP), he would say, “Well, there they go again … not letting the facts get in the way of the story they want you to believe.”

The premise of their March 27 piece is that “Kansas’ huge cuts have left … schools and other public services stuck in the recession, and declining further — a serious threat to the state’s long-term economic vitality.” That’s not true, of course, but it’s what the way-left-leaning CBPP wants you to believe … and what the big-government interests in Kansas are only too happy to repeat.

CBPP and their allies seem to believe that government needs an unlimited supply of taxpayer money and could not possibly operate with a penny less. It’s a classic entitlement mentality and the premise is laughably false.

The volume of falsehoods and misleading statements in “Lessons for other States from Kansas’ Massive Tax Cuts” is so great that we will address each of their five “lessons” in separate blog posts this week. Today’s post will focus on their claim about state revenues.

This isn’t the first time we’ve debunked CBPP tales about Kansas and sadly, probably won’t be the last.

CBPP claim #1 — Kansas’ revenue loss will rise to 16 percent in five years if the tax cuts are not reversed.

As is typical for CBPP, they don’t explain how they arrive at their 16 percent figure but it probably has something to do with their entitlement focus (what government could/should have rather that what it needs). Regardless, the facts from Kansas Legislative Research (KLRD) show otherwise.

KLRD estimates that General Fund revenue will be 9.6 percent higher in five years.1 FY 2014 is the first full year of income tax reform; revenue is 7.1 percent lower this year than the record-setting level of 2012 but it is actually 1.3 percent higher than three years ago! Even more remarkable, a new revenue record is predicted to be set in FY 2018 — just four years after historic tax reform was fully implemented.

I dare you to find one media outlet in Kansas reporting these remarkable facts. To the contrary, most media and their big-government allies cling to versions of CBPP’s “sky is falling” mentality.

CBPP is flat out lying when they say Legislative Research “… estimates that Kansas received $803 million less revenue this year because of the 2012 tax cuts…” It should be noted here that CBPP provides no citation for their outrageously false claim. Here’s the truth. KLRD did predict that much of a loss in personal income tax revenue (not total revenue as claimed by CBPP) two years ago when tax reform was being discussed but they did so on a static basis using the parameters of a particular proposal. Changes to that proposal have since been implemented and consensus revenue estimates have dramatically improved. CBPP wants you to believe that an outdated, static estimate is current despite having access to information that contradicts their claim.

The November 2013 Consensus Revenue estimate for FY 2014 was $5.857 billion or just $484 million below last year’s total revenue.2 Tax revenue (which comprises the vast majority of General Fund revenue) was predicted to be down $466 million and Other Revenue was projected to be $18 million lower.

But tax revenue has been running well ahead of November projections so official revenue estimates were increased in April (after the CBPP publication) by $103.3 million for FY 2014 and $74.3 million for FY 2015.3 Later years were not adjusted upward but that’s just a function of the Consensus Revenue process; we will hopefully an even brighter revenue forecast soon from Legislative Research.

Whenever you see CBPP’s false claims repeated by media, legislators or others who are opposed to tax reform, ask them why they are spreading false claims in light of these facts from Kansas Legislative Research:

  • FY 2014 revenue will be 1.3 percent greater than just three years ago.
  • Revenues will hit an all-time high in FY 2018, just four years after full implementation of tax reform (and maybe sooner, if revenues continue to run ahead of projection).

Tomorrow’s post will deal with their fairy tales about education and other state spending.


1. Kansas Legislative Research, General Fund Profile published by KLRD on April 6, copy in author’s possession. Actual revenue for FY 2011 and FY 2012 and estimated revenue for FY 2016 through FY 2019; FY 2014 and FY 2015 revised per April Consensus Revenue at http://skyways.lib.ks.us/ksleg/KLRD/Publications/2014_CRE_ShortMemo-4-17-14.pdf.
2. Kansas Legislative Research,  http://skyways.lib.ks.us/ksleg/KLRD/Publications/2013_CRE_ShortMemo-11-6-13.pdf
3. Kansas Legislative Research,  http://skyways.lib.ks.us/ksleg/KLRD/Publications/2013_CRE_ShortMemo-11-6-13.pdf

Kansas Capitol

In Kansas, tax giveaways for job creation found ineffective

Kansas-Watchdog-Logo-3-Mark-512From Kansas Watchdog.

Study: State tax giveaways to big business don’t really bring jobs

By Travis Perry, Kansas Watchdog

BIG SUBSIDIES: Kansas has forked over millions in tax breaks since 2009, but new research says it has been ineffective at accomplishing its main goal: Creating new jobs.

OSAWATOMIE, Kan. — By the time theMcQueeny Group signed up for tax breaks through Kansas’ primary economic development engine, vice president Rod Slump said the business was already looking to make a move.

Tax breaks provided through Promoting Employment Across Kansas were just icing on the cake.

Like numerous other firms who have relocated to Kansas to take advantage of PEAK benefits, Overland Park-based McQueeny Group has been handed thousands in tax breaks for creating new jobs — more than $160,000 since 2011, according to the Kansas Department of Commerce.

The state contends McQueeny’s relocation from the Crossroads near downtown Kansas City, Mo., has brought 15 jobs to Kansas, though Slump said only two or three were new to the company after the move.

PEAK allows an employer to retain 95 percent of the payroll tax for creating jobs that pay at or above the county median wage, with the goal of spurring new hiring. In the last two years alone, the program has granted more than $28 million in tax breaks, according to annual reports prepared by the state.

But Slump told Kansas Watchdog all PEAK did was help make the relocation decision easier.

“It’s hard for us to tie creation of jobs to that, as much as it was a business opportunity,” Slump said.

New research suggests McQueeny Group is the rule, not the exception.

“It looks like there’s no evidence that PEAK incentives work in the sense of job creation any way we cut this,” said Nathan Jensen, associate professor of political science at Washington University in St. Louis, who compared data between numerous companies to see if the tax breaks had any real-world effect. “Doing this over and over again, you kind of come up with the same result.”

Prof. Nathan Jensen

Jensen presented the findings in his working paper, “Evaluating Firms-Specific Location Incentives,” during a conference April 17 at Kansas City’s Ewing Marion Kauffman Foundation.

Through statistical research, Jensen discovered that PEAK tax breaks had little to no effect on whether a company created new jobs.

“They’re just incentivizing firms that are already going to expand and relocate,” Jensen said, noting that issues with incentives are hardly restricted to the Sunflower State. “Most of the data is that about two-thirds to three-fourths of firms that get an incentive, globally, were basically getting an incentive to do what they were going to do anyway.”

Jensen compared companies of similar size and industry, examining the job creation figures from 2006 and onward; PEAK was signed into law in 2009. For each of the 72 PEAK firms examined, Jensen matched them with five comparable firms in Kansas that didn’t receive PEAK tax breaks.

Then he did it again.

Jensen said what he found was incredibly unsurprising.

Not only is there no statistical link between PEAK benefits and job creation, Jensen also wrote the “PEAK program is disproportionately used to attract investment from across the (Missouri) border.”

Despite noting that PEAK played a minimal role in Mcqueeny Group’s job creation, Slump disagreed it doesn’t help fuel new jobs, contending the tax breaks free up funds for additional hiring.

While Jensen’s findings are damning enough, he said more information is still needed to see whether PEAK is worth the massive taxpayer support it has received since its inception. Information such as when a firm applied for PEAK benefits and when tax breaks were awarded, as well as tracking which firms were rejected from the program, would go a long way toward determining the value of PEAK, Jensen noted.

More than anything, Jensen would just like to see a little transparency.

“It’s the sort of thing I think should just be on a website,” he said.

Currently, the Kansas Department of Commerce only makes PEAK data available through an open records request. Darla Price, PEAK program director, told Kansas Watchdog she couldn’t say why the information wasn’t posted online; decisions like that aren’t made at her level, she said.

Dan Lara, deputy secretary for public affairs for the state commerce department, said the agency is considering allowing greater levels of transparency regarding the PEAK program, but has yet to make an actual decision.

The Docking Institute of Public Affairs at Fort Hays State University all but confirmed the ineffectiveness of the program after surveying PEAK firms last year. Respondents admitted that 75 percent of new hires would have happened whether or not they received the tax breaks. However, the report justifies the massive program by simply stating that, hey, jobs are jobs.

“(A)ll of the new employees hired by PEAK firms relocating to Kansas represent additional jobs for the State, regardless of whether they would have been hired without the PEAK Program,” the Docking report stated.

Contact Travis Perry at travis@kansaswatchdog.org, or follow him on Twitter at @muckraker62. Like Watchdog.org? Click HERE to get breaking news alerts in your state!

Seal of the State of Kansas

Two versions of the Kansas income tax cuts

From Kansas Policy Institute.

Two Versions of the Income Tax Cuts: The Media’s Story and Reality

By Steve Anderson

In January 2011, when I was first appointed State Budget Director, the state was on the verge of what appeared to be a financial meltdown. Under the previous administration, the first negative ending balance in state history had been allowed exist. Kansas was $27.6 million “in the hole” and this headline was on the front page of the Wichita Eagle “Shortfall for ’11 State Budget Tops $500 million.” Much of the first six months was spent trying to not bounce checks and finding areas to cut spending immediately. We also spent considerable time giving agencies more flexibility to spend down unencumbered funds as agencies had previously been allowed to overspend available funding, a typical policy of Gov. Mark Parkinson and his Budget Director Duane Goosen. However, even as I was using the power the Budget Director holds to operationally limit spending I realized the media’s claim of a $500 million shortfall was an exaggeration.

At the end of the first six months Kansas had $188 million in the bank and within eighteen months the state ended fiscal year 2012 with a $502.9 Million ending balance. This would have been lost to citizens who weren’t doing their own research. They never would have known that the “budget” crisis had passed because the media had moved onto their next “crisis” without revisiting the initial headlines and, in the process, calling into question their first reports.

The media’s next “crisis” was centered on the individual income tax cuts that were passed in 2012. The bill to reduce the tax burden on citizens “would slash income taxes and is expected to produce a $2 billion deficit within five years” according to theWichita Eagle’s articleThe Kansas City Star led with this quote of “state fiscal analysts projecting budget deficits reaching $2.5 billion in 2018.” Just to further emphasize the dire situation the Star added this scare from a representative of a special interest group with no known expertise on the economic impact of lower tax burdens by saying that the tax cuts, “have an enormous impact on everything from public education to public health coverage to infrastructure to other vital social safety-net services.”

