Wichita area job growth

Private sector job growth in the Wichita area is improving, but lags behind local government employment growth.

Data from the Bureau of Labor Statistics through 2014 allows us to compare trends of employment in the Wichita metropolitan area. Over the past few years we see private sector employment rising. At the same time government employment, particularly state and local government employment, has declined or leveled.

Wichita area employment. Click for larger version.
Wichita area employment. Click for larger version.
Over the 24 years covered by the chart, private sector employment grew by 16 percent. Local government employment grew by 41 percent.

This long-term trend is a problem. It is the private sector that generates the taxes that pay for government. When government grows faster than the private sector, economic activity is shifted away from productive activities to unproductive. The economist Dan Mitchell has proposed what he calls the “Golden Rule of Fiscal Policy,” which is: “The Private Sector should Grow Faster than Government.” This is not happening in the Wichita metropolitan area.

Classical liberalism means liberty, individualism, and civil society

Not to be confused with modern American liberalism or liberal Republicans, classical liberalism places highest value on liberty and the individual.

In a short video, Nigel Ashford of Institute for Humane Studies explains the tenets of classical liberalism. Not to be confused with modern American liberalism or liberal Republicans, classical liberalism places highest value on liberty and the individual. Modern American liberals, or progressives as they often prefer to be called, may value some of these principles, but most, such as free markets and limited government — and I would add individualism and toleration — are held in disdain by them.

Here are the principles of classical liberalism that Ashford identifies:

Liberty is the primary political value. “When deciding what to do politically — what should the government do — classical liberals have one clear standard: Does this increase, or does it reduce the freedom of the individual?”

Individualism. “The individual is more important than the collective.”

Skepticism about power. “Government, for example, often claims ‘we’re forcing you to do X because it’s in your own interests to do so.’ Whereas very often, when people with power do that, it’s really because it’s good for themselves. Classical liberals believe that the individual is the best judge of their own interests.”

Rule of law.

Civil society. Classical liberals believe that problems can be dealt with best by voluntary associations and action.

Spontaneous order. “Many people seem to assume that order requires some institution, some body, to manipulate and organize things. Classical liberals don’t believe that. They believe that order can arise spontaneously. People through their voluntary interaction create the rules by which people can live by.”

Free markets. “Economic exchange should be left to voluntary activity between individuals. … We need private property to be able to do that. … History show us that leaving things to free markets rather than government planning or organization, increases prosperity, reduces poverty, increases jobs, and provides good that people want to buy.”

Toleration. “Toleration is the belief that one should not interfere with things on which one disapproves. … It’s a question of having certain moral principles (‘I think this action is wrong’), but I will not try and force my opinions — for example through government — to stop the things I disapprove of.”

Peace. Through free movement of capital, labor, goods, services, and ideas, we can have a world based on peace rather than conflict and war.

Limited government. “There are very few things the government should do. The goal of government is simply to protect life, liberty, and property. Anything beyond that is not justifiable.”

This video is available on YouTube through LearnLiberty.org, a site which has many other informative videos. Besides this video, other resources on classical liberalism include What Is Classical Liberalism? by John C. Goodman, Christianity, Classical Liberalism are Liberty’s Foundations by Leonard P. Liggio, What is Libertarian? at the Institute for Humane Studies, Why I, Too, Am Not a Conservative: The Normative Vision of Classical Liberalism (review of James M. Buchanan book by William A. Niskanen), Myths of Individualism by Tom G. Palmer, and Palmer’s book Realizing Freedom: Libertarian Theory, History, and Practice.

Wichita property tax rates up again

The City of Wichita says that it hasn’t raised its mill levy in many years. Data shows the mill levy has risen, and its use has shifted from debt service to current consumption.

Wichita mill levy rates. This table holds only the taxes levied by the City of Wichita and not any overlapping jurisdictions.
Wichita mill levy rates. This table holds only the taxes levied by the City of Wichita and not any overlapping jurisdictions.
In 1994 the City of Wichita mill levy rate was 31.290. In 2014 it was 32.652, based on the city’s Comprehensive Annual Financial Report and the Sedgwick County Clerk. That’s an increase of 1.362 mills, or 4.35 percent, since 1994. (These are for taxes levied by the City of Wichita only, and do not include any overlapping jurisdictions.)

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

Wichita mill levy rates. Click for larger version.
Wichita mill levy rates. Click for larger version.
While the city doesn’t have control over the assessed value of property, it does have control over the amount it decides to spend.

Change in Wichita mill levy rates, year-to-year and cumulative. Click for larger version.
Change in Wichita mill levy rates, year-to-year and cumulative. Click for larger version.
Also, while some may argue that an increase of 4.35 percent over two decades is not very much, this is an increase in a rate of taxation, not actual tax revenue. The revenue collected is a function of the mill levy rate multiplied by the value of taxable property. Revenue has risen, due both to appreciation in the value of property and an increase in the amount of property.

Application of tax revenue has shifted

The allocation of city property tax revenue has shifted over the years. According to the 2010 City Manager’s Policy Message, page CM-2, “One mill of property tax revenue will be shifted from the Debt Service Fund to the General Fund. In 2011 and 2012, one mill of property tax will be shifted to the General Fund to provide supplemental financing. The shift will last two years, and in 2013, one mill will be shifted back to the Debt Service Fund. The additional millage will provide a combined $5 million for economic development opportunities.”

Wichita mill levy, percent dedicated to debt service. Click for larger version.
Wichita mill levy, percent dedicated to debt service. Click for larger version.
In 2005 the mill levy dedicated to debt service was 10.022. In 2014 it was 8.537. That’s a reduction of 1.485 mills (14.8 percent) of property tax revenue dedicated for paying off debt. Another interpretation of this is that in 2005, 31.4 percent of Wichita property tax revenue was dedicated to debt service. In 2014 it was 26.1 percent.

This shift has not caused the city to delay paying off debt. This city is making its scheduled payments. But we should recognize that property tax revenue that could have been used to retire debt has instead been shifted to support current spending. Instead of spending this money on current consumption — including economic development spending that has produced little result — we could have, for example, used that money to purchase some of our outstanding bonds.

Despite the data that is readily available in the city’s comprehensive annual financial reports, some choose to remain misinformed and/or uninformed. The video below provides insight into the level of knowledge of some elected officials and city staff.

Kansas and U.S. economic dashboard

FREDS exampleHere is a collection of charts comparing aspects of Kansas and its economy to the United States. These charts are from the Federal Reserve Bank of St. Louis, which gathers the data from a variety of sources. The graphs are interactive in a variety of ways and should always be current with the most recent data.

Click here to view the charts.

Wichita economic development, the need for reform

An incentives deal for a Wichita company illustrates a capacity problem and the need for reform.

Next week the Wichita City Council will consider an economic development incentives package intended to enable a local manufacturing company to expand its operations.

R and R Aerospace benefits 2015-05-05City documents give some detail regarding the amounts of property tax to be forgiven on an annual basis, for a period of up to ten years. In the past, city documents have often mentioned other incentive programs that will benefit the company, but that information is missing. Other sources mention two state programs — PEAK and HPIP — the company may benefit from, but amounts are not available.

In order to prepare the incentives package, several events took place. There was a visit to the company. Then another visit and tour. Then economic development officials helped the company apply for benefits from the Kansas Department of Commerce. Then these officials worked closely with Wichita city staff on an incentive package.

City documents state that the expansion will create 28 jobs over the next five years. Obtaining these jobs took a lot of effort from Wichita and Kansas economic development machinery. Multiple agencies and fleets of bureaucrats at GWEDC, the City of Wichita, Sedgwick County, and the State of Kansas were involved. Wichita State University had to be involved. All this to create 5.6 jobs per year for five years.

The jobs are welcome. But this incident and many others like it reveal a capacity problem, which is this: We probably need to be creating 5.6 jobs every working hour of every day in order to make any significant progress in economic growth. If it takes this much effort to create 28 jobs over five years, how much effort will it take to create the many thousands of jobs we need to create every year?

This assumes, of course, that the incentives are necessary to enable the company to expand. City documents state that the tax exemption is necessary to make the project “viable.” It’s likely that the mayor or city council members will say that if we don’t award the incentives, the company won’t be able to expand. Or perhaps the company will expand in some other city. So the incentives really don’t have any cost, they will tell citizens.

This only hints at a larger problem. If companies can’t afford to make investments in Wichita unless they receive exemptions from paying taxes, we must conclude that taxes are too high. (An ongoing study reveals that generally, property taxes on commercial and industrial property in Wichita are high. In particular, taxes on commercial property in Wichita are among the highest in the nation. See here.) It’s either that, or this company simply doesn’t want to participate in paying for the cost of government like most other companies and people do.

To top it off, this expansion and the new jobs seem far from certain. City documents state the company is “bidding on a new work package” and the “expansion project would be completed in phases
based upon the timing and demand of the work package.”

Civic leaders say that our economic development policies must be reformed. So far that isn’t happening. Our leaders say that cash incentives are on the way out. This deal does not include grants of cash, that is true. But forgiveness of taxes is more valuable to business firms than receiving cash. That’s because cash incentives are usually taxable as income, while forgiveness of taxes does not create taxable income. Each dollar of tax that is forgiven adds one dollar to after-tax profits. 1

The large amount of bureaucratic effort and cost spent to obtain a small number of speculative jobs lets us know that we need to do something else in order to grow our local economy. We need to create a dynamic economy, focusing our efforts on creating an environment where growth can occur organically without management by government. Dr. Art Hall’s paper
Embracing Dynamism: The Next Phase in Kansas Economic Development Policy provides much more information on the need for this.

Another thing we can do to help organically grow our economy and jobs is to reform our local regulatory regime. Recently Kansas Policy Institute released a study of regulation and its impact at the state and local level. This is different from most investigations of regulation, as they usually focus on regulation at the federal level.

Business Perceptions of the Economic Impact of State and Local Government Regulation coverThe study is titled “Business Perceptions of the Economic Impact of State and Local Government Regulation.” It was conducted by the Hugo Wall School of Public Affairs at Wichita State University. Click here to view the entire document.

Following is an excerpt from the introduction by James Franko, Vice President and Policy Director at Kansas Policy Institute. It points to a path forward.

Surprising to some, the businesses interviewed did not have as much of a problem with the regulations themselves, or the need for regulations, but with their application and enforcement. Across industries and focus group sessions the key themes were clear — give businesses transparency in what regulations are being applied, how they are employed, provide flexibility in meeting those goals, and allow an opportunity for compliance.

Sometimes things can be said so often as to lose their punch and become little more than the platitudes referenced above. The findings from Hugo Wall are clear that businesses will adapt and comply with regulations if they are transparent and accountable. Many in the public can be forgiven for thinking this was already the case. Thankfully, local and state governments can ensure this happens with minimal additional expense.

A transparent and accountable regulatory regime should be considered the “low hanging fruit” of government. Individuals and communities will always land on different places along the continuum of appropriate regulation. And, a give and take will always exist between regulators and the regulated. Those two truisms, however, should do nothing to undermine the need for regulations to be applied equally, based on clear rules and interpretations, and to give each business an opportunity to comply. (emphasis added)

Creating a dynamic economy and a reformed regulatory regime should cost very little. The benefits would apply to all companies — large or small, startup or established, local or relocations, in any industry.

Our civic leaders say that our economic development efforts must be reformed. Will the path forward be a dynamic economy and reformed regulation? Or will it be more bureaucracy, chasing five jobs at a time?

  1. Site Selection magazine, September 2009. 2015. ‘INCENTIVES — Site Selection Magazine, September 2009′. Siteselection.Com. Accessed May 1 2015. http://www.siteselection.com/issues/2009/sep/Incentives/

WichitaLiberty.TV: Kansas revenue and spending, initiative and referendum, and rebuliding liberty

In this episode of WichitaLiberty.TV: The Kansas Legislature appears ready to raise taxes instead of reforming spending. Wichita voters have used initiative and referendum, but voters can’t use it at the state level. A look at a new book “By the People: Rebuilding Liberty Without Permission.” View below, or click here to view at YouTube. Episode 83, broadcast May 3, 2015.

Kansas school test scores, an untold story

If the Kansas public school establishment wants to present an accurate assessment of Kansas schools, it should start with its presentation of NAEP scores.

Kansas public school leaders are proud of Kansas schools, partly because of scores on the National Assessment of Educational Progress (NAEP), known as “The Nation’s Report Card.” Kansas ranks high among the states on this test. It’s important, however, to examine the results from a few different angles to make sure we understand the entire situation.

I’ve gathered scores from the 2013 administration of the test, which is the most recent data available. I present data in an interactive visualization that you may use through the links at the end of this article. The most widely available NAEP data is for two subjects: reading and math, and for two grades, fourth and eighth. In the nearby images captured from the visualizations, I present data for Kansas and the average for national public schools. I’ve also added Texas and Florida, as schools in those states have sometimes been mentioned in comparisons to Kansas. The numbers in the charts are the percent of students that score at or above proficient.

NAEP scores grouped by ethnicity. Click for larger version.
NAEP scores grouped by ethnicity. Click for larger version.

Considering all students, Kansas has the best scores for all combinations of grade levels and subjects, except for one.

When we compare black students only, we find Kansas outperformed by Texas in all cases. National public schools beat Kansas in one case, and tie in another.

Looking at Hispanic students only, Florida beats Kansas in three cases and ties in one. In some cases the difference is large.

Looking at white students only, Texas outperforms Kansas in all cases. National public schools score higher than Kansas in three of four cases.

Another way to look at test scores is to group students by eligibility for free or reduced school lunches. This is a widely used surrogate for family income. In this analysis Kansas performs better in comparison to other states, but Kansas is not always the best.

NAEP scores grouped by free/reduced lunch eligibility. Click for larger version.
NAEP scores grouped by free/reduced lunch eligibility. Click for larger version.

These visualizations are interactive, meaning that you may adjust parameters yourself. For the visualization grouping students by ethnicity, click here. For the visualization grouping students by school lunch eligibility, click here.

More government spending is not a source of prosperity

Kansas needs to trim state government spending so that its economy may grow by harnessing the benefits of the private sector over government.

