Tag Archives: Government spending

United States Capitol, July 2011

How earmarks pay off for the earmarkers

The case of a Kansas Congressman benefiting from earmark spending once out of office should make us glad the practice has ended, and we should be wary of those who call for its return.

The case of United States House of Representatives Appropriations Committee Member Todd Tiahrt and Neumann Systems is an illustration of the revolving door between government and the private sector. It started with an earmark. An Air Force budgetary document indicates that the earmark spending was at the direction of Congress: “In FY 2006, Congress added $1.2 million for the High Power Fiber Laser Program, and $0.5 million for Oxygen Laser Optical Source.”

Excerpt from Air Force budgetary document.
Excerpt from Air Force budgetary document.

Later in the same document we see “CONGRESSIONAL ADD.” So it’s not like the Air Force asked for this money. Instead, it was added by appropriators in the House of Representatives, of which Todd Tiahrt was a member and appropriator. The oxygen laser spending was an earmark, in other words. It went to a company called Direct Energy Solutions, located in Colorado Springs. Its CEO was David Neumann, who also heads a related company named Neumann Systems Group, Inc.

While this may seem like a small amount of federal money spent on a defense research project, the earmark spending appears to have paid off for Tiahrt. Not only did Tiahrt receive contributions from Neumann for his campaigns both past and present, he also received a client for his consulting firm and, ultimately, a job. When Neumann needed to recover from an illness, Tiahrt worked for Neumann’s company and was paid some $380,000 over two years, according to financial disclosures.

Neumann System Groups had received a contract to build an exhaust gas scrubber for an electrical power plant owned by the City of Colorado Springs. The scubber is controversial. In this article from January 2013, Tiahrt said the scubber would removs sulfur dioxide and nitrogen oxides, but the scubber that is being built will remove only the sulfur compound. Costs seem to have soared over original estimates. The contract is “cost plus” and according to reporting, was awarded without competitive bid. (Costs, doubts rise at Colorado Springs power plant, Colorado Springs Gazette)

None of this was illegal or contrary to ethics codes. It’s just the way the way Washington has worked, with earmarks forging and cementing relationships between Members of Congress and their benefactors.

Earmarks have been banned in Congress since 2010. But not everyone is happy, with progressive lawmakers like Sen. Richard Durbin of Illinois calling for the return of the “glue” that used to hold bills together. But the Wall Street Journal recently commented that Congress is working better without earmarks, resulting in more oversight of, and accountability for, spending.

As he campaigns for a return to Congress, Tiahrt has unabashedly called for a return of earmark spending, telling audiences that the practice did not increase the level of spending. There’s plenty of evidence, along with common sense, that tells us that earmarks do increase spending.

But some people think it’s fun to spend other peoples’ money, and as shown by the post-Congress career path of Todd Tiahrt, it can be lucrative, too.

In Kansas fourth district campaign, PAC contributions are an issue

Candidate Todd Tiahrt criticizes Mike Pompeo for accepting PAC money as campaign contributions, but over his career Tiahrt has accepted PAC dollars in greater proportion than has Pompeo.

In a press release and on the campaign trail, candidate for the Republican Party nomination for United States Congress from the fourth district of Kansas Todd Tiahrt has criticized Mike Pompeo for his acceptance of PAC, or political action committee, campaign contributions. An example from a June 19 press release reads “PAC Man Pompeo’s special interest money means special interest legislation.”

Analysis of source of campaign funds for Todd Tiahrt, career starting in 2000 to present. Center for Responsive Politics, July 12, 2014.
Analysis of source of campaign funds for Todd Tiahrt, career starting in 2000 to present. Center for Responsive Politics, July 12, 2014.

Later in the same release: “So, was Mr. Pompeo representing Kansans or his PAC supporters?”

So if Tiahrt is criticizing a candidate for accepting campaign contributions from political action committees, voters may want to know the entire story. As it turns out, the story is easy to learn.

Analysis of source of campaign funds for Mike Pompeo, career to present. Center for Responsive Politics, July 12, 2014.
Analysis of source of campaign funds for Mike Pompeo, career to present. Center for Responsive Politics, July 12, 2014.

The Center for Responsive Politics has summarized campaign contribution data back to the year 2000. According to its summary, 33 percent of campaign contributions to Tiahrt since then were from PACs.

For Pompeo, over his career as a candidate, the figure is 32 percent of campaign contributions from PACs.