Who are these “state fiscal analysts” that the media used to fan the flames and how did this version of a looming fiscal crisis occur? The state fiscal analysts are staff of the Kansas Legislative Research Division (KLRD) which presents their projection of the impact on the state’s finances of any change in tax regulations. Here are the numbers from KLRD’s analysis of Senate Bill Substitute for House Bill 2117 — the tax cut bill — and the impact on the state’s budget:***

The approach used by KLRD to generate these numbers is not consistent with the realities of state finances. There are three fundamental problems with KLRD’s analytic techniques which create these illusions of fiscal crises where none exists.

  1. It is impossible for the state to have a negative ending balance of this size because the state cannot print money (unlike Washington) which precludes the ability to carry such huge imbalances forward year after year.
  2. The projection of spending growth the KLRD staff uses ignores the reality of the first issue. Spending cannot continue at a rate that exceeds revenue once the first negative balance occurs. KLRD’s analysis ignores options to control spending that are available to the state’s elected officials and instead shows increasing negative balances. In reality shortfalls and surpluses are dealt with each year through a multitude of available options.
  3. KLRD uses a static view of what will happen to revenues when money is returned to the state’s citizens. For example, the assumption is that if a tax cut is $500 million there will be $500 million less in revenues that come into the state coffers the next year. To believe that one of two things would have to happen, 1) either the money would be buried in a jar in the back yard, or 2) every dollar would have to be spent out of state. In reality, that $500 million in tax cuts means that business owners will reinvest some part of that money and wage earners will spend some of it in the local economy.

A more realistic view of Senate Bill Substitute for House Bill 2117 puts things in perspective. The following chart shows what has transpired, to date, based on the effects of the tax cuts. It is very good example of why citizens should take media accounts based on KLRD’s numbers with a full shaker of salt.

Kansas-division-budget-kpi-2014-04

The net difference between KRLD’s ending balance and what the current actual receipts show is $913.4 million. The crisis of the “enormous impact on everything from public education to public health coverage to infrastructure to other vital social safety-net services” that the Kansas City Star’s “expert” on the tax cuts predicted hasn’t occurred. But, we have not yet heard the Eagle or the Star report these facts.

Kansans simply haven’t heard that, after returning $231.2 million to taxpayers in FY-2013 and ANOTHER $802.8 million in fiscal year 2014, ending balances were actually up nearly a billion dollars over the estimates! Estimates that directly led to some dire headlines upon their initial release. Returning nearly a billion dollars to Kansans’ pocket books while ending balances have been steady or increasing is an incredible story of success that media would want to share with readers.

Citizens of Kansas have a right to hear forecasts of disasters but they also deserve to be told by those same media outlets that those forecasts didn’t match what actually took place and that things are going well. Citizen should insist that their legislators request that KLRD begin a policy of only producing projections for a reasonable number of future years based on the realities of the Kansas Constitution. This would limit the use of statistically flawed data being used to fuel for the fire of those who are playing politics under the guise of “news reporting.”

I will follow up shortly with part two of this story on where the state’s finances are headed including commentary and possible adjustments to April 2014 Consensus Revenue Estimates.

*** Kansas Legislative Research Division Senate Tax Plan with Adjusted Severance Tax Receipts 2/15/2012 — full version on file. Expenditures and Revenues Totaled in order to fit the page

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Kansas not good on spending visibility

For more about this issue, see Open Records in Kansas.

The results are in, and the news isn’t good: Kansas continues to plummet in state spending transparency rankings, and it barely squeaked by with a grade of D-minus, according to a report by the U.S. Public Interest Research Group.

Kansas wind turbines

Rural Kansans’ billion-dollar subsidy of wind farms

From Kansas Policy Institute.

Rural Kansans’ Billion-Dollar Subsidy of Wind Farms

By Dave Trabert

Kansas wind turbinesNo, I’m not talking about any federal tax subsidies or mandates to buy high-cost wind energy that have forced higher taxes and electricity prices on every citizen. This billion-dollar gift comes in the form of local property tax exemptions. In some ways, this handout is even more insidious because the cost is borne by a relatively small number of Kansas homeowners and employers in the rural counties where wind farms exist.

Under current law, renewable energy producers enjoy a lifetime exemption from property taxes in Kansas. I testified last week in support of SB 435 to limit their property tax exemption to ten years.  As shown on an attachment to my testimony, the Kansas Legislative Research Department says there is a $108.4 million annual difference between the small fees paid in lieu of taxes and the taxes that would be due if taxed at the regular rates within each county. So technically, the legislation would only “limit” the property tax gift to $1.1 billion over ten years on existing wind farms; more tax gifts would still be done on new wind farms and other renewable energy facilities.

And while renewable energy producers were basically getting a free ride, property taxes on everyone else where going through the roof!

Giving property tax exemptions to private companies, regardless of the rationale, only increases everyone else’s property tax. Local government spending is not curtailed to absorb the exemption; cities and counties just raise taxes on everyone else. We encouraged the Legislature to also require that local mill rates be reduced proportionately if these property tax gifts are limited to ten years so that the new revenue from renewable energy producers’ property tax is used to reduce the burden on everyone else. (You should have seen the stink-eye this produced from the tax-and-spend crowd.)

Predictably, wind farm lobbyists lined up to protest that this legislation would increase their property taxes and send a bad message to the wind industry. Even local governments are opposed to taking away the exemption — after all, they can get their money from everyone else and take credit for bringing jobs and investment to their communities. They refuse to acknowledge that any economic benefit enjoyed by the green energy industry (and their own political benefit) comes out of the pockets of everyone else.

P.S. Remember this billion-dollar gift the next time you’re angered by cronyism in Washington, DC. Bad players in Washington often learn their craft at the state level; fending off bad policy at the state level has many long term benefits.

Kansas Capitol

State employment visualizations

Kansas CapitolThere’s been dueling claims and controversy over employment figures in Kansas and our state’s performance relative to others. I present the actual data in interactive visualizations that you can use to make up your own mind.

(Let’s keep in mind that jobs are not necessarily the best measure of economic growth and prosperity. Russell Roberts relates an anecdote: “The story goes that Milton Friedman was once taken to see a massive government project somewhere in Asia. Thousands of workers using shovels were building a canal. Friedman was puzzled. Why weren’t there any excavators or any mechanized earth-moving equipment? A government official explained that using shovels created more jobs. Friedman’s response: ‘Then why not use spoons instead of shovels?’”)

It’s important to note there are two series of employment data provided by the U.S. Bureau of Labor Statistics, which is part of the U.S. Department of Labor. The two series don’t measure exactly the same thing. Nearby is an example of just how different the two series can appear.

cps-ces-difference-example-2013-12

A document from BLS titled Employment from the BLS household and payroll surveys: summary of recent trends explains in brief: “The Bureau of Labor Statistics (BLS) has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey. … These estimates differ because the surveys have distinct definitions of employment and distinct survey and estimation methods.”

State employment based on Current Employment Statistics (CES) survey, also known as the payroll or establishment survey.
State employment based on Current Employment Statistics (CES) survey, also known as the payroll or establishment survey.
Another BLS document explains in detail the differences between the CPS and CES data. For example: CES: “Designed to measure employment, hours, and earnings with significant industrial and geographic detail” CPS: “Designed to measure employment and unemployment with significant demographic detail.”

Another difference: CES: “Self-employed persons are excluded.” CPS: “Self-employed persons are included.” (See Understanding the employment measures from the CPS and CES survey.)

State employment based on Current Population Survey (CPS), also known as the household survey.
State employment based on Current Population Survey (CPS), also known as the household survey.
I’ve gathered data from BLS and made it available in two interactive visualizations. One presents CPS data; the other holds CES data. You can compare states, select a range of dates, and choose seasonally-adjusted or not seasonally-adjusted data. I’ve create a set that allows you to easily choose Kansas and our nearby states, since that seems to be relevant to some people. (I included Texas in this set, as we often compare ourselves to that state.) The visualizations are indexed, meaning that each shows the percentage change in values from the first data shown.

Using the visualization.
Using the visualization.
Here is the visualization for CES data, and here is visualization for CPS data.

money-bag-struggle

Special interests struggle to keep special tax treatment

Detail of stairway in Kansas Capitol.
Detail of stairway in Kansas Capitol.

When a legislature is willing to grant special tax treatment, it sets up a battle to keep — or obtain — that status. Once a special class acquires preferential treatment, others will seek it too.

When preferential tax treatment is granted, that is, when government says someone doesn’t have to pay taxes, it’s usually the case that someone else has to pay. That’s because governmental bodies usually don’t reduce their spending in response to the tax breaks they give. Spending stays the same (or rises), but someone isn’t paying their share. Therefore, others have to make up the missing tax revenue.

In Kansas, SB 72 has been passed by the Senate and may be considered by the House of Representatives. This bill would, according to its supplemental note “provide a property or ad valorem tax exemption on all property owned and operated by a health club.” In effect, this bill would give all health clubs the same property tax exemption that the YMCA enjoys on its fitness centers.

When the legislature uses tax law to achieve goals, the statute book becomes complicated as illustrated by the many special sales tax exemptions in Kansas. K.S.A. 79-3606 details the special sales tax exemptions that the legislature has granted. In order to list them all, the statute has sections labeled from (a) through (z), then from (aa) through (zz), then from (aaa) through (zzz), and finally from (aaaa) through (gggg).

Some of these sections are needed and valuable, such as the section that exempts manufacturers from paying sales tax on component parts and ingredients used to build final products. It is supposed to be a retail sales tax, after all.

But then there are sections like this: “(vv) (18) the Ottawa Suzuki Strings, Inc., for the purpose of providing students and families with education and resources necessary to enable each child to develop fine character and musical ability to the fullest potential.”

I have no doubt that this organization is engaged in useful work and that there should be more of this. But what about all the other organizations engaged in similar activities, and which are undoubtedly as deserving of the same tax break? Should they be penalized because they did not have the temerity to ask?

In the area of property taxation, we find many similar circumstances, where two businesses that seem to be similarly situated are treated very differently by the tax collector.

For example, Wesley Medical Center, one of Wichita’s principal hospitals, is Wichita’s second-largest property taxpayer, with taxable assessed value representing 0.90 percent of the total of such property in Wichita.

One hospital has many millions in property, but is not taxed on that property.
One hospital has many millions in property, but is not taxed on that property.

But another large Wichita Hospital, Via Christi Hospital on St. Francis, has assets valued at over $115 million, yet pays no property tax. For the mill levy rate that applies to its address, this represents about $3.5 million in property tax savings. (It did pay a Sedgwick County Solid Waste User Fee of $8.91.)

How can we meaningfully distinguish between Wesley and St. Francis Hospitals? Does one provide more charity care than the other? Does the non-profit hospital charge lower rates? (I’d be surprised if so.) Does St. Francis impose less of a burden on city and county resources such as fire and police protection than does Wesley? Since Wesley attempts to earn a profit and St. Francis purportedly does not, does that make Wesley evil and St. Francis saintly? Why do we exempt St. Francis from millions of property tax, yet insist it pay $8.91 in solid waste user fees?