In the debate over how to balance the Kansas budget, those who oppose low state taxes say the burden of taxation is simply transferred to other sources, usually in the form of sales and property taxes. Cutting spending is the other possibility, but it is argued that state spending is a good thing, a source of prosperity that Kansas should exploit.

The idea that government spending is a generator of wealth and prosperity is true for only a certain minimal level of spending. We benefit from government provision of things like national defense, public safety, and a court system. But once government grows beyond these minimal core functions, it is markets — that is, free people trading in the private sector — that can produce a wider variety of better goods and services at lower cost.

Those who call for more government spending seem to fail to realize spending has a cost, and someone has to pay. They see the salary paid to a government worker and say that money gets spent, thereby producing economic activity and jobs. But what is the source of the government worker’s salary? It is money taken from someone through taxation. By necessity, money spent on government reduces the private sector economic activity of those who paid the taxes. (At the federal level, government also spends by borrowing or creating inflation. Kansas can’t do this.)

If this loss was economically equivalent to the gain, we might be less concerned. But there is a huge cost in taxation and government inefficiency that makes government spending a negative-sum proposition.

Another fundamental problem with government taxation and spending is that it is not voluntary. In markets, people voluntarily trade with each other because they feel it will make them better off. That’s not the case with government. I do not pay my taxes because I feel doing so makes me better off, other than for that small part that goes to the basic core functions. Instead, I pay my taxes so that I can stay out of jail. This fundamentally coercive method of generating revenue for government gets things off to a bad start.

Then, ask how that money is spent. Who decides, and how? Jeffrey A. Miron explains: “The political process, alas, does not lend itself to objective balancing of costs and benefits. Most programs benefit well-defined interest groups (the elderly, teachers unions, environmentalists, defense contractors) while imposing relatively small costs per person on everyone else. Thus the winners from excess spending fight harder than the losers, and spending far exceeds the level suggested by cost-benefit considerations.” 1

An example in Kansas is the special interest group that benefits from highway construction. They formed a group called Economic Lifelines. It says it was formed to “provide the grassroots support for Comprehensive Transportation Programs in Kansas.” Its motto is “Stimulating economic vitality through leadership in infrastructure development.”

A look at the membership role, however, lets us know whose economic roots are being stimulated. Membership is stocked with names like AFL-CIO, Foley Equipment Company, Heavy Constructors Association of Greater Kansas City, Kansas Aggregate & Concrete Associations, Kansas Asphalt Pavement Association, Kansas Contractors Association, Kansas Society of Professional Engineers, and PCA South Central Cement Promotion Association. Groups and companies like these have an economic interest in building more roads and highways, whether or not the state actually needs them.

As Miron explained, groups like this will spend almost limitlessly in order to receive appropriations from the government. It’s easier than competing in markets for customers and business. It’s perhaps the largest problem with government spending: Decisions are made by a few centralized actors who are subject to intense lobbying by special interests. It is the well-known problem of concentrated benefits and diffuse costs. 2

Some argue that without government spending, certain types of goods and services will not be provided. A commonly cited example is education, which accounts for about half of Kansas general fund spending. Would there be schools if not for government? Of course there would be. There are many non-government schools now, even though those who patronize them must first pay for the government schools before paying for their own schools. And there were many schools and educated, literate Americans before government decided it need to monopolize education.

Still, it is argued that government spending on education is needed because everyone benefits from an educated citizenry. Tom G. Palmer explains: “Thus, widespread education generates public benefits beyond the benefits to the persons who are educated, allegedly justifying state provision and financing through general tax revenues. But despite the benefits to others, which may be great or small, the benefits to the persons educated are so great for them that they induce sufficient investment in education. Public benefits don’t always generate the defection of free-riders.”

Those who still argue that government spending in education is for the good of everyone will also need to defend the sagging and declining performance of public schools. They need to persuade us that government schools are producing an educated citizenry. They need to defend the capture of Kansas spending on schools by special interest groups that benefit from this spending. They actually do a pretty good job of this, which illustrates the lengths to which special interest groups will go. In Kansas, they throw children under the bus.

Back to the basics: Government spending as economic booster is the theory of the Keynesians, including the administration of Barack Obama. Miron, from the same article cited above, explains the problems with this:

That brings us to the second argument for higher spending: the Keynesian claim that spending stimulates the economy. If this is accurate, it might seem the U.S. should continue its high-spending ways until the recession is over.

But the Keynesian argument for spending is also problematic. To begin with, the Keynesian view implies that any spending — whether for vital infrastructure or bridges to nowhere — is equally good at stimulating the economy. This might be true in the short term (emphasis on might), but it cannot be true over the long haul, and many “temporary” programs last for decades. So stimulus spending should be for good projects, not “digging ditches,” yet the number of good projects is small given how much is already being spent.

More broadly, the Keynesian model of the economy relies on strong assumptions, so we should not embrace it without empirical confirmation. In fact, economists find weak or contradictory evidence that higher government spending spurs the economy.

Substantial research, however, does find that tax cuts stimulate the economy and that fiscal adjustments — attempts to reduce deficits by raising taxes or lowering expenditure — work better when they focus on tax cuts. This does not fit the Keynesian view, but it makes perfect sense given that high taxes and ill-justified spending make the economy less productive.

The implication is that the U.S. may not face a tradeoff between shrinking the deficit and fighting the recession: it can do both by cutting wasteful spending (Medicare, Social Security, and the wars in Iraq and Afghanistan, for starters) and by cutting taxes.

The reduced spending will make the economy more productive by scaling government back to appropriate levels. Lower tax rates will stimulate in the short run by improving consumer and firm liquidity, and they will enhance economic growth in the long run by improving the incentives to work, save, and invest.

Deficits will therefore shrink and the economy will boom. The rest of the world will gladly hold our debt. The U.S. will re-emerge as a beacon of small government and robust capitalism, so foreign investment (and talented people, if immigration policy allows) will come flooding in.

In Kansas, we need to scale back government to appropriate levels, as Miron recommends. That means cutting spending. That will allow us to maintain low tax rates, starting with the income tax. Then we in Kansas can start to correct the long record of sub-par economic performance compared to other states and bring prosperity and jobs here.

  1. Cato Institute, 2010. ‘Slash Expenditure To Balance The Budget’. Accessed April 28 2015. http://www.cato.org/publications/commentary/slash-expenditure-balance-budget.
  2. David Boaz: “Economists call this the problem of concentrated benefits and diffuse costs. The benefits of any government program — Medicare, teachers’ pensions, a new highway, a tariff — are concentrated on a relatively small number of people. But the costs are diffused over millions of consumers or taxpayers. So the beneficiaries, who stand to gain a great deal from a new program or lose a great deal from the elimination of a program, have a strong incentive to monitor the news, write their legislator, make political contributions, attend town halls, and otherwise work to protect the program. But each taxpayer, who pays little for each program, has much less incentive to get involved in the political process or even to vote.”

The Kansas revenue problem in perspective

If we take the budgetary advice of a former Kansas state budget official, we need to be ready to accept the economic stagnation that accompanied his boss’s tenure.

Writing in his blog, former Kansas budget director Duane Goossen offers his advice for fixing the Kansas budget: “The state has a revenue problem that will not fix itself. Lawmakers have to face up to the fact that they must make revenue match expenditures. Unaffordable income tax cuts caused the problem. That’s the place to look for a correction.” (Lawmakers Make It Clear: Kansas Has A Revenue Problem)

Goossen has one thing correct: revenue and expenditures must be equal, over any long period of time. The preference for Goossen, as we see, is to raise revenue to support more spending. We can’t afford tax cuts, he writes.

But this is a backwards way of looking at the relationship between government and its subjects. When someone says we can’t afford tax cuts, that presumes a few things. First, it presumes that the previous level of taxation was better than the current level.

Second, it presumes that tax cuts have a cost that can’t be afforded. The only way this is true is if we believe that the state has first claim on our incomes. The state takes what it believes it needs, and we get to keep the rest. Then if, somehow, the government is persuaded to give any of that claim back to us, this “gift” has to be paid for.

But for those who believe in self-ownership, this is nonsense. It’s the people who “give” tax money to the government, not the government who “gives” it back in the form of tax cuts. If the government cuts taxes, the government gives us nothing. It simply takes less of what is ours in the first place.

Growth of jobs in Kansas and nearby states. Click for larger version.
Growth of jobs in Kansas and nearby states. Click for larger version.
But the attitude of many government officials is the opposite. In 2006 Kansas cut taxes on business equipment and machinery. At the time, the Wichita Eagle reported: “Gov. Kathleen Sebelius, a Democrat, who first proposed the business machinery tax cut, agreed. ‘We’re not giving away money for the sake of giving it away,’ she said. ‘I’m hoping that the economic growth will actually help fund the school plan that we just passed.'” (emphasis added) (Lawmakers hope for growth)

Growth of gross domestic product in Kansas and nearby states. Click for larger version.
Growth of gross domestic product in Kansas and nearby states. Click for larger version.
For the former governor of Kansas, letting business firms keep a little more of the money they earn means the state is “giving it away.” By the way, Duane Goossen — who now believes the only solution for the Kansas budget is to raise taxes — was the state’s budget director when Sebelius said the state is going to “give away money” in the form of tax cuts.

If take Goossen’s advice and return to the tax rates of the Sebelius and Graves eras, let’s make sure we understand the economic growth Kansas experienced during those years. Nearby is a snapshot of Kansas job growth starting when Bill Graves became governor, along with growth in some nearby states. A chart of GDP growth starts in 1997, two years into the Graves administration. We don’t want to return to these levels of growth.

If you’d like to use the interactive visualizations of this employment and GDP data, click here for employment, and click here for GDP.

Efficiency has not come to Kansas government

Kansas state government needs to cut spending, but finds itself in a difficult situation of its own making.

The budget bill under consideration in the Kansas Legislature calls for spending $3 million for the production of an efficiency analysis review. It’s a good idea, but is too late to help the legislature balance the budget this year.

Trimming Kansas government spending is a long-term project. The legislature has looked at several bills that would help control spending, but has not passed the bills. Had they been passed when introduced, the state would be in a much better position to make reforms. But a look at the history of these bills leads us to wonder if the leaders of our state government — both in the executive and legislative branches — are really serious about controlling spending.

The three bills — explained in detail below — were in play during the 2011 and 2012 legislative sessions. They all passed the House of Representatives in 2011. But given that the Senate was in the hands of moderate Republicans, there was little chance that the bills would also pass the Senate. That’s what happened. Each bill died in the Senate.

Starting with the 2013 session, however, the Senate has been in conservative hands. Have the bills been reintroduced? With the exception of the efficiency analysis review mentioned above and a look at K — 12 education, I don’t believe the bills, or anything else like them, have been introduced or considered.

Both chambers of the Kansas Legislature and the governor’s mansion have been under the control of conservatives for three years, but no serious initiative to control spending has emerged, with the exception of the efficiency task force on K — 12 education. This ought to cause voters to ask if the desire and will to cut spending truly exists.

It’s curious that liberals and progressives in Kansas are opposed to efforts to increase efficiency, such as the school task force. If the government services that liberals support are truly vital, they ought to insist that they are delivered as efficiently as possible so that the greatest number may benefit to the greatest extent. But that doesn’t happen.

A simple path forward

Recently I attended a meeting where a speaker reported his observations of state workers wasting time while at work. He contrasted that to the private sector, where he said this waste is less likely to happen. Shouldn’t we investigate state agencies, looking for instances of waste, and when found, eliminate the waste, he asked? It’s a good idea, but something that I think would be difficult to accomplish.

There is an easier way to root out inefficiencies in the operations of state government — and local and federal too. That is to use the benefits of the private sector that the speaker praised. We can do this by outsourcing government functions to the private sector. Then, the work is done under the motivations that exist in the private sector.

Kansas Policy Institute produced a report in 2013 that shows how Kansas can save using the principles of privatization and outsourcing. The report is Better Service, Better Price: How privatization can streamline government, improve services, and reduce costs for Kansas taxpayers.

Reforms of this nature take some time to implement. Several years ago Kansas governmental leaders had time to start the state on a path to reform, but did not take the opportunity. Now these same leaders are considering raising taxes to balance the Kansas budget. This did not have to happen.

The bills that did not pass

In 2011 the Kansas Legislature lost three opportunities to do just this. Three bills, each with this goal, were passed by the House of Representatives, but each failed to pass through the Senate, or had its contents stripped and replaced with different legislation.

Each of these bills represents a lost opportunity for state government services to be streamlined, delivered more efficiently, or measured and managed. These goals, while always important, are now essential for the success of Kansas government and the state’s economy. There is no reason why these bills, or similar measures, could not be revived. The improvements these bills would foster will not balance next year’s budget. But they will set the stage for controlling the growth of Kansas government spending. This will leave more money in the private sector, which will help Kansas grow.

Kansas Streamlining Government Act

HB 2120, according to its supplemental note, “would establish the Kansas Streamlining Government Act, which would have the purpose of improving the performance, efficiency, and operations of state government by reviewing certain state agencies, programs, boards, and commissions.” Fee-funded agencies — examples include Kansas dental board and Kansas real estate commission — would be exempt from this bill.

In more detail, the text of the bill explains: “The purposes of the Kansas streamlining government act are to improve the performance, streamline the operations, improve the effectiveness and efficiency, and reduce the operating costs of the executive branch of state government by reviewing state programs, policies, processes, original positions, staffing levels, agencies, boards and commissions, identifying those that should be eliminated, combined, reorganized, downsized or otherwise altered, and recommending proposed executive reorganization orders, executive orders, legislation, rules and regulations, or other actions to accomplish such changes and achieve such results.”

In testimony in support of this legislation, Dave Trabert, President of Kansas Policy Institute offered testimony that echoed findings of the public choice school of economics and politics: “Some people may view a particular expenditure as unnecessary to the fulfillment of a program’s or an agency’s primary mission while others may see it as essential. Absent an independent review, we are expecting government employees to put their own self-interests aside and make completely unbiased decisions on how best to spend taxpayer funds. It’s not that government employees are intentionally wasteful; it’s that they are human beings and setting self-interests aside is challenge we all face.”

The bill passed the House of Representatives by a vote of 79 to 40. It was referred to the Senate Committee on Federal and State Affairs, where it did not advance.