Lights of various types turned on in the afternoon, Wichita Transit Center, July 11, 2104.

Waste in Wichita, the seen and probably unseen

When the city of Wichita is not concerned about waste that is easily observed, what about waste that not easily seen by citizens?

Lights on at midday in downtown Wichita. July 11, 2014.
Lights on at midday in downtown Wichita. July 11, 2014.
Yesterday most downtown Wichita street lights were switched off during the day. But not all, as can be seen by the many lights switched on at the Wichita Transit Center. They were on Friday afternoon, just as they are on many days.

Wichita Transit Center, July 11, 2104. Some of the bulbs are apparently burnt out.
Wichita Transit Center, July 11, 2104. Some of the bulbs are apparently burnt out.
While waste like this is unacceptable, it is all the more intolerable considering that Wichita’s transit system is out of money. The city council has recommended that Wichitans vote for higher sales taxes, part of which would fund the transit system. That would include, I suppose, funding the wasteful spending on burning street lights in the middle of the day. This is indicative of the attitude of the city as explained in Forget the vampires. Let’s tackle the real monsters.

You have to wonder: If the city’s transit department is, apparently, not concerned about blatant waste like this — waste that anyone can easily observe — what is it doing about waste that can’t easily be seen?

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

Lights of various types turned on in the afternoon, Wichita Transit Center, July 11, 2104.
Lights of various types turned on in the afternoon, Wichita Transit Center, July 11, 2104.
The lights illustrated in these photographs are, undoubtedly, a small portion of the city’s spending. But you don’t have to look very hard to find waste like this, and we know that small examples of waste are multiplied many times. So when city leaders tell us that there is nowhere left to cut in the budget, that everything that can be done to trim the fat has already been done, and that the only thing we can do is raise taxes — well, think of this photograph and others illustrated in Wichita’s monsters on display, again, Forget the vampires. Let’s tackle the real monsters, Wichita advances in the field of cost savings, Another Friday lunch, and even more lights are on, To compensate, Wichita switched on the street lights, In Wichita, the streetside seating is illuminated very well, In Wichita, the rooftops are well-lit and On a sunny day in downtown Wichita you can see the street lights.

This is not to say that waste like this does not occur in the private sector. Of course it does. But businesses and individuals have a powerful incentive to avoid waste that isn’t present in government: Businesses and people are spending their own money. And even if they waste money, it’s their money, not ours.

Todd Tiahrt television advertisement.

Did Rep. Mike Pompeo vote to fund Obamacare?

A television ad by Todd Tiahrt claims that Mike Pompeo voted seven times to fund Obamacare. What are the facts about those bills?

Todd Tiahrt television advertisement.
Todd Tiahrt television advertisement.
The seven bills referenced in the Tiahrt ad are appropriations bills that fund numerous departments and agencies of the federal government. Three of the bills were to fund the operations of government for as little as one week. One bill was 475 pages in length. Most passed with broad support of Republicans, including the Kansas delegation. Some reduced funding that had been authorized by the previous Congress.

Somewhere deep within these bills there may be funding that went to the Department of Health and Human Services that in some way provided funds for the implementation of Obamacare. The first three votes were short-term measures to continue appropriations established by the previous Congress. Tiahrt voted with a minority of Republicans to support that bill in its original form, then voted along with all Republicans except one against the passage of the conference report.

As to whether voting for these bills constitutes voting “to fund Obamacare,” the Pompeo campaign manager told the Wichita Eagle: “This type of flawed logic would drive someone to believe that Mr. Tiahrt voted eight times for Planned Parenthood funding for federal funding of abortions — which would be grossly misleading.”

The Eagle further reported: “Pompeo’s campaign provided a list of those eight bills. A fact-check found Tiahrt did vote ‘yes’ on the bills. But those bills were also general appropriation measures for departments that dealt with family planning.”

Here are the bills referenced in the Tiahrt television advertisement.