A scene from a non-profit retirement living center.
A scene from a non-profit retirement living center.

We find other examples: A luxury retirement community (Larksfield Place) with real property valued at $27,491,440 pays no property tax, except for $5.95 in the solid waste user fee. Less than a mile away, Sedgwick Plaza, a senior living center, has a valuation of $5,067,350 for its real property, and was billed $70,080.51 in property tax, including its solid waste user fee of $972. Despite — or perhaps due to — its non-profit status, Larksfield Place is able to provide its president a salary of over $130,000.

A Goodwill thrift store on West Central in Wichita has real property valued at $696,600, but paid no property taxes except for $5.94 solid waste user fee. On the other side of town, a small thrift store on East Douglas has real property valued at $113,800. It pays $3,437 in property tax, including its solid waste user fee.

These differences in what seem to be properties in similar situations are not justifiable under any theory of taxation, one of which is that similar situations are taxed similarly. The YMCA’s fitness centers are difficult to distinguish from others in Wichita — except for the YMCA’s rarefied tax-exempt status.

The slippery slope

Here’s the danger: Should SB 72 pass and all health clubs start enjoying the same tax privileges as the YMCA, shouldn’t we then expect to see for-profit hospitals like Wesley Medical Center ask to be relieved of their tax burden, using the same logic? If the legislature were to deny that request, how could it possibly explain its reasoning to citizens?

In defense of its tax exempt status, the YMCA says it engages in many charitable activities. I’m sure that’s true, and we’d like to keep those activities. Perhaps the YMCA would consider separating its fitness centers from the rest of its operations. Separate the business-like activities from the charitable. The YMCA can use the “profits” from its fitness centers to finance its charitable activities. To the extent it does that, it will avoid paying state and federal income tax on its profits.

But property taxes are something different from income taxes. The YMCA benefits from all the things the city (and other taxing jurisdictions) provide, ranging from public safety to schools to security for the mayor’s trip to Ghana. When it doesn’t pay its share, others have to pay. That means that others — you and me, for example — have less money available for the charitable (and other) activities they feel important. Even worse, I am forced to subsidize the charitable activities that the YMCA (or the Methodist Church, Boy Scouts, Girl Scouts, etc.) chooses to fund. This is especially true in Kansas, where low-income households pay a regressive sales tax on food.

When the YMCA — or any non-profit, for that matter — escapes taxation that other similar organizations must pay, it means that we all subsidize the charitable activities of these non-profits. It sustains a system in which special interest groups lobby to keep their advantages, and those who are not similarly blessed spend lavishly on campaign contributions and other lobbyists. Even when the organization is widely respected, as is the YMCA, this is wrong. It leads to cynicism as citizens realize that our laws are not applied uniformly, and that special interests feel they can buy their way to special treatment.

For their business-like activities, the YMCA, Larksfield Place, and Goodwill thrift stores should pay property taxes so they shoulder the same burden that the rest of us struggle under. That will spread the cost of government fairly, and let ordinary people themselves decide how to contribute their after-tax dollars.

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Open Records in Kansas

business-records-file-folders

Kansas has a weak open records law. Wichita doesn’t want to follow the law, as weak as it is.

As citizen watchdogs, I and others need access to information and data. The City of Wichita, however, has created several not-for-profit organizations that are largely funded by tax money. The three I am concerned with are the Wichita Downtown Development Corporation, Go Wichita Convention and Visitors Bureau, and Greater Wichita Economic Development Coalition.

I have asked each organization for checkbook-level spending data. Each has refused to comply, using the reasoning that they are not “public agencies” as defined in the Kansas Open Records Act. But consider the WDDC: When I made a request for records, its percent of revenue derived from taxes was well over 90 percent every year but one. In many years the only income WDDC received was from taxes and a small amount of interest earned. Click here to see how much of WDDC’s revenue comes from taxes.

The Wichita city attorney backs these organizations and their interpretation of the law. So do almost all city council members. After 14 months investigating this matter, the Sedgwick County District Attorney agreed with the city’s position. (Click here to read the determination.) The only course of action open to me is to raise thousands of dollars to fund a lawsuit.

Citizen watchdogs and others need the ability to examine the spending of tax money. When government creates quasi-governmental bodies that are almost totally funded through taxes, and then refuses to disclose how that money is spent, we have to wonder why the city doesn’t want citizens to know how this money is spent.

An example of why this is important is the case of Mike Howerter, a trustee of Labette Community College in Parsons. He noticed that a check number was missing from a register. Upon his inquiry, it was revealed that the missing check was used to reimburse the college president for a political campaign contribution. While the college president committed no violation by making this political contribution using college funds, this is an example of the type of information that citizens may want regarding the way public funds are spent.

In Wichita, because of a loophole in the Kansas Open Records Act, a large amount of tax money is spent without this type of scrutiny. This year the Kansas Legislature is considering HB 2567, which will start to bring accountability for how all tax money is spent..

The Attorney General’s page on the Kansas Open Records Act is here. The Kansas Legislator Briefing Book chapter for the Kansas Open Records Act is here.

Wichita doesn’t value open records and open government

On the KAKE Television public affairs program “This Week in Kansas” the failure of the Wichita City Council, especially council member Wichita City Council Member Pete Meitzner (district 2, east Wichita), to recognize the value of open records and open government is discussed.

For more background, see Wichita, again, fails at open government.

Wichita, again, fails at open government

The Wichita City Council, when presented with an opportunity to increase the ability of citizens to observe the workings of the government they pay for, decided against the cause of open government, preferring to keep the spending of taxpayer money a secret. Continue reading here.

Wichita could do better regarding open government, if it wants

Tomorrow the Wichita City Council will consider renewing its contract with Go Wichita Convention and Visitors Bureau. The renewal will provide another opportunity for the council to decide whether it is truly in favor of open government and citizen access to records. Continue reading here.

Wichita government’s attitude towards citizens’ right to know is an issue

At a meeting of the Wichita City Council, Kansas Policy Institute president Dave Trabert explained the problems in obtaining compliance with the Kansas Open Records Act. Continue reading here.

Open records again an issue in Kansas

Responses to records requests made by Kansas Policy Institute are bringing attention to shortcomings in the Kansas Open Records Act. Continue reading here.

In Wichita, disdain for open records and government transparency

Despite receiving nearly all its funding from taxpayers, Go Wichita Convention and Visitors Bureau refuses to admit it is a “public agency” as defined in the Kansas Open Records Act. The city backs this agency and its interpretation of this law, which is in favor of government secrecy and in opposition to the letter and spirit of the Open Records Act. Continue reading here.

Additional information on open records is at:

College costs in Kansas: Rising by more than a tad

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Have college costs exceeded the rate of inflation by just a “tad,” as claimed by a Kansas college professor?

Washburn University Political Science Professor Mark Peterson wrote in a recent op-ed that “The actual cost of obtaining postsecondary education has, like everything else, continued to rise — mostly at the rate of inflation plus a tad.”(Mark Peterson: State sends wrong higher-ed message, Wichita Eagle, Sunday, January 26, 2014.)

The College Board keeps track of college costs and publishes its findings at Trends in College Pricing. Of particular interest is a table titled “Figure 5. Inflation-Adjusted Published Tuition and Fees Relative to 1983-84, 1983-84 to 2013-14 (1983-84 = 100).” This table assigns the cost of tuition and fees for the 1983-1984 school year to be 100, and tracks changes from that level. These numbers are adjusted for inflation.

For the 2013-2014 school year, the values of this index are this:
Private non-profit four-year college: 253
Public four-year college: 331
Public two-year college: 264

The interpretation of these numbers is this: For private non-profit four-year colleges, the cost of tuition and fees is 2.53 times the level in 1983-1984. Or, since these values are inflation-adjusted, the cost rose 2.53 times as fast as inflation.

For public four-year colleges, the rate of increase was higher: 3.31 times the rate of inflation over the past 30 years.

Turning our attention to Kansas: Kansas Policy Institute has examined college costs. Its findings can be found in A Historical Perspective of State Aid, Tuition and Spending for State Universities in Kansas. Nearby is a table from that report. Note that over the ten-year period covered, inflation rose by 25.3 percent. For the six Regents Institutions in Kansas, all except for Fort Hays State had costs increasing by over 100 percent. That’s over four times the ate of inflation. University of Kansas costs rose by 193.6 percent, or 7.6 times the rate of inflation.

inflation-kansas-colleges-kansas-policy-institute-2013-table-2

Remember, Professor Peterson wrote that college costs had risen “mostly at the rate of inflation plus a tad.” His language leaves him a little wiggle room, as “mostly” and “tad” don’t have precise meanings. But evidently the product of the two is a pretty large number.

Peterson also wrote regarding public postsecondary education that “its price continues to climb and the Kansas general fund contributes less.” Note that the KPI table shows that state aid has declined by one-tenth of one percent over ten years. That, I think, qualifies as a “tad.”

The death penalty in Kansas, a conservative view

What should the attitude of conservatives be regarding the death penalty? Ben Jones of Conservatives Concerned about the Death Penalty spoke on the topic “Capital Punishment in Kansas from a conservative perspective: Is it a failed policy?” This was recorded at the Wichita Pachyderm Club on December 6, 2013. Jennifer Baysinger provided the introduction. Click here to listen.

Kansas government grows faster than private sector

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In Kansas, government has grown faster than the private sector. Milton Friedman explains why it’s best to leave spending in the private sector.

For gross domestic product in Kansas attributable to government, growth was 106.0 percent from 1997 to 2012. For the private sector, growth was 86.5 percent.

The nearby chart (click for a larger version) shows Kansas (highlighted in blue) against the other states and regions. (If you’d like to use the interactive visualization of state GDP data, you may click here to open it in a new window.)

kansas-gross-domestic-product-government-private-2014-01Considering the government sector, Kansas did well, compared to other states. Considering the private sector, Kansas is average.

The green highlighted line is Michigan. That state stands out from all others for its poor economic growth. Jennifer Granholm was governor of Michigan from 2003 to 2011, and Kansas Democrats have announced that she is the speaker for their annual Washington Days celebration. It’s difficult to see what Kansas can learn from Michigan regarding economic growth.

Government spending

Is it good for government to grow faster than the private economy? Government depends on the private sector for its funding. Without private sector activity, there are no taxes to collect.

But the real problem is the nature of government spending. A quote from Milton Friedman explains: “Nobody spends other people’s money as carefully as he spends his own.”

In an excerpt from Free to Choose: A Personal Statement, Friedman and his wife Rose explain the problems when people spend other people’s money, which is the nature of government spending.