Privatization and public-private partnerships

Another bill that did not advance was HB 2194, which in its original form would have created the Kansas Advisory Council on Privatization and Public-Private Partnerships.

According to the supplemental note for the bill, “The purpose of the Council would be to ensure that certain state agencies, including the Board of Regents and postsecondary educational institutions, would: 1) focus on the core mission and provide goods and services efficiently and effectively; 2) develop a process to analyze opportunities to improve efficiency, cost-effectiveness and provide quality services, operations, functions, and activities; and 3) evaluate for feasibility, cost-effectiveness, and efficiency opportunities that could be outsourced. Excluded from the state agencies covered by the bill would be any entity not receiving State General Fund or federal funds appropriation.”

This bill passed by a vote of 68 to 51 in the House of Representatives. It did not advance in the Senate, falling victim to a “gut-and-go” maneuver where its contents were replaced with legislation on an entirely different topic.

Opposing this bill was Kansas Organization of State Employees (KOSE), a union for executive branch state employees. It advised its “brothers and sisters” that the bill “… establishes a partisan commission of big-business interests to privatize state services putting a wolf in charge of the hen house. To be clear, this bill allows for future privatization of nearly all services provided by state workers. Make no mistake, this proposal is a privatization scheme that will begin the process of outsourcing our work to private contractors. Under a privatization scheme for any state agency or service, the employees involved will lose their rights under our MOA and will be forced to adhere to the whims of a private contractor who typically provides less pay and poor benefits. Most workers affected by privatization schemes are not guaranteed to keep their jobs once an agency or service is outsourced.”

Note the use of “outsourcing our work.” This underscores the sense of entitlement of many government workers: It is not work done for the benefit of Kansans; to them it is our work.

Then, there’s the warning that private industry pays less. Most of the time representatives of state workers like KOSE make the case that it is they who are underpaid, but here the argument is turned around when it supports the case they want to make. One thing is probably true: Benefits — at least pension plans — may be lower in the private sector. But we’re now painfully aware that state government has promised its workers more pension benefits than the state has been willing to fund.

Performance measures

Another bill that didn’t pass the entire legislature was HB 2158, which would have created performance measures for state agencies and reported that information to the public. The supplemental note says that the bill “as amended, would institute a new process for modifying current performance measures and establishing new standardized performance measures to be used by all state agencies in support of the annual budget requests. State agencies would be required to consult with representatives of the Director of the Budget and the Legislative Research Department to modify each agency’s current performance measures, to standardize such performance measures, and to utilize best practices in all state agencies.” Results of the performance measures would be posted on a public website.

This bill passed the House of Representatives by a nearly unanimous vote of 119 to 2. In the Senate, this bill was stripped of its content using the “gut-and-go” procedure and did not proceed intact to a vote.

Opposition to these bills from Democrats often included remarks on the irony of those who were recently elected on the promise of shrinking government now proposing to enlarge government through the creation of these commissions and councils. These bills, however, proposed to spend modest amounts increasing the manageability of government, not the actual range and scope of government itself. As it turns out, many in the legislature — this includes Senate Republicans who initiated or went along with the legislative maneuvers that killed these bills — are happy with the operations of state government remaining in the shadows.

These proposals to scale back the services that government provides — or to have existing services be delivered by the private sector — mean that there will be fewer government employees, and fewer members of government worker unions. This is another fertile area of gathering support for killing these bills.

State workers and their supporters also argue that fewer state workers mean fewer people paying state and other taxes. Forgotten by them is the fact that the taxes taken to pay these workers means less economic activity and fewer jobs in the private sector.

As to not wanting performance measures: Supporters of the status quo say that people outside of government don’t understand how to make the decisions that government workers make. In one sense, this may be true. In the private sector, profitability is the benchmark of success. Government has no comparable measure when it decides to, say, spend some $300 million to renovate the Kansas Capitol. But once it decides to do so, the benchmark and measurement of profitability in executing the service can be utilized by private sector operators. Of course, private contractors will be subject to the discipline of the profit and loss system, something missing from government.

WichitaLiberty.TV: Shari Howard McMinn, author of “Stretched Yet Unbroken”

In this episode of WichitaLiberty.TV: Former Wichitan Shari Howard McMinn talks about her book “Stretched Yet Unbroken: A Family Knit Together Continues Their Legacy of Faith” and her remarkable journey through life. View below, or click here to view at YouTube. Episode 82, broadcast April 26, 2015.

The website for this book is Stretched Yet Unbroken.

Rebuilding liberty without permission

A forthcoming book by Charles Murray holds an intriguing idea as to how Americans can reassert liberty: Civil disobedience. Make the federal government an “insurable hazard.”

I think it’s a great idea. For an easy introduction to this concept, listen to the Cato Institute’s seven-minute podcast of Murray speaking about these ideas.

From the publisher:

American freedom is being gutted. Whether we are trying to run a business, practice a vocation, raise our families, cooperate with our neighbors, or follow our religious beliefs, we run afoul of the government—not because we are doing anything wrong but because the government has decided it knows better. When we object, that government can and does tell us, “Try to fight this, and we’ll ruin you.”

In this provocative book, acclaimed social scientist and bestselling author Charles Murray shows us why we can no longer hope to roll back the power of the federal government through the normal political process. The Constitution is broken in ways that cannot be fixed even by a sympathetic Supreme Court. Our legal system is increasingly lawless, unmoored from traditional ideas of “the rule of law.” The legislative process has become systemically corrupt no matter which party is in control.

But there’s good news beyond the Beltway. Technology is siphoning power from sclerotic government agencies and putting it in the hands of individuals and communities. The rediversification of American culture is making local freedom attractive to liberals as well as conservatives. People across the political spectrum are increasingly alienated from a regulatory state that nakedly serves its own interests rather than those of ordinary Americans.

The even better news is that federal government has a fatal weakness: It can get away with its thousands of laws and regulations only if the overwhelming majority of Americans voluntarily comply with them. Murray describes how civil disobedience backstopped by legal defense funds can make large portions of the 180,000-page Federal Code of Regulations unenforceable, through a targeted program that identifies regulations that arbitrarily and capriciously tell us what to do. Americans have it within their power to make the federal government an insurable hazard like hurricanes and floods, leaving us once again free to live our lives as we see fit.

By the People’s hopeful message is that rebuilding our traditional freedoms does not require electing a right-thinking Congress or president, nor does it require five right-thinking justices on the Supreme Court. It can be done by we the people, using America’s unique civil society to put government back in its proper box.

Wichita economic development policies questioned

One of the themes of the recent Wichita mayoral campaign was the need to restore trust in city hall. Following, from April 2013, an example of how city hall has created the trust deficit. Although this story was covered nowhere but here, it it exemplary of how Wichita city hall operates. Since then the city’s economic development director has retired, but we have the same city manager and nearly all the same council members, with one having moved up to mayor. For an update on this story, see Wichita: No such document.

At Tuesday’s meeting of the Wichita City Council, I was prepared to ask the council to not approve issuance of Industrial Revenue Bonds. My reason, explained here, was that the cost-benefit analysis did not meet the standard the city has established in its economic development incentives policy.

At the meeting, though, Urban Development Director Allen Bell and Wichita city manager Robert Layton both explained that for downtown projects, the city’s policy that the debt service fund must show a cost-benefit ratio of 1.3 to one or better doesn’t apply. (Video of Bell explaining this policy is here, and of Layton doing the same, here.)

I thought I should have known about that policy. I felt bad — embarrassed, even — for not being aware of it.

There’s a certain logic to their arguments. The parking garage is available to the public — at least some parking stalls. But the garage was not built until the Ambassador Hotel project was finalized. And the number of parking spots actually available to the public is difficult to determine. One analysis shows that the number of spots available to the public is zero, although the city says otherwise.

So the next day I sought to inform myself of this policy regarding the cost-benefit ratio for the city’s debt service fund for downtown projects.

I found a document titled “City of Wichita Downtown Development Incentives Policy” as approved by the Wichita City Council on May 17, 2011. It doesn’t address cost-benefit ratios for any funds, at least by my reading.

(By the way, that document, which was available on the city’s website at wichita.gov, wasn’t available after the city recently transitioned to a new website.)

There is also the evaluation matrix for downtown projects. It includes as a criterion “Extent City’s ROI exceeds benefit/cost ratio of 1.3:1 on CEDBR Model.”

I don’t see either of these documents supporting what was stated by two top city officials at Tuesday’s meeting, that the cost-benefit ratio of 1.3 to one requirement does not apply to the debt service fund for downtown projects.

I’ve asked the city to provide such a policy document. So far, city officials have searched, but no such document has been provided. You’d think that if there is a document containing this policy, it would be readily accessible.

Whether the “new” policy explained Tuesday by Messrs. Bell and Layton is sound public policy is something that should be discussed. It might be a desirable policy.

But this entire episode smacks of molding public policy in order to fit the situation at hand.

The city relies on cost-benefit analysis produced by Wichita State University Center for Economic Development and Business Research. The positive result produced for the general fund — the 2.62 that Bell referred to — was used to justify the public investments the city asked taxpayers to make in September 2011.

We didn’t know about the unfavorable result for the city’s debt service at that time. City officials, however, knew, as it’s contained in the analysis provided to the city from CEDBR.

City officials could have — if they had wanted to — explained this special debt service policy for downtown projects at that time. City officials or the mayor could have explained that part of the Ambassador Hotel project doesn’t meet the city’s economic development policies, but here’s why the project is a good idea nonetheless.

City officials and the mayor could have used that opportunity to inform Wichitans of the special policy for downtown projects regarding the debt service fund, if such a policy actually existed at that time.

But they didn’t do that. And if the policy actually existed at that time, it was a well-kept secret, and was until Tuesday.

I’m sure some will say that we should just shrug this off as an innocent oversight. But this project is steeped in cronyism. It is the poster child for why Wichita and Kansas need pay-to-play laws so that city council members are prohibited from voting to send millions to their significant campaign contributors and the mayor’s fishing buddy.

Soon the city will probably ask Wichitans to trust it with more tax revenue so the city can do more for its citizens. The city commissioned a survey to justify this. Also, the mayor wants a dedicated stream of funding so that the city can spend more on economic development.

In other words, the city wants its citizens to trust their government. But in order to gain that trust, the city needs to avoid episodes like this.

Wichita has examples of initiative and referendum

Citizens in Wichita have been busy exercising their rights of initiative and referendum at the municipal level. The Kansas Legislature should grant the same rights to citizens at the state level.

What recourse do citizens have when elected officials are not responsive? Initiative and referendum are two possibilities. Citizens in Wichita have exercised these rights, but Kansans are not able to do this at the state level.

Initiative is when citizens propose a new law, and then gather signatures on petitions. If a successful petition is filed, the matter is (generally) placed on a ballot for the electorate to decide whether the proposed law will become actual law. Examples are the initiative to add fluoride to Wichita water (which voters rejected) and reduce the penalties for possession of small amounts of marijuana (which passed, but has not taken effect pending legal action by the Kansas Supreme Court.)

Referendum is when citizens petition to overturn an act passed by a governing body. An example is the 2012 repeal of a charter ordinance passed by the Wichita city council.

So at the municipal level in Kansas, citizens have the right of initiative, although in practice the right is limited. The right of referendum is more narrowly limited. But at the state level, there is no possibility for citizens to exercise initiative or referendum. The law simply does not allow for this.

Policies, not politicians

Initiative and referendum allow citizens to vote on specific laws or policies. This is contrasted with elections for office, where voters must choose candidate A or candidate B. Voters have to take the entire package of positions associated with a candidate. It isn’t possible to select some positions from candidate A, and others from candidate B. So when a candidate wins an election, can we say why? Which of the candidate’s positions did voters like, and which did voters not like? Results of regular elections rarely provide a clear answer.

Initiative and referendum, however, let citizens vote on a specific law or proposal. There is little doubt as to the will of the voters.

There’s a difference between voting for politicians and voting for policies. When given a chance, Wichitans have often voted different from what the council wanted. An example is the 2012 overturn of a charter ordinance the council passed. Another is the failure of the sales tax in November 2014. That was on the ballot not because of citizen initiative, but it is an example of voting directly for an issue rather than a candidate. Citizens rejected the sales tax by a wide margin, contrary to the wishes of the city council, city hall bureaucrats, and the rest of Wichita’s political class.

It’s different voting for policies than politicians. For one thing, the laws passed by initiative don’t change, at least for some period of time. But politicians and their campaign promises have a short shelf life, and are easily discarded or modified to fit the current situation.

Politicians don’t want it, which is its best argument

Generally, politicians and bureaucrats don’t want citizens to be empowered with initiative and referendum. When the city council was forced to set an election due to the successful petition regarding the Ambassador Hotel issue, reactions by council members showed just how much politicians hate initiative and referendum. Council Member Pete Meitzner (district 2, east Wichita) wanted to move the election to an earlier date so as to “avoid community discourse and debate.”

Council Member Janet Miller (district 6, north central Wichita) expressed concern over “dragging this out,” and said she wants to “get it over with as soon as we can so that we can move on.”

In his remarks, Mayor Carl Brewer advocated having the election as soon as possible. He told the city “By doing that, it eliminates a lot of turmoil inside the community, unrest.”

As you can see by these remarks, politicians don’t like citizens second-guessing their actions. Initiative and referendum gives citizens this power. John Fund said it best: “Without initiatives and referendums, elites would barely bother at all to take note of public opinion on issues they disdained — from supermajority requirements to raise taxes to term limits. They serve as a reminder that the experts sometimes have to pay attention to good old common sense.”

Petitioning is not easy

A criticism often leveled against initiative and referendum is that ballots will be crowded with questions submitted by citizens. But as anyone who has been involved in a petitioning effort knows, filing a successful petition is not a simple matter. The first petition effort to relax Wichita marijuana laws failed, with the election commissioner ruling that an insufficient number of valid signatures were submitted. (Generally, petition signers must meet certain requirements such as being a registered voter and living within a certain jurisdiction.) Now the Kansas Attorney General contends that the second petition by the same group is defective because it lacks the proper legal language. It is common for the validity of petitions to be contested, either by government or by special interest groups that believe they will be adversely affected.