A simple classification of spending shows why that process leads to undesirable results. When you spend, you may spend your own money or someone else’s; and you may spend for the benefit of yourself or someone else. Combining these two pairs of alternatives gives four possibilities summarized in the following simple table:

friedman-spending-categories-2013-07

Category I in the table refers to your spending your own money on yourself. You shop in a supermarket, for example. You clearly have a strong incentive both to economize and to get as much value as you can for each dollar you do spend.

Category II refers to your spending your own money on someone else. You shop for Christmas or birthday presents. You have the same incentive to economize as in Category I but not the same incentive to get full value for your money, at least as judged by the tastes of the recipient. …

Category III refers to your spending someone else’s money on yourself — lunching on an expense account, for instance. You have no strong incentive to keep down the cost of the lunch, but you do have a strong incentive to get your money’s worth.

Category IV refers to your spending someone else’s money on still another person. You are paying for someone else’s lunch out of an expense account. You have little incentive either to economize or to try to get your guest the lunch that he will value most highly. However, if you are having lunch with him, so that the lunch is a mixture of Category III and Category IV, you do have a strong incentive to satisfy your own tastes at the sacrifice of his, if necessary.

All welfare programs fall into either Category III — for example, Social Security which involves cash payments that the recipient is free to spend as he may wish; or Category IV — for example, public housing; except that even Category IV programs share one feature of Category III, namely, that the bureaucrats administering the program partake of the lunch; and all Category III programs have bureaucrats among their recipients.

In our opinion these characteristics of welfare spending are the main source of their defects.

Legislators vote to spend someone else’s money. The voters who elect the legislators are in one sense voting to spend their own money on themselves, but not in the direct sense of Category I spending. The connection between the taxes any individual pays and the spending he votes for is exceedingly loose. In practice, voters, like legislators, are inclined to regard someone else as paying for the programs the legislator votes for directly and the voter votes for indirectly. Bureaucrats who administer the programs are also spending someone else’s money. Little wonder that the amount spent explodes.

The bureaucrats spend someone else’s money on someone else. Only human kindness, not the much stronger and more dependable spur of self-interest, assures that they will spend the money in the way most beneficial to the recipients. Hence the wastefulness and ineffectiveness of the spending.

But that is not all. The lure of getting someone else’s money is strong. Many, including the bureaucrats administering the programs, will try to get it for themselves rather than have it go to someone else. The temptation to engage in corruption, to cheat, is strong and will not always be resisted or frustrated. People who resist the temptation to cheat will use legitimate means to direct the money to themselves. They will lobby for legislation favorable to themselves, for rules from which they can benefit. The bureaucrats administering the programs will press for better pay and perquisites for themselves — an outcome that larger programs will facilitate.

The attempt by people to divert government expenditures to themselves has two consequences that may not be obvious. First, it explains why so many programs tend to benefit middle- and upper-income groups rather than the poor for whom they are supposedly intended. The poor tend to lack not only the skills valued in the market, but also the skills required to be successful in the political scramble for funds. Indeed, their disadvantage in the political market is likely to be greater than in the economic. Once well-meaning reformers who may have helped to get a welfare measure enacted have gone on to their next reform, the poor are left to fend for themselves and they will almost always he overpowered by the groups that have already demonstrated a greater capacity to take advantage of available opportunities.

The second consequence is that the net gain to the recipients of the transfer will be less than the total amount transferred. If $100 of somebody else’s money is up for grabs, it pays to spend up to $100 of your own money to get it. The costs incurred to lobby legislators and regulatory authorities, for contributions to political campaigns, and for myriad other items are a pure waste — harming the taxpayer who pays and benefiting no one. They must be subtracted from the gross transfer to get the net gain — and may, of course, at times exceed the gross transfer, leaving a net loss, not gain.

These consequences of subsidy seeking also help to explain the pressure for more and more spending, more and more programs. The initial measures fail to achieve the objectives of the well-meaning reformers who sponsored them. They conclude that not enough has been done and seek additional programs. They gain as allies both people who envision careers as bureaucrats administering the programs and people who believe that they can tap the money to be spent.

Category IV spending tends also to corrupt the people involved. All such programs put some people in a position to decide what is good for other people. The effect is to instill in the one group a feeling of almost God-like power; in the other, a feeling of childlike dependence. The capacity of the beneficiaries for independence, for making their own decisions, atrophies through disuse. In addition to the waste of money, in addition to the failure to achieve the intended objectives, the end result is to rot the moral fabric that holds a decent society together.

Another by-product of Category III or IV spending has the same effect. Voluntary gifts aside, you can spend someone else’s money only by taking it away as government does. The use of force is therefore at the very heart of the welfare state — a bad means that tends to corrupt the good ends. That is also the reason why the welfare state threatens our freedom so seriously.

Kansas legislative briefing book for 2014

Kansas CapitolKansas Legislative Research has released the 2014 edition of the Legislator Briefing Book. From the prelude:

Kansas Legislators are called upon to make decisions on many issues that come before the Legislature. In addition, members of the Legislature are frequently asked by constituent groups to discuss public policy issues in a community forum in their districts. The purpose of the Kansas Legislator Briefing Book is to assist members in making informed policy decisions and to provide information in a condensed form that is usable for discussions with constituents — whether in their offices in Topeka or in their districts.

This publication contains several reports on new topics plus reports from the prior version. Most of the reports from the prior version have been updated with new information.

This year the book is 411 pages in length. The original location of the document is here. Or, for a version that will probably work better on mobile devices, click here to view this document at Scribd.

Kansas gross domestic product

Seal of the State of Kansas

Since 1997, Kansas gross domestic product has grown 89.1 percent. The United States as a whole has grown 88.2 percent.

Considering compound annual rate of growth for the same period, the rate for Kansas is 4.34 percent, and for the U.S. the rate is 4.31 percent.

So the record for Kansas is right about in the middle of the states. Not good, but not bad either.

kansas-michigan-gdp-2014-01

Of note: Kansas Democrats have announced their speaker for their annual Washington Days celebration. It’s Jennifer Granholm, who was governor of Michigan from 2003 to 2011. In the nearby illustration (click it for larger version) of state GDP, Kansas is highlighted in blue. The green line that stands out from all other states is Michigan.

Using the visualization.
Using the visualization.
If you’d like to use the interactive visualization of state GDP data, you may click here to open it in a new window. Data is from U.S. Bureau of Economic Analysis along with author’s own calculations. Visualization created using Tableau Public.

Job claims in Kansas addresses

Kansas Capitol

How can conflicting jobs claims made by two Kansas leaders and candidates for governor be reconciled?

Listening to the State of the State Address and the official response might cause Kansans to become confused, or worse. The claims made by Sam Brownback and Paul Davis appear to contain conflicting views of Kansas employment.

In the State of the State Address, Brownback said “Since December 2010, Kansas has added on average, more than a thousand private sector jobs every month.”

Davis, in the official response, said “According to the latest jobs report — released just a few weeks ago — there are 16,000 fewer Kansans working than when Governor Brownback took office.”

bureau-labor-statistics-logoWho is correct? The answer is not easy to provide. That’s because there are two series of employment data provided by the Bureau of Labor Statistics. The two series don’t measure exactly the same thing, and each of these candidates for Kansas governor has chosen to use the series that benefits their campaign. Nearby is an example of just how different the two series can appear.

cps-ces-difference-example-2013-12

A document from BLS titled Employment from the BLS household and payroll surveys: summary of recent trends explains in brief: “The Bureau of Labor Statistics (BLS) has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey. … These estimates differ because the surveys have distinct definitions of employment and distinct survey and estimation methods.”

Another BLS document explains in detail the differences between the CPS and CES data. For example: CES: “Designed to measure employment, hours, and earnings with significant industrial and geographic detail” CPS: “Designed to measure employment and unemployment with significant demographic detail.”

Another difference: CES: “Self-employed persons are excluded.” CPS: “Self-employed persons are included.” (See Understanding the employment measures from the CPS and CES survey.)

I’ve prepared a table showing the claims made primarily by the Davis campaign in December (since it provided the most detail) and gathered data from both the CES and CPS series. I’ve also showed the seasonally adjusted data compared to the raw data when available. Sometimes the numbers match exactly with the claims made by the campaigns, and sometimes the numbers are a little different. Click here for the full table.

cps-ces-jobs-compared-2013-12
I’ve also created an interactive visualization of the CPS and CES data for Kansas. Click here to open it in a new window.

Each campaign uses the data that best makes its case. Generally speaking, the CES data shows larger employment gains.

We still have this question: Who is correct? Here’s something to consider. On the national level, a widely-watched number each month is the count of new jobs created. This number, which is universally considered to be important, comes from the CES survey. That’s the number that shows quite a bit of job growth in Kansas.

Download (PDF, 42KB)

Kansas legislative documents

Kansas Capitol

As the Kansas Legislature begins its 2014 session today, citizens who want to keep track of the happenings have these resources available.

Video and audio

The Kansas Legislature doesn’t broadcast or archive video of its proceedings except in rare instances of committee hearings. Travis Perry of Kansas Watchdog reports on this issue in Camera shy: KS legislators sidestep transparency and Eye in the sky: Kansas legislative leader won’t require streaming video.

Both the House and Senate broadcast audio of their proceedings. But you must listen live, as the broadcasts are not made available to the public in any other way. It would be exceedingly simple to make these past broadcasts available to the public. It could be done at no cost on YouTube, and at little cost at other sites specifically tailored to host audio. As a side benefit, at YouTube the recordings would be transcribed by machine, giving a rough transcript of the proceedings. (I use the adjective “rough,” as if you have viewed these transcripts, they vary widely in accuracy. But they still have value.)

Broadcasting video of House and Senate proceedings would be a large step that would probably have a large cost. But archiving the audio and making it available provides nearly all the benefit of video, and at very little additional cost.

Documents

Kansas Legislative Research Department (KLRD) has many documents that are useful in understanding state government and the legislature. This agency’s home page is Kansas Legislative Research Department. Of particular interest:

Kansas Legislative Briefing Book. This book’s audience is legislators, but anyone can benefit. The book has a chapter for major areas of state policy and legislation, giving history, background, and explanations of law. In some years the entire collection of material has been made available as a single pdf file, but not so this year. Contact information for the legislative analysts is made available in each chapter. The most recent version can be found on the Reports and Publications page. So far a version for 2014 is not available. (Update: The 2014 version is here.)

Kansas Fiscal Facts. This book, in 124 pages (for 2011), provides “basic budgetary facts” to those without budgetary experience. It provides an overview of the budget, and then more information for each of the six branches of Kansas state government. There is a glossary and contact information for the fiscal analysts responsible for different areas of the budget. This document is updated each year. The most recent version can be found on the Reports and Publications page.

Legislative Procedure in Kansas. This book of 236 pages holds the rules and explanations of how the Kansas Legislature works. It was last revised in November 2006, but the subject that is the content of this book changes slowly over the years. The direct link is Legislative Procedure in Kansas, November 2006.

How a Bill Becomes Law. This is a one-page diagram of the legislative steps involved in passing laws. The direct link is How a Bill Becomes Law.

Summary of Legislation. This document is created each year, and is invaluable in remembering what laws were passed each year. From its introduction: “This publication includes summaries of the legislation enacted by the 2011 Legislature. Not summarized are bills of a limited, local, technical, clarifying, or repealing nature, and bills that were vetoed (sustained).” 204 pages for 2011. The most recent version can be found on the Reports and Publications page.

Legislative Highlights. This is a more compact version of the Summary of Legislation, providing the essentials of the legislative session in 12 pages for 2011. The most recent version can be found on the Reports and Publications page.

Kansas Tax Facts. This book provides information on state and local taxes in Kansas. The most recent version can be found on the Revenue and Tax page.

Kansas Statutes. The laws of our state. The current statutes can be found at the Revisor of Statutes page.

Kansas Register. From the Kansas Secretary of State: “The Kansas Register is the official state newspaper. This publication provides a wide range of information such as proposed and adopted administrative regulations, new state laws, bond sales and redemptions, notice of open meetings, state contracts offered for bid, attorney general opinions, and many other public notices.” The Register is published each week, and may be found at Kansas Register.

Two legislative reforms that would benefit Kansans

Kansas Legislature

Following is a letter to legislators from Kansas Representative John Rubin regarding two reforms to legislative procedure that, I believe, would improve the process. The first concerns granularity, that is, considering a group of bills (actually conference reports) with a single vote. The second simply asks that all non-trivial votes be recorded and made available to the public.

As many of you know, I have always been and remain an ardent advocate of full transparency and accountability to the voters who have elected us to serve in the Legislature and to all the citizens of Kansas. I believe our oath of office demands no less. In my view, effective and responsible governance demands that we always cast informed votes, and that we always disclose to our constituents and all Kansans how we vote on the public policies that so profoundly affect their lives.

In my mind, our longstanding legislative practices of bundling multiple bills in a single conference committee report for one vote under the Joint Rules, and of not recording our votes on bills, resolutions and amendments in the Committee of the Whole on General Orders under the House Rules, directly contravene our obligation to the people of Kansas to be fully informed on the matters on which we vote, and to be transparent in and accountable for our votes, factors critical to effective governance. Accordingly, I have drafted two resolutions amending the Joint Rules and House Rules, respectively, to correct these undemocratic legislative practices. I plan to prefile them the week before our 2014 session starts. I am asking for your support, and hopefully your co-sponsorship, of both.

The first initiative, Revisor draft 14rs2664, is a Concurrent Resolution amending the Joint Rules to provide that a conference committee report (CCR) may contain only the bill being conferenced and all or part of one other bill that has passed either Chamber during the current biennium. As you know, current practice allows for an unlimited number of additional bills or parts of bills that have been passed by either Chamber to be added to the bill being conferenced, and we members have one vote on the entire CCR package on the floor. It is not unusual for as many as four, six, eight or more bills to be added to a conferenced bill in a CCR. Unless a member serves on the committee from which the bills have emanated — and perhaps not even then — the member has little if any opportunity to fully inform himself or herself of the contents, consequences or effects of the additional bills, particularly if the added bills did not originate in and were not debated in our Chamber, and particularly under the pressing time constraints we experience late in session, when most of these CCRs are considered. Accordingly, the likelihood that most members are even marginally well informed on the votes we are asked to east on these multi-bundled CCRs is slim. Worse, even if we do inform ourselves on all aspects of all bundled bills in such CCRs, we may well be of two minds regarding how to cast our one vote on it. For example, a member may fully support four of the bundled bills in an eight-bundle CCR because they square with the member’s principles and are, in his or her view, good public policy for the member’s constituents and all Kansans, and he or she may oppose the other four because they are not. In short, current practice virtually ensures that members often cast uninformed or unprincipled votes on much of the public policy contained in multi-bundled CCRs. That is no way to govern. Concurrent Resolution 14rs2664 will correct these irresponsible and undemocratic legislative deficiencies.

If you support and wish to co-sponsor this anti-bundling Concurrent Resolution, please email Revisor Gordon Self at Gordon.Self@rs.ks.gov by January 6, 2014 and inform him of your intent to do so, referencing the Concurrent Resolution draft, 14rs2664. Your name will be added to the Concurrent Resolution as a co-sponsor prior to prefiling it the week of January 6, 2014.

The second initiative, Revisor draft 14rs2668, is a House Resolution amending the House Rules to require that all House floor votes, whether in the Committee of the Whole on General Orders or on Final Action, shall be recorded votes. The only exceptions are for procedural votes such as on motions to recess or adjourn, motions to rise and report, or resolutions pertaining to commendations or acknowledgments. As you know, current practice on General Orders is that all votes on bills, resolutions and amendments are voice votes, or, on a division call, unrecorded electronic votes, absent a show of 15 hands requiring a roll call vote. Make no mistake — those “unrecorded” electronic division votes are in fact being recorded outside our chamber and in the House Gallery, by handwritten notes, camera phones directed to the closed circuit television screen, and otherwise, by government officials, lobbyists, and other political insiders vested in the outcomes of these votes. I believe that the citizens who sent us to Topeka should have the same access to these vote results that political insiders do. Moreover, all Kansans are, in my view, entitled to know how we vote on every public policy question put to us — in bills, amendments and resolutions — not just on Final Action, but preliminarily on General Orders as well — and are entitled to know whether, and ask why, we changed our vote on a measure between the Committee of the Whole vote one day, and Final Action on the same measure the next. I believe that our oath of office and our responsibility to be transparent in our votes and accountable to the people of Kansas for them require no less.

If you support and wish to co-sponsor this House Resolution requiring that all substantive House floor votes be recorded, please email Revisor Gordon Self at Gordon.Self@rs.ks.gov by January 6, 2014 and inform him of your intent to do so, referencing the Concurrent Resolution draft, 14rs2668. Your name will be added to the Resolution as a co-sponsor prior to prefiling it the week of January 6, 2014.

Thank you for your serious consideration and possible support of these two important resolutions promoting accountability and transparency in our work in the Kansas Legislature on behalf of the citizens of Kansas.

Kansas trails surrounding states in economic freedom

Kansas trails surrounding states in economic freedom

By , Kansas Watchdog

AVERAGE: In a recent study of economic freedom in North America, Kansas ranked in the middle of the pack nationwide, but trails most surrounding states.

OSAWATOMIE, Kan. — The Sunflower State scored middle of the pack in a recent study of economic freedom in North America, and while policy analysts sayKansas is trending in the right direction, the state still has some ground to cover.

Breaking down the data released last month by the Canada-based Fraser Institute, an independent, nonpartisan research and educational organization, Dave Trabert, president of the conservative Kansas Policy Institute, said the state’s black eye is starkly presented in the numbers.

“In terms of what Kansas needs to do to improve, it’s pretty clear, you start from the bottom,” Trabert said. “The biggest thing it can do is deal with the fact that we have a lot more government in Kansas than we need, and this is just one of the latest (studies) to point that out.”

The Fraser report looked at things such as how much the government contributes to the overall state economy and workforce, levels of tax revenue, minimum wage laws and labor union density, among other factors.

Kansas ranked in the second-highest quartile in terms of economic freedom based on data collected from 2011. While that’s encouraging, the fact loses some of its luster when you consider that the only surrounding state to rank lower was Missouri Oklahoma ranked 17th out of all states, compared to Kansas’ 23rd place ranking. Nebraska and Colorado joined Delaware, Texas, Nevada, Wyoming, South Dakota, Georgia, Utah and Illinois to be named the 10 “most free” states.

Trabert said based on a review of census data provided by the Bureau of Labor Statistics, Kansas saw a 21.5 percent increase in population between 1980 and 2011, while at that same time local government employment has increased 62.7 percent.

Dave Trabert, Kansas Policy Institute

“It’s kind of across the board,” he said. “Kansas, the structure itself, we have a lot more government than most states.”

Only looking at cities, counties and townships, Trabert said, nationwide the average is about 8,066 residents per government. In Kansas, that figure is significantly lower, clocking in at around 1,445 state residents per government — and that’s not even counting school districts or numerous other, smaller government entities. Kansas’ figures are five times the national average.

While the study knocks Kansas for its 2011 tax rates, Gov. Sam Brownback’s tax plan signed into law the following year, which decreases income tax rates, will likely improve the state’s placement in future studies.

Still, the rankings of surrounding states give Trabert cause for concern.

“People have been voting with their feet for a long time, and that’s going to continue to happen,” he told Kansas Watchdog.

It’s a trend that was revealed in even greater clarity last year, when an analysis of IRS and U.S. Census Bureau data revealed that Texas, Florida, Colorado and other low-tax states were veritable magnets for cash exiting Kansas.

“It all comes down to how much you spend,” Trabert said. “The more government you have, the more government spends, the more you have to tax people.”

The least free states, according to the Fraser Institute study, are Vermont, New Mexico, West Virginia, Mississippi, Maine, Kentucky, Montana, Arkansas, Hawaii and Rhode Island.

Related: Texas, Florida are top destinations for Kansas cash

Contact Travis Perry at travis@kansaswatchdog.org, or follow him on Twitter at@muckraker62. Like Watchdog.org? Click HERE to get breaking news alerts in YOUR state!

Job growth, Kansas and other states

Kansas Capitol 2013-11-11 14.58.34Critics of Kansas Governor Sam Brownback and his economic growth plans say Kansas hasn’t been creating jobs. A look at the statistics tells us that Kansas has produced substandard performance in job growth for a long time.

job-growth-states-compound-annual-rate-2013-12

The nearby chart (click for a larger version) shows the compound annual rate of growth of jobs in the states, with Kansas highlighted in blue.

From 1992 to 2012, Kansas created jobs at the rate of 1.022 percent per year, compounded. Arkansas managed 1.096 percent over the same period. That seems like a small difference, just 0.074 percentage points. But over time, compounding adds up, so to speak. If both states started with one million jobs and continued growing at these rates, in ten years Arkansas would have 8,136 more jobs than Kansas. In 20 years, the difference would be 18,080 jobs. That’s about as many people as work in each of Finney and Ford Counties, home to Dodge City and Garden City, respectively.

Or, consider Texas, the state Kansas progressives love to hate. It’s has created jobs at the rate of 2.001 percent. If both states started with one million jobs and grew at these rates, in ten years Texas would have 112,083 more jobs than Kansas would have. In 20 years the difference would be 260,722 jobs. That’s almost as many people as work in the Wichita metropolitan area.