How to get it

It will take an amendment to the constitution for the people of Kansas to have initiative and referendum rights at the state level. That requires passage in both chambers of the legislature by a two-thirds margin, and then passage by a majority of voters.

Although the governor does not play a direct role in constitutional amendments — as they do not require the governor’s signature — a governor can still have a role. In 1991 Joan Finney supported initiative and referendum. An amendment passed the Kansas Senate, but did not advance through the House of Representatives.

Today it seems unlikely that the present Kansas Legislature would support an amendment implementing initiative and referendum. Politicians just don’t want to give up the power. (The laws giving some initiative and referendum rights at the municipal level is a state law. State legislators were imposing a hardship on other elected officials, not themselves.)

But initiative and referendum are popular with voters. In 2013 Gallup polled voters regarding petitioning at the national level. 68 percent favored this, while 23 percent opposed. One of the few issues that poll higher than this is term limits for office holders.

By the way, do you know what citizens in states often do after gaining the right of initiative? Impose term limits on their legislatures. Lawmakers don’t want you to do that.

Recent history in Wichita

In 2011, Wichitans petitioned to overturn a charter ordinance passed by the city council. In February 2012 the ordinance was overturned by a vote of 16,454 to 10,268 (62 percent to 38 percent). This was a special election with only question on the ballot.

In 2012 a group petitioned to add fluoride to Wichita water. The measure appeared on the November 2012 general election ballot, and voters said no by a vote of 76,906 to 52,293, or 60 percent to 40 percent.

On the November 2014 general election ballot, Wichita voters were asked about a one cent per dollar sales tax. This was not the result of a petition, but it provides an example of a vote for a policy rather than a person. Voters said no to the sales tax, 64,487 to 38,803 (62 percent to 38 percent.)

In 2015 a group petitioned to reduce the penalties for possession of small amount of marijuana. The measure appeared on the April 2015 city general election ballot, where Wichita voters approved the proposed law 20,327 to 17,183 (54 percent to 46 percent).

Wichita tourism plan should include spending disclosure

As part of a plan for spending a dedicated tax revenue stream, the Wichita city council should include disclosure of spending. It would fulfill a campaign promise.

When the City of Wichita collects money through taxation, citizens have the right to know how it is spent. For the city, it is possible to view every check that is written, although the city is not able to supply this information in machine-readable form. But it is available.

But when the city establishes non-profit corporations that are funded totally, or nearly totally, with taxes, different rules apply, says the city: Spending does not have to be disclosed.

This is contrary to the spirit of the Kansas Open Records Act, which opens with the preamble “It is declared to be the public policy of the state that public records shall be open for inspection by any person unless otherwise provided by this act, and this act shall be liberally construed and applied to promote such policy.”

For some time citizens have asked that the spending records of Wichita Downtown Development Corporation, Greater Wichita Economic Development Coalition, and Go Wichita Convention and Visitors Bureau (now known as Visit Wichita) be made available. But it is the position of each of these agencies that despite being funded almost totally by taxes, they do not need to reveal their spending records. The City of Wichita has backed this position.

This week the city council will consider a scope of services and budget agreement with its convention and visitors bureau. This year that agency is receiving the proceeds of a new 2.75 percent tax on hotel bills. City documents indicate this tax is expected to raise $2.7 million annually. When added to other tax funds the convention and visitors bureau receives, its budget is some $5 million per year.

But none of this money is subject to the same disclosure as regular city spending.

During the recent mayoral campaign, candidate Jeff Longwell wrote this in response to a question for the Wichita Eagle voter guide: “The city needs to continue to improve providing information online and use other sources that will enable the taxpayers to understand where their money is going.”

Now Wichita mayor, Longwell has an opportunity to implement a campaign promise. It would be simple to do. All the council needs to do is insist that the convention and visitors bureau agree that it is what the law says it is: An agency funded nearly totally by taxes, which means it is a public agency that falls under the scope of the Kansas Open Records Act.

Intrust Bank Arena loss for 2014 is $5 million

The depreciation expense of Intrust Bank Arena in downtown Wichita recognizes and accounts for the sacrifices of the people of Sedgwick County and its visitors to pay for the arena. But no one wants to talk about this.

The true state of the finances of the Intrust Bank Arena in downtown Wichita are not often a subject of public discussion. Arena boosters promote a revenue-sharing arrangement between the county and the arena operator, referring to this as profit or loss. But this arrangement is not an accurate and complete accounting, and hides the true economics of the arena. What’s missing is depreciation expense.

In February the Wichita Eagle reported: “The arena’s net income for 2014 came in at $122,853, all of which will go to SMG, the company that operates the facility under contract with the county, Assistant County Manager Ron Holt said Wednesday.” A reading of the minutes for the February 11 meeting of the Sedgwick County Commission finds Holt mentioning depreciation expense not a single time. Strike one.

Last December, in a look at the first five years of the arena, its manager told the Wichita Eagle this: “‘We know from a financial standpoint, the building has been successful. Every year, it’s always been in the black, and there are a lot of buildings that don’t have that, so it’s a great achievement,’ said A.J. Boleski, the arena’s general manager.” Strike two.

I didn’t notice the Eagle opinion page editorializing this year on the release of the arena’s profitability figures. So here’s an example of incomplete editorializing from Rhonda Holman, who opined “Though great news for taxpayers, that oversize check for $255,678 presented to Sedgwick County last week reflected Intrust Bank Arena’s past, specifically the county’s share of 2013 profits.” (Earlier reporting on this topic in the Eagle in 2013 did not mention depreciation expense, either.) Strike three in the search for truthful accounting of the arena’s finances.

The problem with the reporting of Intrust Bank Arena profits

There are at least two ways of looking at the finance of the arena. Most attention is given to the “profit” (or loss) earned by the arena for the county according to an operating and management agreement between the county and SMG, a company that operates the arena.

This agreement specifies a revenue sharing mechanism between the county and SMG. For 2103, the accounting method used in this agreement produced a profit of $705,678, to be split (not equally) between SMG and the county. The county’s share, as Holman touted in her Eagle op-ed, was $255,678. (Presumably that’s after deducting the cost of producing an oversize check for the television cameras.)

For 2014, the arena’s profit was $122,853. All that goes to SMG, based on the revenue-sharing agreement.

The Operations of Intrust Bank ArenaWhile described as “profit” by many, this payment does not represent any sort of “profit” or “earnings” in the usual sense. In fact, the introductory letter that accompanies these calculations warns readers that these are “not intended to be a complete presentation of INTRUST Bank Arena’s financial position and results of operations and are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America.”

That bears repeating: This is not a reckoning of profit and loss in any recognized sense. It is simply an agreement between Sedgwick County and SMG as to how SMG is to be paid, and how the county participates.

A much better reckoning of the economics of the Intrust Bank Arena can be found in the 2014 Comprehensive Annual Financial Report for Sedgwick County. This document holds additional information about the finances of the Intrust Bank Arena. The CAFR, as described by the county, “… is a review of what occurred financially last year. In that respect, it is a report card of our ability to manage our financial resources.”

Regarding the arena, the CAFR states:

The Arena Fund represents the activity of the INTRUST Bank Arena. The facility is operated by a private company; the county incurs expenses only for certain capital improvements or major repairs and depreciation, and receives as revenue only a share of profits earned by the operator, if any, and naming rights fees. The Arena had an operating loss of $5.0 million. The loss can be attributed to $5.2 million in depreciation expense.

Financial statements in the same document show that $5,157,424 was charged for depreciation in 2014, bringing accumulated depreciation to a total of $26,347,705.

Depreciation expense is not something that is paid out in cash. Sedgwick County didn’t write a check for $5,157,424 to pay depreciation expense. Instead, depreciation accounting provides a way to recognize and account for the cost of long-lived assets over their lifespan. It provides a way to recognize opportunity costs, that is, what could be done with our resources if not spent on the arena.

But not many of our public leaders recognize this. In years past, Commissioner Dave Unruh made remarks that show the severe misunderstanding that he and almost everyone labor under regarding the nature of the spending on the arena: “I want to underscore the fact that the citizens of Sedgwick County voted to pay for this facility in advance. And so not having debt service on it is just a huge benefit to our government and to the citizens, so we can go forward without having to having to worry about making those payments and still show positive cash flow. So it’s still a great benefit to our community and I’m still pleased with this report.”

Earlier in this article we saw examples of the Sedgwick County Assistant Manager, the Intrust Bank Arena manager, and several Wichita Eagle writers making the same mistake.

Intrust Bank Arena commemorative monument
Intrust Bank Arena commemorative monument
The contention — witting or not — of all these people is that the capital investment of $183,625,241 (not including an operating and maintenance reserve) in the arena is merely a historical artifact, something that happened in the past, something that has no bearing today. There is no opportunity cost, according to this view. This attitude, however, disrespects the sacrifices of the people of Sedgwick County and its visitors to raise those funds. Since Kansas is one of the few states that adds sales tax to food, low-income households paid extra sales tax on their groceries to pay for the arena — an arena where they may not be able to afford tickets.

Any honest accounting or reckoning of the performance of Intrust Bank Arena must take depreciation into account. While Unruh is correct that depreciation expense is not a cash expense that affects cash flow, it is an economic fact that can’t be ignored — except by politicians, apparently. The Wichita Eagle aids in promoting this deception.

We see our governmental and civic leaders telling us that we must “run government like a business.” Without frank and realistic discussion of numbers like these and the economic facts they represent, we make decisions based on incomplete and false information.

Political perspective masquerades as ‘documentary’

From Kansas Policy Institute.

Political perspective masquerades as ‘documentary’

By Dave Trabert

“Where the Buffaloed Roam — An Ode to the Kansas Budget,” a film by Louisburg High School student Carson Tappan, is being featured at the Kansas City Film Festival.  It is billed as a “documentary” but in reality, it merely presents a political viewpoint that doesn’t let facts get in the way of the story it wants to tell.

Mr. Tappan is to be commended for tackling the project and it is heartening to see a high school student take an interest in state budget issues. He deserves an “A” for initiative and creativity but he fails in his goal to “make the problem clean and simple.” I agreed to be interviewed for the film and provided Mr. Tappan with a great deal of data, some of which contradicts claims made by other participants but he chose not to use it.

I recently asked Mr. Tappan why he excluded pertinent facts I provided and he wrote back saying, “I did not exclude any facts that you provided, the interview was too long to keep it in its entirety.” But as explained later in this piece, he did indeed exclude facts that contradict one of his own contentions.

Mr. Tappan and other participants in the film are certainly entitled to their opinion, and healthy discussions of alternate views are productive. Different opinions can be evenly presented in a documentary format but “Where the Buffaloed Roam” goes out of its way to ridicule those who don’t agree with its premise that reducing taxes is a bad idea.

The film takes the position that states like Texas and Florida can manage without an income tax because they have oil and tourism revenue, but that is not the reason. Texas, for example, could have all of the oil revenue in the nation and still have a high tax burden if it spent more. Every state provides the same basket of basic services (education, social service, etc.) but some states do so at a much lower cost and pass the savings on in the form of lower taxes.

In 2012, the states that tax income spent 49 percent more per-resident providing services than the states without an income tax, and they don’t do it by pushing spending to local government; the ten states with the highest combined state and local tax burden spent 43 percent more per resident than the ten states with the lowest burdens. Kansas, by the way, spent 37 percent more per resident than the states without an income tax.

While Kansas spent $3,409 per resident, Texas only spent $2,293 and Florida spent just $1,862 per resident. Small states also spent less; New Hampshire (which doesn’t have an income tax or a state sales tax) spent just $2,455 per resident. States that spend less, tax less.

The “oil and tourism” objection is common so I gave this information to Mr. Tappan and discussed it in the interview. He didn’t just ignore those facts .. he actually made the “oil and tourism” argument.

The “clean and simple” explanation of the Kansas budget is that spending wasn’t adjusted when taxes were reduced. Regardless of whether legislators agreed with tax reform, they and Governor Brownback should have reduced the cost of government. Instead, they succumbed to pressure from the bureaucracy and special interests and continue to increase spending. General Fund spending will set a new record this year and is proposed to rise even higher over the next two years.

Let’s put that in perspective. Kansas’ 2012 spending of $6.098 billion was 37 percent higher than the per-resident spending of states without an income tax. This year Kansas is expected to spend $191.5 million more than in 2012 and the budgets under consideration in the Legislature will add another $210.1 million in the next two years.

Kansas doesn’t need to be as efficient as states with low taxes to balance the budget…the state just needs to operate a few percentage points better. Ask legislators or Governor Brownback if government operates efficiently and they will say, “of course not.”  Then ask what they are going to do about it. This year, as in the past, the majority would rather raise taxes unnecessarily than stand up to the bureaucracy and special interests that profit from excess government spending. That is the clean and simple explanation of what is wrong with the Kansas budget.

Former state budget director Duane Goossen tells a different story (but still won’t debate us in public where he can be called out). He said revenue dropped three straight years during the recent recession and it appeared that revenue would decline for a fourth year, which prompted a sales tax increase that he attributes for the revenue turnaround. But that’s not exactly true. Mr. Goossen talked about tax revenue declines before carefully shifting to a discussion of revenue declines. Most people, and probably Mr. Tappan, wouldn’t catch that nuance but Mr. Goossen knows exactly what he was doing.

As shown in the above table, tax revenue only declined two years during the recession, in 2009 and 2010. Total revenue did decline a third year and was projected down a fourth year but that was because of conscious decisions made by legislators to transfer tax money out of the General Fund. The November 2009 Consensus Revenue Estimate predicted that tax revenues would increase for 2011, from $5.192 billion to $5.324 billion, and that estimate did not consider any sales tax increase. Mr. Gossen is simply pushing a notion that tax increases are necessary. Or, maybe tax increases are Mr. Gossen’s preference but he would rather distract his interlocutor with obfuscation than simply state his true goal.

This tax revenue chart that appears in the film clearly attributes tax revenue growth between 2010 and 2012 to the 1 cent sales tax that began July 1, 2010 (it’s unknown whether Mr. Goossen or Mr. Tappan prepared it because there is no sourcing). But this chart is yet another misrepresentation of the facts.

Data readily available from the Kansas Legislative Research Department shows that income taxes and other tax sources also increased in 2011 and 2012. Income tax revenue increased by $560 million over the two years while retail sales taxes grew by $490 million and all other General Fund taxes increased by $125 million. 

Kansas certainly has a spending problem but tax revenue is actually running well ahead of inflation…even after income taxes were reduced. General Fund tax revenue increased 28 percent between 2004 and 2014 while inflation was only 24 percent. The November 2014 Consensus Revenue Estimate shows that tax revenue will continue to stay well ahead of inflation (assuming inflation continues at its current pace. Tax revenue in 2017 would be 39 percent higher than 2004 but inflation would be 29 percent higher (again, assuming inflation maintains its current pace.)

The film also contains a number of false claims about school funding. Heather Ousley, who is a member of an organization that actively campaigns for the defeat of legislative candidates who do not subscribe to the “just spend more” philosophy of school funding, repeatedly claimed that schools are being defunded. She also repeats the mantra that schools are being defunded so that public education can be privatized; she may believe that but having spent a lot of time working with legislators, I know that to be a false assumption. Defenders of the status quo are fond of repeating the mantra, but it is nothing more than a scare tactic.

Schools are not being defunded and Mr. Tappan was provided with data from the Kansas Department of Revenue that contradicts claims made in the film. Again, he chose not to use that information. In reality, school funding will set a fourth consecutive record this year at $6.145 billion. On a per-pupil basis, it’s $13,343 and will be the third consecutive record. The facts are explained in greater detail in another blog post, which also shows that state funding is increasing this year under the new block grants.

There are other examples of factual inaccuracy in the film, but hopefully those set forth here sufficiently demonstrate that “Where the Buffaloed Roam” is not the documentary it purports to be but an artfully designed political statement.

Those who agree with the film’s position are certainly entitled to their view. They should just be honest and say that they prefer higher taxes and the high spending that goes with it.

Note: KPI staff members Patrick Parkes and David Dorsey deserve credit for much of the research in this blog post.

WichitaLiberty.TV: Wichita Eagle reporting, marijuana laws, and the Kansas economy

In this episode of WichitaLiberty.TV: The Wichita Eagle prints several stories that ought to cause readers to question the reliability of its newsroom. Wichita voters pass a marijuana law that conflicts state law. Performance of the Kansas economy. Finally, some unexplained results in the way people vote. View below, or click here to view at YouTube. Episode 81, broadcast April 19, 2015.

Kansas school test scores, two interactive visualizations

When comparing Kansas school test scores to those of other states or the nation, it’s important to consider disaggregated data. Otherwise, we may make inaccurate conclusions regarding Kansas schools.

Kansas school leaders are proud of Kansas schools, partly because of scores on the National Assessment of Educational Progress (NAEP), known as “The Nation’s Report Card.” Kansas ranks pretty high among the states on this test. It’s important, however, to examine the results from a few different angles to make sure we understand the entire situation.

NAEP test scores subdivided by ethnicity. Click for larger version.
NAEP test scores subdivided by ethnicity. Click for larger version.
I’ve gathered scores from the 2013 administration of the test, which is the most recent data available. I present them in a visualization that you can use yourself through the links at the end of this article. The most widely available NAEP data is for two subjects: reading and math, and for two grades, fourth and eighth. In the nearby images captured from the visualizations, I present data for Kansas and the average for national public schools. The numbers are the percent of students that are at or above proficient.

Looking at the data for all students, you can see why Kansas school leaders are proud: The line representing Kansas is almost always the highest. But there are important statistical considerations to take into account.

NAEP makes data available by ethnic subtypes. If we present a chart showing black students only, something different appears. In some instances the line for national public schools coincides with the Kansas line, or is above the Kansas line. A similar pattern exists when considering Hispanic students only.

Perhaps surprisingly, when considering white students only, the same pattern exists: In many cases national public schools white students score as well as, or sometimes above, Kansas white students.

NAEP test scores subdivided by eligibility for free or reduced lunch. Click for larger version.
NAEP test scores subdivided by eligibility for free or reduced lunch. Click for larger version.
Looking at the data subgroups by eligibility for free or reduced price lunches is useful, too. This eligibility is a commonly-used surrogate for selecting students from low-income households. When looking at the subgroups, the advantage of Kansas schools sometimes disappears, although the effect is not as marked.

How can this be? The answer is Simpson’s Paradox. A Wall Street Journal article explains: “Put simply, Simpson’s Paradox reveals that aggregated data can appear to reverse important trends in the numbers being combined.”

The Wikipedia article explains: “A paradox in which a trend that appears in different groups of data disappears when these groups are combined, and the reverse trend appears for the aggregate data. … Many statisticians believe that the mainstream public should be informed of the counter-intuitive results in statistics such as Simpson’s paradox.”

A more technical paper gives this definition: “Simpson’s paradox refers to a phenomena whereby the association between a pair of variables (X, Y ) reverses sign upon conditioning of a third variable, Z, regardless of the value taken by Z.”

Kansas and National Public Schools demographics 2015-04In this case, the confounding factor (“lurking” variable) is that Kansas differs greatly from national public schools in the proportion of students in ethnic groups. Most prominently, in Kansas, 68 percent of students are white. For national public schools, the value is 51 percent.

This large difference in the composition of students is what makes it look like Kansas students perform better on the NAEP than the national average. But looking at the scores for ethnic subgroups, can we still say that Kansas schools outperform national public schools? It’s important to know that aggregated data can mask or hide underlying trends.

Note that there is not much difference in eligibility for free or reduced lunches between Kansas and national public schools. This is why Simpson’s Paradox is not strongly apparent in these scores.

Have you heard Kansas school leaders talk about this? Or do they present Kansas NAEP test scores without considering the different makeup of the states?

The interactive visualizations of NAEP scores are not difficult to use. The adjustment most people may want to make is selecting a different combination of states. To open the visualization for ethnicity in a new window, click here. For the visualization based on lunch eligibility, click here.

Did Jeff Longwell dodge a tough city council vote?

On election day, Wichita city council member and mayoral candidate Jeff Longwell appears to have ducked an inconvenient vote and would not say why.

At his Wichita mayoral campaign announcement last November, then-council member Jeff Longwell called for a moratorium on the use of forgivable loans until a new policy is implemented. 1

Jeff Longwell, now Wichita mayor
Jeff Longwell, now Wichita mayor

At other times he called for the end to traditional cash incentives, telling the Wichita Eagle “I think that we have to get away from the traditional cash incentives that we’ve been using and look for better ways to grow jobs in this community.” 2

In the Wichita Eagle voter guide, for the question “What is your philosophy or practice regarding public incentives for companies and developers?” Longwell started his response with this: “I believe there is a better way to promote economic growth.” 3

Wichita voters can be excused for believing Jeff Longwell wants to pursue economic development in a different way. It was a good strategy for the candidate to employ, as the rejection of the sales tax last year by Wichita voters is widely thought to be grounded in voter distrust of the economic development package.

Summary of benefits for Figeac AeroOn election day this April, an economic development incentive package was under consideration by the Wichita city council. The deal contained a common mix of incentives from city, county and state. Details on the amounts of the incentives were sketchy, so I estimated the benefit to the company at $2,315,000 up front cash and credits equivalent to cash, and $605,000 in ongoing annual benefits for at least five years. 4

This was an example of the traditional way Wichita and other cities do economic development, that is, targeted incentives for specific companies. It’s something that Longwell said we need to get away from, especially the forgivable loans part, having called for a moratorium on their use.

This matter provided a perfect opportunity for Longwell to cast a vote aligned with his new perspectives on economic development. So when this matter came before the city council, how did Longwell vote?

The answer is: We don’t know. Longwell didn’t vote. At about 10:27 am, shortly before the council took up this economic development incentives agenda item, Longwell left the council chambers. He did not return before the meeting ended. When asked why he left the meeting, Longwell would not provide an answer. He provided several contradictory explanations. He said he would explain at his campaign watch party on election night the reason for leaving, but would not say that afternoon why he left the meeting. (See Twitter and Facebook dialogs following.)

In a profile during the campaign, Longwell told the Wichita Eagle “I certainly can appreciate and understand the need to not vote on items, but sometimes you just simply, as tough as it is, you have to take a position,” he said. “I don’t know any better way to explain it. It’s part of the responsibility of being elected to do a job. 5

Here was a tough vote for Longwell. It was an opportunity for citizens to see him cast a vote in alignment with his campaign rhetoric. But he didn’t vote. He didn’t take a position, and he wouldn’t say why.

This isn’t the first time Longwell has dodged questions he doesn’t want to answer. He canceled an appearance on The Joseph Ashby Show and would not reschedule. Ashby, for those who haven’t listened, asks tough questions.

Twitter and Facebook transcripts, April 7, 2015

Bob Weeks @bob_weeks Apr 7
Does anyone know why Jeff Longwell left the city council meeting early? @jefflongwellict #ictcouncil @CityofWichita

Jeff Longwell @jefflongwellict Apr 7
@bob_weeks I had a prior appointment. I had to see a man about a horse. I know you miss me when I’m not there. @CityofWichita

Bob Weeks @bob_weeks Apr 7
@jefflongwellict @CityofWichita May I ask why you made an appointment during city council hours?

Jeff Longwell @jefflongwellict Apr 7
@bob_weeks Bob, I’m touched. Thank you for being concerned that my voice is being heard on the council and I’m there to help guide our city.

Jeff Longwell @jefflongwellict Apr 7
@bob_weeks Also, this was unplanned and was of a personal nature. But thank you for your concern. It means a lot, Bob.

Bob Weeks @bob_weeks Apr 7
@jefflongwellict @CityofWichita Would you please answer why you made an appointment during city council hours?

Bob Weeks @bob_weeks Apr 7
@jefflongwellict @CityofWichita Which was it? A prior appointment or unplanned?

Jeff Longwell @jefflongwellict Apr 7
@bob_weeks An appointment I had to schedule this morning. Priorly unplanned to making it. Don’t worry, I’m fine. @CityofWichita

Bob Weeks @bob_weeks Apr 7
@jefflongwellict @CityofWichita Could you please tell us some details? Why did it have to be done during a city council meeting?

Bob Weeks @bob_weeks Apr 7
@jefflongwellict @CityofWichita When a council member and mayoral candidate misses an important vote, the public has a right to know why.

Jeff Longwell @jefflongwellict Apr 7
@bob_weeks City council members leave meetings periodically. It’s a personal matter, not a conspiracy, Bob. @CityofWichita

Jeff Longwell @jefflongwellict Apr 7
@bob_weeks if you’d like to stop by my watch party tonight we can chat about it all you want. @CityofWichita

Bob Weeks @bob_weeks Apr 7
@jefflongwellict @CityofWichita You will not tell voters why you scheduled this appointment, is that your response?

Bob Weeks @bob_weeks Apr 7
@jefflongwellict @CityofWichita It’s not me who deserves to know. It’s the people of Wichita who need to know why a council member left.

Jeff Longwell @jefflongwellict Apr 7
@bob_weeks Nothing would have changed with my vote today, Bob. Council members miss on occasion. @CityofWichita

Bob Weeks @bob_weeks Apr 7
@jefflongwellict @CityofWichita If you had a legitimate reason for missing a vote, I would think you’d be willing to tell voters details.

Later, on Facebook:

Mayor Jeff Longwell: As I said, while I appreciate your concern and the fact that you feel my presence is crucial to city council meetings, I had to leave for a personal matter. Council members leave meetings on occasion, and nothing would have changed with the addition of my vote. But it really means a lot to me that you feel I’m a vital part of the council and miss me when I’m gone, Bob.
April 7 at 3:02pm

Bob Weeks: Dodging the question again. You said that you would tell me tonight why you left the meeting, so why won’t you say now?
April 7 at 3:05pm

  1. Kansas, 2015. ‘Economic Development Among Mayoral Candidate Jeff Longwell’s Priorities For Wichita’. Accessed April 16 2015. http://www.kansas.com/news/local/article393829
  2. Kansas, 2015. ‘Jeff Longwell, Sam Williams Advance In Race For Wichita Mayor’. Accessed April 16 2015. http://www.kansas.com/news/politics-government/election/article12332810.html
  3. C3.thevoterguide.org, 2015. ‘Wichita Mayor — The Wichita Eagle Voter Guide.’ Accessed April 16 2015. http://c3.thevoterguide.org/v/wichita15/race-detail.do?id=14013125
  4. Weeks, Bob. 2015. ‘Figeac Aero Economic Development Incentives’. Voice For Liberty In Wichita. Accessed April 16 2015. http://wichitaliberty.org/wichita-government/figeac-aero-economic-development-incentives/
  5. Kansas, 2015. ‘Council Member Jeff Longwell Touts Experience In Mayoral Race’. Accessed April 16 2015. http://www.kansas.com/news/politics-government/election/article15627836.html

Economic indicators for Kansas

During this century the Kansas economy has not kept up with the national economy and most neighboring states.

The Federal Reserve Bank of Philadelphia calculates two indexes that track and forecast economic activity in the states and the country as a whole.

Coincident Economic Activity Index, Kansas highlighted against neighboring states.
Coincident Economic Activity Index, Kansas highlighted against neighboring states.
The coincident index is a measure of current and past economic activity for each state. This index includes four indicators: nonfarm payroll employment, the unemployment rate, average hours worked in manufacturing, and wages and salaries. July 1992 is given the value 100.

The leading index predicts the six-month growth rate of the state’s coincident index. In addition to the coincident index, “the models include other variables that lead the economy: state-level housing permits (1 to 4 units), state initial unemployment insurance claims, delivery times from the Institute for Supply Management (ISM) manufacturing survey, and the interest rate spread between the 10-year Treasury bond and the 3-month Treasury bill.”

Leading Index, Kansas highlighted against neighboring states.
Leading Index, Kansas highlighted against neighboring states.
Positive values mean the coincident index is expected to rise in the future six months, while negative values mean it is expected to fall.

I’ve created an interactive visualization of these two indexes. Examples appear nearby. Click here to open the visualization in a new window. You may select a range of dates and one or more states to include on the chart. Click on a state’s legend color to spotlight it against other states.

Wichita Eagle fails readers, again

In its coverage of the 2015 election, the Wichita Eagle prints several stories that ought to cause readers to question the reliability of its newsroom.