Using the visualization.
Using the visualization.
If you’d like to use the interactive visualization of state employment data, you may click here to open it in a new window. Data is from Bureau of Labor Statistics, U.S. Department of Labor. Visualization created using Tableau Public.

In Kansas, dueling job claims

bownback-davis-logo-01Candidates for Kansas governor last week released statements on recent job figures in Kansas. The releases from Sam Brownback and Paul Davis appear to contain conflicting views of Kansas employment.

Brownback released a statement containing this, in part: “In the past year, we have seen more than 20,000 new jobs in Kansas and a total of 45,600 new jobs created from January 2011 through October 2013.” (Click here for the full statement.)

Davis released a statement containing this, in part: “From January 2011 – Oct 2013: Period during which Brownback cites 46,500 new jobs … Employed: +3,634 (not 46,500, which is what was claimed by Brownback)” (Click here for the full statement.)

So which campaign is correct? The answer is not easy to provide. That’s because there are two series of employment data provided by the Bureau of Labor Statistics. The two series don’t measure exactly the same thing, and each campaign has chosen to use the series that benefits their campaign. Nearby is an example of just how different the two series can appear.

cps-ces-difference-example-2013-12
A document from BLS titled Employment from the BLS household and payroll surveys: summary of recent trends explains in brief: “The Bureau of Labor Statistics (BLS) has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey. … These estimates differ because the surveys have distinct definitions of employment and distinct survey and estimation methods.”

Another BLS document explains in detail the differences between the CPS and CES data. For example: CES: “Designed to measure employment, hours, and earnings with significant industrial and geographic detail” CPS: “Designed to measure employment and unemployment with significant demographic detail.”

Another difference: CES: “Self-employed persons are excluded.” CPS: “Self-employed persons are included.” (See Understanding the employment measures from the CPS and CES survey.)

I’ve prepared a table showing the claims made primarily by the Davis campaign (since it provided the most detail) and gathered data from both the CES and CPS series. I’ve also showed the seasonally adjusted data compared to the raw data when available. Sometimes the numbers match exactly with the claims made by the campaigns, and sometimes the numbers are a little different. Click here for the full table.

cps-ces-jobs-compared-2013-12
I’ve also created an interactive visualization of the CPS and CES data for Kansas. Click here to open it in a new window.

Each campaign uses the data that best makes its case. Generally speaking, the CES data shows larger employment gains.

Download (PDF, 42KB)

Kansas job loss claims seem not to add up

kansas-city-star-2013-10-10

The Kansas City Star carried a story about Kansas jobs and unemployment. The claim was made that “Put another way: Kansas has lost more than 8,800 jobs this year.”

paul-davis-facebook-2013-10-10

Kansas Representative Paul Davis, a Democrat who has said he will run for governor next year, linked to the article on his Facebook page and made a statement based on the job loss claim, writing “Kansas has lost nearly 9,000 jobs in 2013.”

I don’t know what data the Star reporter relied on, or what computations he made. I gathered statistics from the Kansas Department of Labor. I’ve made them available here, and a chart is below.

Job levels can be seasonally adjusted, or not. Using the seasonal data, total non farm employment in Kansas rose from 1,366,900 in January to 1,372,000 in August, the last month for which data is available.

Using the not seasonally adjusted data, jobs rose from 1,347,800 in January to 1,361,900 in August.

Maybe the reporter used a different range of dates. I don’t know. If we use the not seasonally adjusted job count from December 2012, which is 1,376,300, the job count in August is less, but by a number not close to the number in the story. Using the seasonally adjusted number for December 2012 produces a gain of jobs since then.

kansas-job-levels-2013-10-10

Kansas job levels

visualization-example-small

Here’s an interactive visualization of Kansas statewide job levels. Data is monthly, seasonally adjusted, with numbers in thousands.

Data is from the Bureau of Labor Statistics of the U.S. Department of Labor. Visualization created by myself using Tableau Public. Use the visualization below, or click here to open it in a new window, which will probably work better in most cases.

Anderson, former Kansas budget director, speaks

Last Friday former Kansas budget director Steve Anderson spoke to members and guests of the Wichita Pachyderm Club. Two videos are available, a highlights version and full version. View below, or to view on YouTube, click here for highlights or here for full version.

Also, it was announced on Friday that Anderson would be joining Kansas Policy Institute in the role of senior adjunct fiscal policy fellow. For more on this from KPI, see Former state budget director Steve Anderson joins Kansas Policy Institute.

Highlights video

Full speech

In Kansas, politics may now cure its own harm

I don’t care who does the electing so long as I do the nominating.
– William “Boss” Tweed, political boss of Tammany Hall

Critics of Kansas Governor Sam Brownback point to his nomination of a confidant to the Kansas Court of Appeals as evidence of politics trumping the — purportedly — merit-based selection process formerly in place.

The previous process, however, was nothing if not political. Its defenders — the state’s legal profession — denied that, but they were in charge of the process.

In fact, the reason that Caleb Stegall, the current nominee, is not already on the bench is politics.

Stegall’s recommendation from Felita Kahrs, a member of the Supreme Court Nominating Commission, highlights both his judicial qualifications and the political challenge he may face as a nominee. Ms. Kahrs previously reviewed Stegall’s application for the Kansas Court of Appeals, and her recommendation says that she found that his “outstanding academic background, his excellent writing ability, and the experience he brings to this position, exceeded and in some cases far surpassed the other applicants.” Even though she believed that he “was one of the top candidates that appeared before the Commission,” she explained, “due to politics, his name was not submitted.”

That’s from National Review Online’s Bench Memos.

And if you’re wondering why so many will criticize this appointment and the new process, well, “hell hath no fury like a lawyer scorned.”

Business tax credits more desired than zero tax rates

Economic developmentA Kansas business welfare program is more attractive and valuable than elimination of the Kansas corporate income tax, at least for some influential corporations in Kansas. The program is High Performance Incentive Program (HPIP), which grants tax credits in exchange for capital investment.

In April Dr. Art Hall of the Center for Applied Economics at the Kansas University School of Business delivered a presentation on Kansas tax reform, and he explained the situation (video here):

There is something called an HPIP investment tax credit. It stands for High Performance Incentive Program. This is a very valuable tax credit to corporations. But, you don’t get it automatically. You have to apply to the state. Only about 100 or 125 of these credits are given out each year. It’s about $50 to $60 million per year. It’s a very large number. Back in 2011, … the plan was to get rid of all of these special deals, especially this one credit, and we’re going to reduce all the rates.

The corporate sector — some very influential people in the corporate sector — did not want that at all. They went to the mat, hard. … The point is, there was an effort to reduce corporate income tax. The corporations, at least a very strong constituent sector, didn’t want it. They wanted their credit.

In other words, the business welfare benefits these corporations — many thought to be in the aerospace industry — receive from the state is greater than the Kansas income tax they pay. That’s the only conclusion we can draw from their choice of favoring the HPIP credits over elimination of their Kansas income tax.

A table from Hall’s paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy holds calculations that reveal this effect.

hpip-credits-example-2013-07

The 11.92% that is highlighted in yellow shows the deformation of the business investment and tax landscape that causes some corporations to prefer HPIP tax credits over zero tax rates. Each row in the table represents a different scenario, one being retaining the HPIP credit. Columns represent various amounts of investment. It is in the column for the largest amount of investment that HPIP is most valuable, based on expected rate of return for the investment. HPIP is also more valuable than the strategy in any other row, considering the large investment column. HPIP, we can see, favors large corporations over small, as it is most valuable when making large investments.

A problem, as Hall told the audience in the video, is that the HPIP is not given automatically to all companies that make capital investments. The credit must be applied for, various conditions must be met, and approval received.

This system of selecting which companies receive targeted economic development investment in Kansas is contrary to market principals. The state, rather than markets, is making investment decisions. It’s also contrary to Hall’s economic dynamism concept explained in the paper referenced above. In this idea, the goal of the state is to encourage a large number of business startups each year, and then nurture conditions where all have a chance to thrive. Many will not survive, but some will. We don’t know which firms will thrive, so it’s important to treat all firms equally and give all a chance.

Programs like HPIP are contrary to this philosophy, and instead concentrate the state’s investments in existing, often large, companies — the companies that make the large capital investments for which HPIP returns the most favorable financial results. This is also an illustration of the difference between a business-friendly environment and capitalism.

Sedgwick is a red county in a pink state

Translation: Sedgwick County is bleeding income.

This is according to IRS and U.S. Census Bureau data examined by Travis Brown and presented online at HowMoneyWalks.com. This is a website that is companion to the book How Money Walks — How $2 Trillion Moved Between the States, and Why It Matters.

According to the publisher:

Between 1995 and 2010, millions of Americans moved between the states, taking with them over $2 trillion in adjusted gross incomes. Two trillion dollars is equivalent to the GDP of California, the ninth largest in the world. It’s a lot of money. Some states, like Florida, saw tremendous gains ($86.4 billion), while others, like New York, experienced massive losses ($58.6 billion). People moved, and they took their working wealth with them. The question is, why? Why did Americans move so much of their income from state to state? Which states benefited and which states suffered? And why does it matter? Using official statistics from the IRS, How Money Walks explores the hows, whys, and impact of this massive movement of American working wealth.

sedgwick-county-money walks-2013-07

Kansas, as a state, lost $3.15 billion in income during the period covered by the book. That colors Kansas a moderate shade of pink on a map of all states. Pink, or red, in this case, means like it does in accounting: A loss of money.

Looking at a map of Kansas counties, we see that Sedgwick County is a bright shade of red. From 1992 to 2010, Sedgwick County lost $1.12 billion in annual AGI (adjusted gross income).

To put these numbers in perspective, in 2009 AGI in Kansas was $61.7 billion, and in Sedgwick County, $10.6 billion. So Sedgwick County has lost some ten percent of its income. And that’s on an annual basis.

How to grow the Kansas economy

In this 14 minute video from April, Art Hall, who is Director of Center for Applied Economics at Kansas University, talks about how to grow the Kansas economy.

An important takeaway is that our targeted economic development strategies can’t handle the volume needed to create a lot of jobs in Kansas. We need policies that apply uniformly, so that we can generate as many business start-ups as possible. Of these start-ups, some will grow rapidly, but we don’t know the identities of these companies in advance.

For more about these ideas, see Hall’s paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy.

Westar rate increase contains business welfare

electric-meters

The rate increase that Westar Energy has applied for contains a large dose of discretionary business welfare spending. Westar, in conjunction with out current economic development machinery, will be allowed to grant discounts on electricity to new businesses. A current program exists, but Westar says it doesn’t offer the flexibility Westar needs.