Readers of the Wichita Eagle must be wondering if the newspaper trusts its own reporting. In a fact check article regarding the Wichita mayoral general election printed on March 27, the newspaper looked at claims made by campaign ads. The story examined this claim from an advertisement by Sam Williams, referring to opponent Jeff Longwell: “Supported government handouts for low-paying jobs and then chastised voters when they rejected his plan.”

The article’s verdict on this claim: “There is no apparent reference to ‘chastising’ comments in the blog posts or article.”

Here’s what the Eagle itself reported on September 14, 2011, regarding the possibility that citizens might petition to overturn a measure Longwell supported. I’ve emphasized a few portions.

City council member Jeff Longwell called the petition drive “disappointing.” “We had a very transparent, open hearing, listened to both sides, listened to all of the arguments,” Longwell said. “We moved in a direction we felt was most compelling, and now you have a group that still is unhappy and it is just sour grapes. I’d argue that when they keep pulling these kinds of stunts, they will continue to lose credibility.

The dictionary holds this definition for chastise: “To criticize severely; reprimand or rebuke.” I’d say that Longwell’s criticisms fit this definition. It’s unknown why the Eagle reporters and editors came to a different conclusion.

This is not the only example. Here’s the start of the newspaper’s profile of Longwell:

It’s 4:45 a.m. on a Friday, and Jeff Longwell is playing basketball with a group of guys at the Northwest YMCA. Three days a week, 10 to 15 men gather before dawn to shoot hoops. Sneakers squeak. Shouts echo. Longwell, 55, jokingly describes himself as a “prolific three-point shooter.” “I don’t think WSU is going to recruit me,” he says, worn out after the game. The guys say that if Longwell is elected mayor, he still has to play with them. He agrees. Teamwork is his style, he says, and not only in basketball.

For the Williams profile, the article started with this:

Sam Williams sits on a cerulean blue couch in his campaign headquarters, nervously picking at the edges. “Stuck in the Middle With You” plays on the radio as volunteers – mostly family members – make calls, urging people to vote for Williams for mayor on April 7. For a few moments, a guy who spent a lifetime in advertising has trouble articulating why he should be mayor of Wichita. “It’s uncomfortable for me having this conversation talking about me,” Williams says, still picking at the couch.

The difference in the way the Wichita Eagle chose to portray the two candidates is startling. It’s not that there are no awkward or unflattering incidents that could be used to introduce Jeff Longwell. There are many. Likewise, there are many positive aspects to Sam Williams that could have been used in his introduction, including feats of athleticism. These two articles illustrate, in my opinion, an effort to promote Longwell and dismiss Williams.

Wichita Eagle Building, detail
Wichita Eagle Building, detail
This is not the only recent incident regarding the Eagle newsroom that is troubling. In the campaign for the Wichita sales tax last year, The newspaper published a fact-check article titled “Fact check: ‘No’ campaign ad on sales tax misleading.” There was no similar article examining ads from the “Yes Wichita” group that campaigned for the sales tax. Also, there was little or no material that examined the city’s claims and informational material in a critical manner.

It’s one thing for the opinion page to be stocked solely with liberal columnists and cartoonists, considering the content that is locally produced. But newspapers like the Eagle tell us that the newsroom is separate from the opinion page. The opinion page endorsed Jeff Longwell for mayor, just as it endorsed passage of the sales tax. As far as the newsroom goes, by failing to hold Longwell accountable for his remarks, by printing the two introductions illustrated above, and fact-checking one side of an issue and failing to produce similar pieces for the other side — well, readers are free to draw their own conclusions about the reliability of the Wichita Eagle newsroom.

Sedgwick County elections have an anomaly

A Wichita statistician is thwarted in efforts to obtain data that might explain a strange observation.

A paper details the discovery of unexplained patterns in election returns. The paper is titled 2008/2012 Election Anomalies, Results, Analysis and Concerns. The authors are Francois Choquette and James Johnson. A passage from the introduction explains what has been noticed:

Back in February 2012 during the South Carolina primaries, a keen observer noted that Republican candidate Mitt Romney had an unusual gain of votes in larger precincts. Analysts noted this effect violated expected statistics. Specifically, the percentage of votes in each precinct strangely increased as a function of precinct size (vote tally). The vote gain is correlated to precinct size, not the precinct location, be it in cities or rural areas. This anomaly is not apparent in other elections that don’t include Republican candidates. In 2008, Mitt Romney had the benefit of this anomaly and then the gain switched to John McCain once Romney exited the campaign. The Democrat Party elections we looked at don’t show this problem. (emphasis added)

There is a mysterious correlation between votes for Republican candidates and the number of votes cast in a precinct. So far no one has advanced a convincing reason why this should happen.

Results from Obama vs. Romney, Sedgwick County, 2012, showing Romney's lead increasing with precinct size. Click for larger version.
Results from Obama vs. Romney, Sedgwick County, 2012, showing Romney’s lead increasing with precinct size. Click for larger version.
In Wichita, WSU statistician Beth Clarkson has sought to obtain the paper tapes that Sedgwick County voting machines produce as voters make selections using the electronic machines. (“WSU statistician sues seeking Kansas voting machine paper tapes,” April 1, 2015 Wichita Eagle)

But Kansas Secretary of State Kris Kobach has said no, the time for viewing the tapes has passed. According to Kansas law, he says, the records are sealed. (“Kobach on Sedgwick County election lawsuit: Time is past, votes are sealed, April 5, 2015 Wichita Eagle)

The Choquette and Johnson paper gives the method for examining the relationship between precinct size and candidate vote percentages. I applied the method to three recent Sedgwick County elections. The anomaly appears to be present.

Results from Brownback vs. Davis vs. Umbehr, Sedgwick County, 2014, showing Brownback's percentage increasing with precinct size. Click for larger version.
Results from Brownback vs. Davis vs. Umbehr, Sedgwick County, 2014, showing Brownback’s percentage increasing with precinct size. Click for larger version.
If Kansas law does in fact prevent the release of voting machine tapes to Clarkson, we need to change the law, and right now. It’s curious that Secretary Kobach is not interested in investigating this apparent anomaly. Voting fraud has been one of Kobach’s key issues.

I was concerned that the paper tapes produced by voting machines might contain information that would link individual voters with the votes they cast. That would be a potential problem concerning the confidentiality of votes. But when I voted this week, I watched the information printed on the tape, and I don’t believe there is a concern.

Results from the Wichita marijuana ballot question, April 2015.
Results from the Wichita marijuana ballot question, April 2015.

Rich States, Poor States, 2105 edition

In Rich States, Poor States, Kansas continues with middle-of-the-pack performance, and fell in the forward-looking forecast for the second year in a row.

In the 2015 edition of Rich States, Poor States, Utah continues its streak at the top of Economic Outlook Ranking, meaning that the state is poised for growth and prosperity. Kansas continues with middle-of-the-pack performance rankings, and fell in the forward-looking forecast.

Rich States, Poor States is produced by American Legislative Exchange Council. The authors are economist Dr. Arthur B. Laffer, Stephen Moore, who is Distinguished Visiting Fellow, Project for Economic Growth at The Heritage Foundation, and Jonathan Williams, who is vice president for the Center for State Fiscal Reform at ALEC,

Rich States, Poor States computes two measures for each state. The first is the Economic Performance Ranking, described as “a backward-looking measure based on a state’s performance on three important variables: State Gross Domestic Product, Absolute Domestic Migration, and Non-Farm Payroll Employment — all of which are highly influenced by state policy.” The process looks at the past ten years.

Economic Outlook Ranking. Click for larger version.
Economic Outlook Ranking. Click for larger version.
Looking forward, there is the Economic Outlook Ranking, “a forecast based on a state’s current standing in 15 state policy variables. Each of these factors is influenced directly by state lawmakers through the legislative process. Generally speaking, states that spend less — especially on income transfer programs, and states that tax less — particularly on productive activities such as working or investing — experience higher growth rates than states that tax and spend more.”

For economic performance this year, Kansas is twenty-eighth. That’s up from thirty-second last year.

In this year’s compilation for economic outlook, Kansas ranks eighteenth, down from fifteenth last year and eleventh the year before. In 2008, the first year for this measure, Kansas was twenty-ninth.

Kansas compared to other states

A nearby chart shows the Economic Outlook Ranking for Kansas and some nearby states, shown as a trend over time since 2008. The peak of Kansas in 2013 is evident, as is the decline since then.

Why Kansas fell

Rich States Poor States Kansas trends 2015 aloneKansas fell in the Economic Outlook Ranking from 2013 to 2015. To investigate why, I gathered data for Kansas from 2008 to 2015. The nearby table shows the results for 2015 and the rank among the states, with the trend since 2008 shown. A rank of one is the best ranking, so for the trend lines, an upward slope means a decline in ranking.

There are several areas that may account for the difference. One value, “Top Marginal Corporate Income Tax Rate,” did not change from 2013 to 2015, remaining at 7.00%. But the ranking for Kansas fell from 24 to 27, meaning that other states improved in this measure relative to Kansas.

For “Personal Income Tax Progressivity (change in tax liability per $1,000 of Income)” Kansas fell two positions in rank.

In “Property Tax Burden (per $1,000 of personal income)” Kansas fell three spots since 2013.

In “Sales Tax Burden (per $1,000 of personal income)” Kansas fell three spots in rank. The burden is calculated proportional to personal income.

In “Recently Legislated Tax Changes (per $1,000 of personal income)” Kansas fell one position in rank.

Kansas improved six rank positions for “Debt Service as a Share of Tax Revenue.”

Kansas remains one of the states with the most public employees, with 695.4 full-time equivalent employees per 10,000 population. This ranks forty-eighth among the states.

“Average Workers’ Compensation Costs (per $100 of payroll)” rose by one cent, and Kansas fell two spots in ranking.

Kansas has no tax and expenditure limitations, which is a disadvantage compared to other states.

How valuable is the ranking?

Correlation of ALEC-Laffer state policy ranks and state economic performance
Correlation of ALEC-Laffer state policy ranks and state economic performance
After the 2012 rankings were computed, ALEC looked retrospectively at rankings compared to actual performance. The nearby chart shows the correlation of ALEC-Laffer state policy ranks and state economic performance. In its discussion, ALEC concluded:

There is a distinctly positive relationship between the Rich States, Poor States’ economic outlook rankings and current and subsequent state economic health.

The formal correlation is not perfect (i.e., it is not equal to 100 percent) because there are other factors that affect a state’s economic prospects. All economists would concede this obvious point. However, the ALEC-Laffer rankings alone have a 25 to 40 percent correlation with state performance rankings. This is a very high percentage for a single variable considering the multiplicity of idiosyncratic factors that affect growth in each state — resource endowments, access to transportation, ports and other marketplaces, etc.

Rich States, Poor States compilation for Kansas. Click for larger version.
Rich States, Poor States compilation for Kansas. Click for larger version.

Wichita marijuana ballot issue, April 7, 2015

Following is a map of voting for the Wichita marijuana ballot issue, April 7, 2015. A vote of “Yes” was in favor of reducing the penalty for possession. View below, or click here to open in a new window or mobile device. Click or tap on a precinct to view data.

For a tabular presentation of this data and other Wichita election returns, click here. 37,166 votes were cast for the marijuana ballot measure, and 37,190 votes were cast for mayor.

Someone also asked if there was a correlation between the marijuana vote and the mayoral vote. A plot of the two is below. With R = .01, there is no correlation to speak of.

Longwell - marijuana plot 2015-04-07

Kansas Center for Economic Growth: Short on facts again

The Kansas Center for Economic Growth’s latest scare tactic on education funding is filled with demonstrably inaccurate data which they use to make false claims about tax reform and the efficacy of education spending, writes David Dorsey of Kansas Policy Institute.

KCEG won’t document their false claims on education funding — again

By David Dorsey

The Kansas Center for Economic Growth’s latest scare tactic on education funding is filled with demonstrably inaccurate data which they use to make false claims about tax reform and the efficacy of education spending. KCEG has a long history of making inaccurate claims and declining requests for documentation (here, here, and here for example) and this time is no different.

In Kansas Prioritizes Tax Cuts Over Kids, KCEG says a reduction in state revenue has caused cuts to education and attempts to send the message that not making even bigger “investments” in education means the state doesn’t care about student outcomes. To solidify that contention by making it appear universal, KCEG points to Wisconsin as another state that cut taxes (income and property taxes) and likewise, aid to education. But as it turns out, the only thing these assertions have in common is that neither is based in reality. Here is how their false allegations stack up to the facts.

1. KCEG claim: Kansas general aid per pupil is down 2.6% (about $129) between 2013 and 2014, a percentage that is proportionate to reduction in state revenues.

Fact: According to the Kansas Department of Education website (official data) “General State Aid Per Pupil” (a KSDE definition) increased $13 between 2013 and 2014 as shown in the table below (and all aid per pupil increased $179).

2. KCEG claim: Wisconsin cut taxes which led to cuts in education spending. General aid per pupil was cut by $36 from 2013 to 2014.

Fact: A quick look at the Wisconsin Department of Public Instruction website indicates that statewide revenue per pupil (the term in Wisconsin is “member”) shows an increase of $193 between 2013 and 2014 as shown in the table below.

And here is another fact that KCEG conveniently omitted: 2013-14 was the second consecutive year of record funding in Kansas K-12 education with $12,959 per pupil, which totals nearly $6 billion in revenue. That trend will continue with the new block grant education funding set to start next year. As KPI pointed out in this blog, total funding to education is poised to set yet another record in 2015-16.

So much for letting the truth get in the way of a highly charged contention.

KCEG relied on tax revenue data from the Rockefeller Institute of Government (RIG) and education spending data from a study by the Center for Budget and Public Policy (CBPP) to make their claims. KPI reached out to KCEG, RIG, and CBPP to source and verify their data. We received no response from KCEG or CBPP, but the director of RIG stated the 2.6% reduction in revenues was likely a misinterpretation of their data. So, instead of citing original source data from Kansas state government agencies, KCEG chose to cherry-pick and manipulate data from outside sources in order to fit their narrative. And that narrative includes the false choice that lower government spending automatically precipitates a lower quality of service.  By the way, CBPP is also notorious for making false and unsubstantiated claims; see here and here for examples.

KCEG has even gone a step farther by turning this mantra into a scare tactic. They declare less money will lead to lower educational outcomes because there will be less money to the classroom. So why are the students/teachers/classroom always the targets of the fear mongers? Why always the threat of teacher layoffs? Why not administrators? Could it be that it’s not as emotionally compelling to say an assistant principal, or a curriculum director, or even a communications officer may be let go? It is well documented that schools choose not to operate efficiently, so it’s always the students who are made human budget shields.

The idea that more money leads to better outcomes simply does not stand up to scrutiny. Much has been written to discredit that claim. Perhaps this quote from a Heritage Foundation study says it best: “Continuous spending increases have not corresponded with equal improvement in American educational performance.” NAEP reading and math scores have remained flat, as have ACT scores, and quoting KCEG in a different context: “[W]e don’t have to go any further than our own backyard to see that.”

Perhaps it’s time KCEG just acknowledge their affinity for high taxes and ineffective spending and stop pretending to present data-driven conclusions.

KPI has a history of reaching out to KCEG to have a public discussion on the issues. We again welcome that chance to provide the facts about education spending so Kansans can come to their own conclusions. We invite and are willing to host KCEG to an open debate on this issue.

For Wichita’s Longwell, flipping in the face of an election

Campaign season provides an opportunity to see just how malleable candidates’ positions can be, leaving us to wonder if some have any firm and guiding principles.

When Wichita City Council Member Jeff Longwell was asked about citizens exercising their constitutional right to challenge an ordinance passed by the council, Jeff Longwell said it was “disappointing,” and a “stunt.” He said that using this fundamental aspect of democracy causes citizens to “lose credibility.” (Wichita Eagle, September 14, 2011)

Now that Wichitans are voting on controversial matter that was placed on the ballot using a similar procedure, Longwell told the same newspaper “I believe the voters should be allowed to decide this issue and I supported placing the issue on the ballot.”

What caused the evolution from “disappointing” to “supported”? Why was one a “stunt” and another a simple exercise in democracy?

It’s easy to see. The present issue — reducing the penalty for possession of marijuana — doesn’t involve money, at least to any appreciable extent. And even if it passes, it’s likely the state will try to block it from taking effect.

But the 2011 issue involved Longwell voting for a taxpayer-funded giveaway to the special interests that fund his campaigns. His cronies, in other words. That is what really counts for Longwell, and it shows his lack of respect for the rule of law.

Figeac Aero economic development incentives

Wichita politicians, economic development officials, and civic leaders bemoan the lack of incentives Wichita can offer. A deal under consideration illustrates what is really available.

Next week the Wichita City Council will consider a forgivable loan to Figeac Aero North America related to its expansion of its Wichita facility. Following is an explanation of the various incentives and benefits planned for this company.

Figeac will receive forgivable loans of $250,000 each from Sedgwick County and the City of Wichita, with the State of Kansas adding $500,00, although it is not clear if that is a grant or forgivable loan.

City documents don’t mention this, but a letter from the Kansas Department of Commerce indicates that Figeac will benefit from the Promoting Employment Across Kansas program, commonly known as PEAK. This program rebates 95 percent of the state withholding taxes back to the company. An investigation from earlier this year showed that PEAK incentive payments can be a substantial sum. Tables available at the Kansas Department of Revenue indicate that for a single person with no exemptions who earns $40,000 annually, the withholding would be $27 per week (for weekly payroll), or $1,404 annually. For a married person with two children earning the same salary, withholding would be $676 annually. Under PEAK, the company retains 95 percent of these values.

Briefcase with moneyWe don’t know how much withholding tax Figeac employees will generate. An estimate is that with 200 employees earning $40,000, averaging the two withholding scenarios illustrated above, Figeac would receive $1040 * 200 * 95% = $191,900 per year in PEAK payments.

The Department of Commerce also offers tax credits through the High Performance Incentive Program (HPIP). This rebates, in the form of tax credits, 10% of the capital investment above $1.0 million. City documents state Figeac will invest about $21,000,000, with capital investment of $7,000,000 in machinery and equipment, which should qualify for HPIP credits. This means the company would receive tax credits equal to ($7000000 – $1000000) * 10% or $600,000. It’s possible that other expenditures would qualify for these credits. Tax credits are economically equivalent to a cash grant for both the state and the recipient.

The letter from Commerce also says the state will “underwrite a portion of the company’s actual expenses for training new employees.” No dollar value is given for this.

Finally, the city is issuing Industrial Revenue Bonds in an amount up to $20,680,000. The city does not lend this money to Figeac. Instead, the purpose of the IRBs is to enable property tax and sales tax forgiveness. City documents are sketchy as to the amount of tax that will be saved, but documents state “After the five year exemption period, the new improvements would generate an estimated $82,470 annually for the General Fund and $29,196 for the Debt Service Fund.” This means the city alone is forgiving $111,666 per year in taxes. City documents usually give the amount of tax that overlapping jurisdictions are abating, but this information is missing. Based on relative mill levies for the county, school district, and state, I estimate the total property tax benefit at $414,000 per year.

The IRBs also carry a sales tax exemption. The $7,000,000 in machinery and equipment would be exempt from sales tax, and possibly some of the property improvements. If Figeac spent $10,000,000 in expenditures subject to sales tax, the one-time benefit to Figeac is $715,000.

The following table summarizes the benefits.

Summary of benefits for Figeac Aero

WichitaLiberty.TV: Kansas Policy Institute Vice President and Policy Director James Franko

In this episode of WichitaLiberty.TV: Kansas Policy Institute has produced a study of the effect of state and local regulation on business. James Franko of KPI discusses. View below, or click here to view at YouTube. Episode 80, broadcast April 5, 2015.

The complete study from KPI may be read here.

Wichita city council member Jeff Longwell should not have voted

A sequence of events involving Jeff Longwell should concern citizens as they select the next Wichita mayor. Based on Wichita law, Longwell should not have voted on a matter involving the Ambassador Hotel, either for or against it.

In 2011 the Wichita City Council voted to award millions of taxpayer subsidy to the developers of the Ambassador Hotel in downtown Wichita. Because of the nature of one of the ordinances the council passed, citizens were able to petition to have it overturned. A successful petition was filed, so there was an election.

Ambassador Hotel sign 2014-03-07A group named “Moving Wichita Forward” was formed to campaign for the Ambassador Hotel for the February 28, 2012 election regarding the repeal of its special guest tax measure. The measure benefited Paul Coury, Dave Burk, and executives of Key Construction. The primary funder of the campaign was this ownership group.

As part of the campaign, on January 30, 2012 Moving Wichita Forward spent money with Luminance Display, a company that sold space on billboards.

Jeff Longwell Luminance Display 2012-01-30 excerpt

Based on a statement of substantial interests that Longwell filed in 2012, you can see that he had an ownership interest in Luminance Display.

Jeff Longwell SSI 2012-05-31 excerpt

So far, nothing contrary to Wichita city code has taken place. Yes, it is sleazy to sell advertising to people who have had business before the council in the past. But there’s nothing in the Wichita city code addressing this.

Then on April 16, 2013 Longwell voted in favor of Industrial Revenue Bonds for the Ambassador Hotel. The bond package allowed the hotel to avoid paying $703,017 in sales tax, according to city documents.

That is where Longwell crossed the line from being merely sleazy to acting contrary to city code. Here’s an excerpt from Section 2.04.050 Code of ethics for council members from the Wichita city code as passed in 2008:

“[Council members] shall refrain from making decisions involving business associates, customers, clients, friends and competitors.”

The owners of the Ambassador Hotel were customers of a company that Jeff Longwell partially owned. Based on the laws of the City of Wichita, Longwell should not have voted on a matter involving the Ambassador Hotel, either for or against it.

Study on state and local regulation released

This week Kansas Policy Institute released a study of regulation and its impact at the state and local level. This is different from most investigations of regulation, as most focus on federal regulations.

Business Perceptions of the Economic Impact of State and Local Government Regulation coverThe study is titled “Business Perceptions of the Economic Impact of State and Local Government Regulation.” It was conducted by the Hugo Wall School of Public Affairs at Wichita State University. Click here to view the entire document.

Following is an excerpt from the introduction by James Franko, Vice President and Policy Director at Kansas Policy Institute.

Surprising to some, the businesses interviewed did not have as much of a problem with the regulations themselves, or the need for regulations, but with their application and enforcement. Across industries and focus group sessions the key themes were clear — give businesses transparency in what regulations are being applied, how they are employed, provide flexibility in meeting those goals, and allow an opportunity for compliance.

Sometimes things can be said so often as to lose their punch and become little more than the platitudes referenced above. The findings from Hugo Wall are clear that businesses will adapt and comply with regulations if they are transparent and accountable. Many in the public can be forgiven for thinking this was already the case. Thankfully, local and state governments can ensure this happens with minimal additional expense.

A transparent and accountable regulatory regime should be considered the “low hanging fruit” of government. Individuals and communities will always land on different places along the continuum of appropriate regulation. And, a give and take will always exist between regulators and the regulated. Those two truisms, however, should do nothing to undermine the need for regulations to be applied equally, based on clear rules and interpretations, and to give each business an opportunity to comply.

Wichita city council candidates

Voice for Liberty Radio 150x150On March 31, 2015 Coalition for a Better Wichita held a candidate forum for candidates for Wichita city council districts 4 and 5. For district 4 the candidates are Jeff Blubaugh and Josh Shorter. Blubaugh was unable to attend. For district 5, the candidates are Gary Bond and Bryan Frye. Jennifer Baysinger was the moderator. Mason Baysinger was the timer.

Ranzau, Peterjohn endorse Sam Williams for Wichita mayor

Despite past differences, two members of the Sedgwick County Commission have endorsed Sam Williams for Wichita Mayor.

Citing recent revelations that Jeff Longwell voted to use taxpayer funds that helped his private business profit, County Commissioners Richard Ranzau and Karl Peterjohn called on supporters of ethics reform and transparency to oppose Longwell and support Sam Williams.

“Even though Sam Williams has supported our opponents in the past, we think it is vital that he be elected over Longwell,” Peterjohn and Ranzau said in a joint statement.

“We have known for some time that Jeff Longwell has had a problem with ethics. In fact, the voters rejected his approach to government when he ran against me,” Karl Peterjohn stated. “It was during his race against me that Longwell presented the appearance that his vote was for sale. Now there is evidence that not only did he utilize his position on the City Council to enrich his campaign coffers, but he also has used it for his personal enrichment.”

According to campaign finance reports filed by Longwell, his campaign for County Commission accepted multiple out-of-state donations from the CEO of Walbridge and his spouse the day before he voted to award Walbridge a contract that was millions of dollars higher than another bid being considered. Three days after that vote, Longwell accepted thousands of dollars more from other Michigan-based employees of the company.

It was recently reported that Jeff Longwell made a motion and then supported the use of $10,000 in taxpayer money to sponsor the car show known as The Blacktop Nationals. What Longwell failed to disclose was that his company, Ad Astra Printing, which is registered as an LLC with Jeff Longwell as the only listed owner, received compensations for doing work for the event. Longwell recently admitted his firm did profit from the event. According to Wichita’s Code of Ethics for Council Members (Title 2, Section 2.04.050), council members “shall refrain from making decisions involving business associates, customers, clients, friends and competitors.” Longwell’s motion to use public funds for a project where he would personally profit is clearly a violation of the Code of Ethics for Council Members. The relevant Wichita law can be found here.

“For Wichita to move forward and to grow the jobs we all want, we have to work together in the interest of south-central Kansas — not in the self-interests of politicians,” stated Commissioner Richard Ranzau. “It is well-documented that Sam Williams has actually supported my opponents, as well as those of Karl Peterjohn, in the past, but I know that Sam’s top priority is enriching Wichita, not enriching himself. That’s why I am supporting Sam Williams for mayor. The public needs to have greater transparency and I believe Sam Williams will be an advocate for that. Jeff Longwell has been in office for 20 years and has done nothing to increase transparency or to make local government more accessible to the people,” Ranzau stated.

“Longwell’s consistent ethical lapses will damage economic development opportunities in Sedgwick County. Business leaders will shy away doing business in that manner. Sam Williams is a proven job creator, and I urge voters to support him for mayor,” stated Peterjohn.

Downtown Wichita deal shows some of the problems with the Wichita economy

In this script from a recent episode of WichitaLiberty.TV: A look at the Wichita city council’s action regarding a downtown Wichita development project and how it is harmful to Wichita taxpayers and the economy. This is from episode 77, originally broadcast March 8, 2015. View the episode here.

This week a downtown Wichita project received many economic benefits such as free sales taxes and a bypass of Wichita’s code of conduct for city council members.

Exchange Place
Exchange Place
The issue had to do with tax increment financing, or TIF. This is a method of economic development whereby property taxes are routed back to a real estate development rather than funding the cost of government. It’s thought that TIF is necessary to make certain types of projects economically feasible. I appeared before the Wichita city council and shared my concerns about the harmful effects of this type of economic development.

I said that regarding the Exchange Place project in downtown Wichita, I’d like to remind the council of the entire subsidy package offered to the project.

There are historic preservation tax credits, which may amount to 25 percent of the project cost. These credits have the same economic impact as a cash payment, and their cost must be born by taxpayers.

There is $12.5 million in tax increment financing, which re-routes future property tax revenues back to the project for the benefit of its owners. Most everyone else pays property taxes in order to pay for government, not for things that benefit themselves exclusively, or nearly so.

There is a federal loan guarantee, which places the federal taxpayer on the hook if this project isn’t successful.

The owner of this project also seeks to avoid paying sales taxes on the purchase of materials. City documents don’t say how much this sales tax forgiveness might be worth, but it easily could be several million dollars.

I said: Mayor and council, if it in fact is truly necessary to layer on these incentives in order to do a project in downtown Wichita, I think we need to ask: Why? Why is it so difficult to do a project in downtown Wichita?

Other speakers will probably tell you that rehabilitating historic buildings is expensive. If so, working on historic buildings is a choice they make. They, and their tenants, ought to pay the cost. It’s a lifestyle choice, and nothing more than that.