Following is an excerpt from testimony Westar submitted to the Kansas Corporation Commission. I’ve added emphasis:

Q. HOW WILL THE FIRST COMPONENT OF PROMOTE KANSAS WORK?
A. The economic development portion of the proposal would permit Westar, at its option, to provide economic development assistance in the form of discounted electric service to new customers and existing customers with planned expansions if three conditions are met: (1) the customer adds new jobs to its work force, (2) the customer brings new capital equipment and plant to a new or expanded facility and (3) the economic development effort is supported and backed by a state organization such as the Kansas Department of Commerce or a local economic development organization.

Q. HOW WILL PROMOTE KANSAS PROVIDE WESTAR WITH FLEXIBILITY TO ADDRESS ECONOMIC DEVELOPMENT NEEDS ON A CASE-BY-CASE BASIS?
A. If approved, Promote Kansas will allow Westar to adjust the economic incentive — in the form of reduced electric rates — provided to a customer based on the circumstances involved. This is a change from Westar’s existing EDR, which provides for a fixed percentage discount of 25 percent to the customer’s electric bill in the first year. The incentive credit declines by five percent per year over a mandatory five year period. After the fifth year of service, the customer pays the full cost of their electric service. Westar has no flexibility to adjust the amount of the incentive credit level or duration under the current EDA.

We believe that the fixed percentage under the existing EDA is too rigid. In some situations, the customer may not require the entire 25 percent reduction in its electric bill, or a full five years of reduced electric rates, in order to move forward with an expansion or relocation to Kansas. In these cases, the rigidity of the existing EDA tariff results in either contributing more than needed to attract the new customer or encourage the expansion, or not offering the incentive at all. The current EDA tariff was developed over a quarter century ago, tailored to specific circumstances that no longer exist. It was based on past exigencies, and it is time to revise it to meet today’s priorities and business environment.

Promote Kansas would contain a variable incentive credit. If Westar decides to provide the incentive credit to a customer, it would range from five percent to 25 percent the first year and would then decline over no more than a five-year period. This will allow Westar flexibility to determine how much incentive is necessary to attract the new customer or the expansion. Westar will be able to actively participate in negotiations with potential new businesses along with other economic development organizations in order to develop the best package of benefits for the customer’s specific situation.

We need to be concerned with this part of Westar’s application. This language — at its option … based on the circumstances involved … variable incentive credit … this will allow Westar flexibility — gives huge discretion to Westar to decide how much customers will pay for electricity.

Westar is not a government agency, but as a tightly regulated entity, it’s almost like government. It exercises the type of monopoly power that few outside of government do: It holds a near-monopoly on the delivery of a product that almost everyone wants and needs. With few exceptions, households and business firms can’t negotiate with Westar on their electric rates.

Therefore, when Westar offers — at its discretion — lower electric rates to some customers, others must necessarily pay more. Testimony to this effect was offered by Westar.

If we could be certain that the goals of this program would be realized, that would be one thing. But as a quasi-governmental entity, Westar suffers from the same knowledge problem as does government, especially regarding targeted investment programs like that proposed in this new rate structure. These actors believe that they have the ability to select which companies are worthy of public investment, and which are not. Really, it’s even a larger decision, as all other Westar customers have to pay for the investment decisions that will be made.

This rate plan implements a form of centralized planning by the state that shapes the future direction of the Kansas economy. We have to decide who is in the best position to make these decisions: Regulators and utility company executives, or the diverse market where thousands of business firms freely compete for voluntary investments to be made.

Arnold Kling has written about the ability of government experts to decide what investments should be made with public funds. There’s a problem with knowledge and power:

As Hayek pointed out, knowledge that is important in the economy is dispersed. Consumers understand their own wants and business managers understand their technological opportunities and constraints to a greater degree than they can articulate and to a far greater degree than experts can understand and absorb.

When knowledge is dispersed but power is concentrated, I call this the knowledge-power discrepancy. Such discrepancies can arise in large firms, where CEOs can fail to appreciate the significance of what is known by some of their subordinates. … With government experts, the knowledge-power discrepancy is particularly acute.

Despite this knowledge problem, the Kansas Corporation Commission is considering giving Westar the very type of power that ought to be left to markets. For this reason, KCC should reject Westar’s rate increase application until this program, and the program it is intended to replace, are eliminated.

The full rate application is available at Docket 13-WSEE-629-RTS: Application of Westar Energy and Kansas Gas and Electric Company Charges for Electric Service. A public hearing is scheduled tonight in Wichita; see Westar electricity rate hikes.

Kansas bonds downgraded; economic development programs imperiled

money-bag-struggle

Moody’s Investor Service has downgraded the credit rating of a series of bonds that Kansas uses to fund an economic development program. The program is IMPACT (Investments in Major Projects and Comprehensive Training), which provides financial benefits to companies locating to or expanding in Kansas.

The problem is that the state borrows money to give to companies, and uses the withholding taxes of these companies’ employees to repay the bonds. So what happens if the state reduces — or eliminates — the personal income tax? Moody’s explains:

Because IMPACT program bonds are backed by a statutory allocation of revenue from income tax withholding, efforts to eliminate the state income tax without defeasing the debt or substituting a new revenue source will expose bondholders to risks greater than previously anticipated. IMPACT debt has historically been supported by steadily growing revenues from a source that was broad-based and important to the state’s continued operations. Last year’s major income tax rate reductions, followed by additional cuts this year, constitute what we expect to be a trend of repeated cuts in the revenues pledged to these bonds. The final maturity on the IMPACT bonds is 2023, by which time Kansas may have fully removed the income tax. So far, there is no assurance the state will allocate revenue from a different source or take other steps protect bondholders. (Moody’s downgrades Kansas Department of Commerce IMPACT bonds to A3 from Aa3)

I don’t think there’s much likelihood that the state will fail to pay these bonds fully as payments become due. Even though the spending that produced this debt, in my opinion, is ill-considered, it’s still an obligation of the state.

But in a blog post, the Wichita Eagle editorial board could barely conceal its glee that a State of Kansas program might encounter difficulties during the Brownback regime. That’s because income tax rates have been reduced, and will fall farther. This threatens the government spending that the Eagle editorialists favor over private-sector spending.

Besides this one Kansas spending program, others will probably also be affected by lower income tax rates. Another economic development program Kansas uses is the Promoting Employment Across Kansas (PEAK) program. Administered by the Kansas Department of Commerce, the program allows qualifying companies to retain 95 percent of the state income withholding taxes their employees pay.

It’s a roundabout method of distributing corporate welfare that allows companies — and gullible or self-serving politicians — to pretend as though this program has no cost, or that companies are in fact investing their own money.

What’s interesting is that the money paid to companies is based on the withholding of employee taxes, not actual taxes paid. Withholding is just an estimate. At the end of the year employees file tax returns to compute their actual tax liability. Based on the difference between withholdings and liability, the state may issue a refund (or maybe the employee owes more).

It’s common for people to receive tax refunds. For employees that work for companies participating in PEAK, their tax withholdings (less five percent) have already been spent by the state in the form of economic development incentives. Their refunds have to be funded in some other way.

Other government spending programs will be affected, too. Historic preservation tax credits are used to funnel millions to developers in downtown Wichita, for example. These credits have value only as long as someone owes income tax (or similar taxes paid by financial institutions) to the state. If there are no income taxes, these tax credits have no value.

This is all good. It’s great that tax rates are falling. It’s also good that the state loses some of its tools for dishing out business welfare. With programs like PEAK and tax credits, the legislature authorizes the program by passing a law. After that, the programs function on auto-pilot. Companies apply for the benefits, and then either automatically or at the discretion of the bureaucracy, applications are approved and benefits flow.

This leads to systems with little accountability. Expenditures are barely noticed. The normal basis for justifying taxation is threatened. Employees that work at PEAK companies might look at the Kansas tax withheld on the paychecks and rationalize “Well, at least it’s going for the kids’ schools or some other beneficial purpose.”

No. Their withholding taxes are being paid (less five percent) to their employer.

Without these tax expenditure programs, legislatures would have to pass specific bills to spend taxpayer money. Can you imagine if the State of Kansas passed a bill to give $3.5 million in taxpayer credits to developers of a luxury hotel in downtown Wichita? Citizens would look at things differently. They’d wonder why we’re spending this way. Using semi-mysterious mechanisms like PEAK and tax credits shrouds the true economic transactions taking place.

Kansas university spending and funding

kansas-regents-logo

In response to a small decrease in Kansas university funding in next year’s budget, there’s been a bit of overreaction. Consider this Wichita Eagle editorial: “The higher tuition just forced on state universities by the Legislature effectively is a tax increase that will deepen loan debt for some Kansans and put college out of reach for others. And a $66 million cut to higher education is no way to ‘grow’ an economy.”

Examine the assumptions underlying this:

1. The only possible response to a small cut in state funding is for universities to raise tuition.

2. If students have to pay more of the cost of their college education, it’s a “tax increase.”

3. The response of students to higher tuition will be to increase their student loan borrowing or avoid college.

4. Spending on universities — as opposed to letting people spend and invest their own money — is the better way to grow the Kansas economy.

The most nonsensical of these is the claim of “tax increase.” Taxes are paid involuntarily. Attending college is a decision. Asking working Kansans to pay more for students to attend college: That is taxation.

Aside from this, Kansas regents universities — as is the case almost universally — have been increasing spending and tuition. Analysis by Kansas Policy Institute shows that for most Kansas regents universities, spending and tuition increases rise faster than inflation. Many times faster, in some cases. The KPI study is A Historical Perspective of State Aid, Tuition and Spending for State Universities in Kansas.

Below, Kansas Representative Marc Rhoades, who is Chair of the House Appropriations Committee, explains more about the funding and spending of Kansas regents universities, and recognizes the Washington Monument strategy employed by KU in an effort to shape public opinion on this matter. It worked on the Wichita Eagle editorial board.

Asking Questions of Higher Education

By Kansas Representative Marc Rhoades

Year after year, despite unchanged or increased state funding, the six state-funded Kansas colleges increased tuition far above inflation with little scrutiny. Undergraduate tuition and fees at the six universities increased 137 percent between 2002 and 2012. From 2002 to 2012, KU raised fees and tuition by 194 percent; KSU by 170 percent; and WSU by 117 percent.

Universities’ All Funds spending was $1.814 billion in 2005; $2.186 billion in 2008; and $2.421 billion in 2012 — a 33 percent increase in spending even with a recession.

Since 2003, unencumbered carryover cash balances in two student fee accounts increased by $248 million. In other words, they collected almost a quarter-billion dollars more in fees than they spent on whatever the fees were earmarked to do. General Fees plus interest earned on those accounts can be used for other purposes — say, for example, holding down tuition increases. Instead, students paid more in fees and more in tuition and the fee accounts kept accumulating.