I told the council that I’m really troubled about the sales tax exemption. Just a few months ago our civic leaders, including this council, recommended that Wichitans add more to our sales tax burden in order to pay for a variety of things.

Only 14 states apply sales tax to food purchased at grocery stores for home consumption, and Kansas has the second-highest statewide rate. We in Kansas, and Wichita by extension, require low-income families to pay sales tax on their groceries. But today this council is considering granting an exemption from paying these taxes that nearly everyone else has to pay.

I told the council that these tax subsidies are not popular with voters. Last year when Kansas Policy Institute surveyed Wichita voters, it found that only 34 percent agreed with the idea of local governments using taxpayer money to provide subsidies to certain businesses for economic development. Then, of course, there is the result of the November sales tax election where city voters emphatically said no to the council’s plan for a sales tax increase.

This project is slated to receive many million in taxpayer-funded subsidy. Now this council proposes to wave a magic wand and eliminate the cost of sales tax for its owners. People notice this arbitrary application of the burden of taxation. They see certain people treated differently under the law, rather than all being treated equally under the law. People don’t like this. It breeds distrust in government. This council can help restore some of this trust by not issuing the Industrial Revenue Bonds and the accompanying sales tax exemption.

In response to my remarks, city council member and mayoral candidate Jeff Longwell had a few comments, as we see here in video from the meeting.

We see city council member and mayoral candidate Jeff Longwell contesting the idea that TIF funds are being rerouted to the benefit of the owners of the project. We’re getting a public parking garage is the city’s response.

Let’s look at the numbers and see if we can evaluate this claim. According to city documents, the project will hold 230 apartments, and the garage is planned to hold 273 parking stalls. You can imagine that many of the apartment renters or buyers will want a guaranteed parking space available to them at all times. And in fact, an early version of the development plan states: “A minimum of 195 spaces will be allocated for use by the apartments. The remaining 103 spaces will be for public parking.” So the city is giving up $12.5 million of tax revenue to gain 103 parking spaces. That’s 121 thousand dollars per parking spot. You can buy a very nice house in Wichita for that.

The actual situation could be even worse for the city’s taxpayers. The development agreement states: “A minimum of 103 parking spaces shall be set aside in the Parking Garage for public parking and the balance for the exclusive use of the residents and guests of Exchange Place Building and Douglas Building.” It also holds this: “This allocation can be revised by Developer as market experience may demonstrate a need to reallocate parking spaces with consent of the City Representative (which consent shall not be unreasonably withheld or delayed).”

So a large portion of the parking garage is not a public benefit. It’s for the benefit of the apartments developer. If not for the city building the garage, the developer would need to provide these parking spaces in order to rent the apartments. And because of tax increment financing, the developer’s own property taxes are being used to build the garage instead of paying for government, like almost all other property taxes do, like your property taxes do. If this was not true, there would be no benefit to the developer for using tax increment financing. And if TIF did not have a real cost to the rest of the city’s taxpayers, we might ask this question: Why not use TIF more extensively? Why can’t everyone benefit from a tax increment financing district?

In his remarks, the city manager mentioned the Block One garage as a public asset, as it was funded by tax increment financing, so let’s look at the statistics there. According to the revised budget for the project, the plan is for 270 stalls in the garage. But 125 stalls are allocated for the hotel, and 100 are allocated for the Slawson development, and 45 allocated for the Kansas Leadership Center building. That leaves precisely zero stalls for public use. That’s right. If these three businesses make full use of their allocation of parking stalls, there will be zero stalls available for the public.

It’s not quite that simple, as Slawson will use its spaces only during the workday, leaving them available to the public evenings and weekends. Perhaps the same arrangement will be made for the Kansas Leadership Center. Being near the Intrust Bank Arena, the garage is used for parking for its events. Except, there aren’t very many event in the arena. In some months there are no events. But you can see that something that is promoted for the public good really turns out to be narrowly focused on private interests.

The manager also mentioned the garage on Main Street. According to city documents, the cost to rehabilitate this garage is $9,685,000, which creates 550 parking stalls. But the city is renting 180 parking stalls to a politically-connected company at monthly rent of $35. We looked at this a few months ago and saw how bad this deal is for city taxpayers.

In his remarks, Mayor Carl Brewer thanked city staff and the developers for “working collectively as a team.” He criticized those who say, in his words, “let’s not do anything, let’s just see where the chips may fall.” As an alternative, he said “we can come together, we can work together, we can work collectively together, and we can bring about change and form it the way we want.”

These remarks illustrate the mayor’s hostility to free markets, that is, to thousands and millions and billions of people trading freely in order to figure out how to allocate scarce resources. But the mayor likens the marketplace of free people to a random event — where the chips may fall, he said. But that’s not how markets work. Markets are people planning for themselves, using their knowledge and preferences and resources in order to build things they want, and what they think others will want. That’s because in markets, the only way you can earn a profit is by doing things that other people want. You have to please customers in order to profit.

But Wichita Mayor Carl Brewer says we need to work collectively together. He says we can form the future the way “we” want. Well, who is the “we” he’s talking about? As we see, the dynamics of free markets results in people doing what other people want. But the “we” the mayor talks about is politicians, bureaucrats, cronies, and do-gooders deciding how they want things to be done, and using your money to do it. That reduces your economic freedom. Your money is directed towards satisfying the goals of politicians and bureaucrats rather than actual, real people.

Here’s how bad this deal really is for Wichita. In my remarks to the council I also said this: Might I also remind the people of Wichita that some of their taxpayer-funded subsidies are earmarked to fund a bailout for a politically-connected construction company for work done on a different project, one not related to Exchange Place except through having common ownership in the past? I don’t think it is good public policy for this city to act as collection agent for a private debt that has been difficult to collect.

I was referring to the fact that the Exchange Place project started as an endeavor of the Minnesota Guys, two developers who bought a lot of property in downtown Wichita and didn’t do very well. They both have been indicted on 61 counts of securities violations in relation to their work in downtown Wichita. One of their projects was the Wichita Executive Center on north Market Street. The Minnesota Guys still owe money to contractors on that project, and some of the taxpayer funding for the Exchange Place project will be used to pay off these contractors.

Why, you may be asking, is the city acting as collection agent for these contractors? There’s an easy answer to this. Money is owed to Key Construction company. We’ve talked about this politically-connected construction firm in the past. Through generous campaign contributions and friendships, Key Construction company manages to gain things like no-bid contracts and other subsidies from the city.

Wichita Mayor Carl Brewer with major campaign donor Dave Wells of Key Construction.
Wichita Mayor Carl Brewer with major campaign donor Dave Wells of Key Construction.
This is a problem. Dave Wells, the president of Key Construction, is a friend of the mayor, as well as frequent and heavy campaign financier for the mayor and other council members. And the mayor voted for benefits for Wells and his company. That is a violation of Wichita city code, or at least it should be. Here’s an excerpt from Wichita city code section 2.04.050, the Code of ethics for council members as passed in 2008: “[Council members] shall refrain from making decisions involving business associates, customers, clients, friends and competitors.”

Dave Wells and Carl Brewer are friends. The mayor has said so. But the City of Wichita’s official position is that this law, the law that seem to plainly say that city council members cannot vote for benefits for their friends, this law does not need to be followed. Even children can see that elected officials should not vote economic benefits for their friends — but not the City of Wichita.

There’s much research that shows that tax increment financing is not an overall benefit to a city’s economy. Yes, it is good for the people that receive it, like the developer of Exchange Place and the mayor’s friends and cronies. But for cities as a whole, the benefit has found to be missing. Some studies have found a negative effect of TIF on economic progress and jobs. That’s right — a city is worse off, as a whole, for using tax increment financing. The evolving episode involving Exchange Place — the massive taxpayer subsidies, the cronyism, the inability of the mayor and council members to understand the economic facts and realities of the transactions they approve, the hostility towards free markets and their benefits as opposed to government planning of the economy — all of this contributes to the poor performance of the Wichita-area economy. This is not an academic exercise or discussion. Real people are hurt by this.

Mayor Brewer has just a month left in office, and there will be a new mayor after that. We, the people of Wichita, have to hope that a new mayor and possibly new council members will chart a different course for economic development in Wichita.

School employment data shows gaps in reporting and wide variations among districts

Kansas school districts vary widely in employment ratios, and that’s not counting the unreported employees, writes David Dorsey of Kansas Policy Institute.

School employment data shows gaps in reporting and wide variations among districts

By David Dorsey

Kansas Policy Institute has created a state public education employment metrics report for FY 2014 and the file can be accessed here. The file contains employment totals and also five categories of pupil-per-employee ratios. Here are some highlights and analysis.

Pupils per classroom teacher

The employment metrics file shows considerable variation among the districts when it comes to the number of pupils per classroom teacher. Weskan, with an enrollment of just 92 students has a ratio of 6.2 pupils for every classroom teacher, while Spring Hill with 2,850 students has 20.5 students for every classroom teacher. Among the state’s largest districts, Shawnee Mission has the highest ratio at 17.9 and Salina is the lowest at 14.6. The state median is 13, while the mean is 15.4 pupils per classroom teacher. (KSDE excludes special education and reading specialists from their definition of classroom teaches.)

These ratios are considerably smaller than what is typically reported as classroom size. It is impossible to make an exact comparison because KSDE does not keep data on classroom size.

Administrative manager employment

As the table below shows, there is a wide range of pupils per manager* across the state. Manhattan-Ogden (USD 383) carries the distinction of having the most top-heavy administration among the state’s 20 largest districts with a ratio of 96.2 pupils per manager. Contrast that with Andover (USD 385), which has 238.7 pupils per manager. Put another way, USD 383 has 5 percent more students, but 160 percent more administrators than USD 385.

Among the biggest districts, Shawnee Mission is the most efficient with nearly twice as many pupils per manager than fellow Johnson County district Blue Valley and more than twice as many pupils per manager than Topeka. Shawnee Mission claims an even smaller administrative footprint in FY 2015 in favor of more money going toward instruction.

The following table summarizes the ranges among all districts on a per-pupil basis through the low, high, and median values for each metric.

Special Education Cooperatives and Interlocals Make Comparisons Difficult

Most school districts in Kansas enter into inter-district agreements to provide special education services in an effort to provide those services in a more cost-effective manner. According to the KSDE directory, 252 of the 286 schools districts in the state are part of what is called either a cooperative or an interlocal. Essentially, it means two or more school districts in an area pool their teaching resources to serve special education kids. This distorts the employment reporting for these two reasons:

  • About half the districts are in cooperatives that list all the employees of the cooperative in only the “home” district of that cooperative. Example: the East Central Kansas Special Education Cooperative consists of 8 districts. The home district, Paola USD 368, reports 60 special education teachers and 253 special education paraprofessionals. The other 7 districts report zero special education teachers and zero special education paraprofessionals.
  • The remaining cooperatives have been given a school district number (all in the 600s), but the number of special education teachers, paraprofessionals and other employees go unreported. According to the KSDE directory of schools there are 19 such “districts” that include 143 unified school districts. And, according to KSDE, these cooperatives have 5,284 employees, none of whom are included in state employment totals because KSDE only reports employment for unified school districts.

*”Manager” is a KPI defined category that combines the 17 KSDE administrative categories reported by all school districts (superintendents, asst. superintendents, principals, asst. principals, business managers, and directors of all other functions).

No-bid contracts still passed by Wichita city council

Despite a policy change, the Wichita city council still votes for no-bid contracts paid for with taxpayer funds.

In the current campaign for Wichita mayor, one candidates says he never has voted for no-bid contracts: “[Longwell] also takes issue with the claim he has ever voted for any no-bid contract, something he says his voting record will back up. ‘That’s the beauty of having a voting record,’ he says.” Mayoral candidate Williams decries ‘crony capitalism’ of critics, Wichita Business Journal, March 12, 2015

We don’t have to look very hard to find an example that contradicts Longwell’s claim of never voting for a no-bid contract. Minutes from the August 9, 2011 meeting of the city council show that there was discussion about the no-bid contract for the garage benefiting the Ambassador Hotel. Then-council member Michael O’Donnell questioned if the city was getting the best deal for taxpayers, since the garage was to be built with public funds. O’Donnell was told that the no-bid contract was at “the developer’s request.” These developers include principals and executives of Key Construction and Dave Burk, all who have been generous and consistent funders of Longwell’s campaigns.

But we don’t have to go back that far to find voting for no-bid contracts paid for with taxpayer funds. Longwell has voted several times in favor of the Exchange Place project, starting when it was a project of the Minnesota Guys. The latest such vote was on March 3, 2015, when Longwell voted in favor of a project that contained this benefit, according to city documents: “The City will also provide TIF funding in an amount not to exceed $12,500,000 for the acquisition of land and construction of the parking structure.”

This garage, to be paid for through public funds, was not competitively bid. Despite the garage being pitched as a public good, most parking spaces are for the exclusive benefit of Exchange Place.

Impetus for change

The votes by Longwell and others for no-bid contracts sparked the city manager to ask for a change in policy. The Wichita Eagle reported in 2012:

The days of awarding construction projects without taking competitive bids might be numbered at City Hall if City Manager Robert Layton has his way, especially with public projects such as parking garages that are part of private commercial development.

Layton said last week that he intends to ask the City Council for a policy change against those no-bid contracts.

Three years later, Longwell and others are still voting to spend taxpayer funds on no-bid contracts.


Minutes from August 8, 2011 meeting

Council Member O’Donnell stated and we will not being going out to bid to find the best
deal on that and are just awarding.

Allen Bell Urban Development Director stated that is the developer’s request. Council Member O’Donnell asked if that is City precedent and that with a government project in the tune of $6 million dollars, does not have to be sent out for bid?

Gary Rebenstorf Director of Law stated we have Charter Ordinance No. 203 that has been adopted by the City Council, which provides a procedure to exempt these types of projects from the bidding requirements from the City and has to meet certain requirements in order for it to be used by the Council. Stated the most significant is that there has to be a public hearing and has to be a 2/3 vote by the Council to approve this development agreement that sets up this type of project.

Council Member O’Donnell stated he is glad the media is here to pick up on that because he thinks that $6 million dollars is a lot of money and to just award that to a contractor that has special ties to campaign finance reports of everyone on the City Council except himself, seems questionable.

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