This year the legislature examined the numbers and asked questions with a desire to initiate an open conversation about higher education spending, tuition and student outcomes.

The end result: a 1.5 percent reduction to Regents which hardly qualifies as a slash, but that’s the narrative being used; and since State Aid represents less than half of their General Use Expenditures, a 1.5 percent reduction in their State Aid amounts to a 0.7 percent reduction to that account.

Compare a 1.5 percent State Aid reduction with recent requests from Kansas colleges for increases in tuition up to 8 percent next year, even with inflation below 2 percent.

But the template never changes: Demands for more spending are always “modest and necessary”; reduced spending is always “drastic and draconian” — regardless of the amounts or how the money is used.

The legislature did not set out to reduce funding. We simply had questions.

Why so many unfilled FTE positions perpetually placed on the books with money systematically diverted for other uses?

Even factoring for inflation, why has tuition gone up so much without a correlation to past increases in state funding?

When defaulted on, students’ government-backed loans are paid for, ultimately, by taxpayers, so shouldn’t improved graduation and employment rates be prioritized over even higher salaries to the already-highly-paid?

By the way, the salary cap we requested was not a cut. You will hear it referred to as a cut, even though salaries were held level and not reduced.

I serve as a commissioner with the Midwest Higher Education Compact — a 12-state network of universities. Last week I attended a commissioner’s meeting in Indiana where we heard from current and former chancellors about the future of higher education. Similar to other sectors — healthcare, for example — there are two very different driving forces promoting two very different paths: collective institution-oriented versus individual outcomes-oriented.

College students, many unemployed and underemployed, are buried in debt while universities appear more focused on impressing their peers and expanding their infrastructure.

Indiana colleges, among others around the country, are addressing this disconnect. Indiana University-East, just one example, increased its student numbers and graduation rates while decreasing cost-per-student over 20 percent.

Kansas state-funded colleges have been raising tuition at astronomical rates, but under the radar. The only difference this year is they are vocal about increasing tuition using the legislature’s 1.5 percent budget reduction as a scapegoat.

Early in the session, following a discussion about spending and outcomes, KU’s response was to threaten closure of some of Kansas’ most viable institutions: KU’s medical campuses in Wichita and Salina. It was a classic bully move. Rather than address legitimate financial questions, they made threats to cut something highly valued by all. Think White House tour closures.

In response, the House and Senate conference committees added a proviso to the budget to prevent those closures from happening, even though insiders understood KU’s intention was to stir up angst among constituents in order to intimidate legislators so they would stop asking questions and hand over the money. Think shakedown.

When the endgame shifts to quantifiable student outcomes — retention and graduation rates, realistic employment tracks, greater efficiencies, reduced costs, lower tuition — collaborative conversations can take place and real-world results can be achieved in Kansas. I remain hopeful and open to such a dialogue.

Kansas taxes, the debate

Seal of the State of Kansas

Kansans are not being helped by their stable of newspaper editorial boards. We’ve seen this before (Kansas editorial writers aren’t helping), and the conclusion of the legislative session provides more examples.

An example is the editorial Why are these Kansas politicians celebrating? in the Kansas City Star. A quote is this: “Lawmakers had to go into overtime in the 2013 session trying to figure out how to climb out of the ditch they created last year when they gave away $3.7 billion in income tax cuts without figuring out how to offset them.”

This quotation serves to illustrate much of what’s wrong with Kansas newspaper editorial writing, and also with a large group of Kansas politicians.

A first problem is ideological. When you read words like they gave away income tax cuts, you know the writer believes that a certain portion of your income belongs not to you, but to the state. If the portion going to the state is reduced, the state is giving away something. What the state is giving away must be offset or paid for in some way, according to this ideology.

Private sector job growth, Kansas and selected states

A second problem is the presumption that the Kansas economy has been humming along smoothly, and that efforts to reduce taxes (and therefore government spending) are a change for the worse — the “ditch” that the Star referred to. But I would ask anyone who believes Kansas has been doing well to acquaint themselves with the facts about our economy. An example is the nearby chart (click for larger version) of private sector job growth in Kansas and surrounding states for the past two decades. For most of this period Kansas government has been in the hands of “moderates,” both Republican and Democratic. How would you say cumulative job growth in Kansas compares to our peer states?

Anyone who defends the recent decades of moderation must confront this and similar statistics. If private sector job growth doesn’t convince you, how about personal income growth? An interactive visualization of data from the U.S. Bureau of Economic Analysis is here. The pre-configured view shows income in Kansas growing slower than our peer states, the Plains states, and the United States.

If people are not aware of the dismal performance of the Kansas economy, ask them why they don’t know the facts. If they know the facts, ask them why they defend the status quo. Ask them why they want to deny Kansans the level of economic opportunity that people in, say, Oklahoma have.

But, editorial writers would rather complain about what the legislature did to “pay for Brownback’s perilous tax experiment.” (H. Edward Flentje : Is Kansas on the right track? Wichita Eagle)

Echoing the sentiment of the left-wing editorial boards, Flentje, a professor at Wichita State University with much practical experience in state and local government, also wrote that the legislature had to “clean up the mess” created by last year’s “financial debacle,” that being the income tax cuts. He also used the “pay for” line of thinking — several times for good measure — as well as tossing in “perilous tax experiment.” (I think I mentioned that earlier, but it bears repeating.)

This left-wing ideology is the prevailing breeze that propels Kansas newspaper editorial boards, along with others like Flentje who ought to know better. For those who disagree, I ask them to defend the record of the Kansas economy under the leadership of coalition of moderate Republicans and Democrats. (For more background, see Kansas traditional Republicans: The record.)

While it’s good that Kansas reduced income tax rates, it’s bad that on the balance, more tax revenue will flow to Topeka. In particular, raising the sales tax (or preventing its reduction, whichever you prefer) was a bad move, and particularly the sales tax on food. Writing in the Wichita Eagle, Kansas Senate President Susan Wagle wrote that Kansas has moved towards more of a “FairTax” model Susan Wagle : Kansas is on the path to prosperity. That’s true in some respects. But an important part of the FairTax model is the “prebate.” This is a monthly advance refund of sales tax on necessities up to the poverty level. Its purpose is to mitigate the regressive nature of consumption, or sales, taxes.

Kansas, however, taxes the sale of food. Furthermore, on July 1 the sales tax on food will be higher than it would be under current law. The new tax law restores a portion of the food sales tax credit program, but this is a clunky measure that will benefit very few people.

The biggest failure of the Kansas legislature this year was that little or nothing was done to reduce spending. In 2011 three bills passed the House that would take a long-term approach to reducing the cost of Kansas government. None of these bills were considered this year. (See In Kansas, there are ways to reduce the cost of government.)

Kansas Policy Institute has also prepared ways that Kansas can save money. See Kansas can cut spending, if we want.

Cutting government spending is important if we want to grow Kansas. See States that Spend Less, Tax Less — and Grow More and To boost jobs and prosperity, Kansas should cut spending.

Kansas tax changes

Tax

What are the changes to Kansas tax law that have been passed by the legislature and await the governor’s signature?

The nearby table presents estimated changes in tax revenue based on changes to the law that was current at the time of the estimate. (The source is Kansas Legislative Research Department.) The largest factor in that law was that if the legislature did nothing, the sales tax rate would change from 6.3 percent to 5.7 percent on July 1, 2013. The legislature decided to change the rate to 6.15 percent on July 1. The estimated increase in revenue is estimated to be $193.2 million in fiscal year 2014, and $1,118.5 million total over the next five years.

Kansas tax changes, June 2013

Other changes to the law presented along with the estimated change in revenue.

The most important number to notice is the five-year total: $777.1 million. This is the additional tax revenue that Kansas is expected to collect based on the action of the legislature this year. For the year starting July 1, the number is $307.9 million, which is 40 percent of the five-year total.

Someone asked me whether the tax bill increases taxes on the middle class. It’s hard to answer that question, as several changes were made. Here’s what each change means:

Sales tax: On July the sales tax rate will be less than it has been for the last three years, but more than if the legislature had done nothing. Whether this counts as a tax increase or not is solely in the eye of the beholder. The new tax law, as the chart shows, brings in more sales tax revenue than the law we’ve been living under, so I think that’s a tax increase.

Sales taxes are commonly thought of as regressive, meaning the burden falls disproportionally on the poor or low income. To help with this, the legislature partially restored the food sales tax credit program. This is estimated to refund a little more than $20 million to low-income Kansans to compensate for the sales tax on food.

The mechanism of the food sales tax credit is clunky. One has to file an income tax return to receive it. Further, the credit is now non-refundable, meaning that it can only be used to offset an income tax liability. In tax year 2010, when it was refundable, this credit was worth $59 million to Kansans, but is estimated to provide only $20 million in relief next year.

Itemized deductions: Except for charitable deductions, the value of itemized deductions is being reduced. It’s called a “haircut,” and the amount is 30 percent next year, and increasing after that.

For example, if a taxpayer has a deduction of $1,000, the value of that deduction is either $30 or $49, depending on whether the taxpayer is in the 3.0 percent or 4.9 percent marginal tax brackets. After the haircut, the deduction is reduced to $700, meaning the value of that deduction is either $21 or $34.30. This change to the law is estimated to bring in an additional $114.6 million next year, and $663.8 million over five years.

Not everyone itemizes deductions. At the federal level, only about 30 percent of returns use itemized deductions. So for 70 percent of filers, the value of the standard deduction is greater than their itemized deductions. For these, this tax law change has no impact.

Standard deduction: Most taxpayers use the standard deduction. Last year, Kansas increased the amount of this deduction, meaning that everyone paid less tax. Currently, it is set at $9,000. The new lax law changes that to $7,500 for married taxpayers filing jointly and to $5,500 for single heads-of-household. This means taxes will rise for most people. A family will pay tax on an additional $1,500 of income, which is an extra $45 or $103.50 in taxes. This change is estimated to raise an additional $56.3 million next year, and $311.1 million over five years.

Tax rate reduction: The new tax bill reduces tax rates. For tax year 2013, the two marginal income tax rates are 3.0 percent and 4.9 percent. The law calls for these to be reduced slowly over the next five years. This change in tax law is estimated reduce revenue by $35.2 million next year, and by $1,195.5 million over five years.

Rural Opportunity Zones: This program provides income tax relief to those who move to eligible counties. Its expansion is estimated to reduce tax revenue by $10.3 million over five years.

Food sales tax rebate: As explained above, this program is expected to reduce revenue to the state by $110.5 million over five years.

So whose taxes went up, and whose went down? The law changes several provisions, and in different directions. None of the changes are particularly large in magnitude, unless you spend a lot or earn a lot. Most people will be paying a different mix of taxes, which will influence their behavior.

The bottom line, though is this: Tax revenue flowing to the state of Kansas is rising.