H.J.Res. 44 (112th) votesH.J.Res. 44 (112th): Further Continuing Appropriations Amendments, 2011. This bill provided appropriations for several dozen federal agencies. It passed 335 to 91. Republicans voted 231 to 6 in favor. All Kansans voted in favor. The Hill described this bill as a “two-week spending resolution … to support a measure aimed at averting a government shutdown this week.” (GOP spending bill passes in landslide as 100 Dems defect)

H.J.Res. 48 (112th) votesH.J.Res. 48 (112th): Additional Continuing Appropriations Amendments, 2011. This bill provided appropriations for a number of federal agencies. It also eliminated specific spending that was approved in 2010. It passed 271 to 158. Republicans voted 186 to 54 in favor. All Kansans except Huelskamp voted in favor. The Hill described this bill as a “three-week spending resolution.” (House adjourns, likely until late March)

H.R. 1363 (112th) votesH.R. 1363 (112th): Further Additional Continuing Appropriations Amendments, 2011. As described by the Congressional Research Service, the bill “Provides reduced rates of operation for FY2011 for the following accounts or activities within the Department of Transportation (DOT).” It also provided funds at reduced rates of operation for FY2011 for some accounts within the Department of Housing and Urban Development (HUD). It also appears to have eliminated some earmarks passed by an earlier Congress. This bill passed 247 to 181. Republicans voted 232 to 6 in favor. All Kansans voted in favor. Of this bill, The Hill reported it was “a bill that would fund the federal government for another week.” (House adopts rule for one-week budget stopgap)

H.R. 1473 (112th) votesH.R. 1473 (112th): Department of Defense and Full-Year Continuing Appropriations Act, 2011. This is a large bill at 175 pages in length. The summary from the Congressional Research Service runs nearly 20,000 words. It passed 260 to 167. Republicans voted 179 to 59 in favor. All Kansans except Huelskamp voted in favor. This bill, voted on in April, was described by The Hill as “an agreement to fund the federal government for the rest of fiscal 2011.” The federal fiscal year ends on September 30.

H.R. 2055 (112th) on passage votesH.R. 2055 (112th) conference report votesH.R. 2055 (112th): Consolidated Appropriations Act, 2012. At 486 pages, another large bill making appropriations for many agencies. On passage of the bill in the House, the vote was 411 to 5 in favor. The later vote on agreeing to the conference report passed 296 to 121. Republicans voted 147 to 86 in favor. All Kansans except Huelskamp voted in favor. The Hill reported this bill “covers spending for Defense, Energy and Water, Financial Services and General Government, Homeland Security, Interior, Labor/Health and Human Services, Legislative Branch, Military Construction/VA, and State/Foreign Operations.” (House approves $1 trillion omnibus spending bill in easy 296-121 vote)

H.J.Res. 117 (112th) votesH.J.Res. 117 (112th): Continuing Appropriations Resolution, 2013. This bill provided appropriations for a number of federal agencies. It passed 329 to 91. Republicans voted 165 to 70 in favor. Kansans Huelskamp and Yoder voted against; Jenkins and Pompeo voted in favor. The Hill described this bill as a “six-month spending resolution to keep the government funded.” (Senate passes resolution to keep government funded)

H.R. 933 (113th) votesH.R. 933 (113th): Consolidated and Further Continuing Appropriations Act, 2013. A 240 page bill that provides appropriates to many federal agencies. The House agreed to the conference report by a vote of 318 to 109. Republicans voted 203 to 27 in favor. All Kansans except Huelskamp voted in favor.

Detail of stairway in Kansas Capitol.

Kansas was an earmark donor state

The practice of federal earmark spending was not kind to Kansas, as data shows Kansas was an earmark donor state.

Detail of stairway in Kansas Capitol.
Detail of stairway in Kansas Capitol.
The former practice of earmarking federal spending was seen as a way for members of Congress to demonstrate their political prowess by bringing the federal bacon back home to the district or state. Data gathered and analyzed by Brandon Arnold of Cato Institute shows that states differ greatly in the dollars sent to Washington as federal income taxes and the earmarks received.

Data for 2009, one of the last years for earmarking, along with Arnold’s calculations of a earmark ratio, shows that the value of this ratio varies from 25 percent to 1,104 percent. This ratio is calculated by first determining the proportion of total federal income taxes paid by a state. Use that to calculate the state’s proportional share of earmark dollars. Then, compare to earmarks actually received.

For 2009, the earmark ratio for Kansas was 81.9 percent. Based on the state contributing 0.9 percent of total federal taxes paid, Kansas should have received $173 million in earmarks. It actually received $142 million.

Arnold’s article contains other interesting find, such as comparing a state’s earmark ratio with it having members on appropriations committees.

I’ve presented Arnold’s data in an interactive spreadsheet. View the data below, or click here to open it in a new window, which may work best in most cases. This is a spreadsheet in Google Docs format. You may manipulate and save the data as your own copy.

WichitaLiberty.TV July 2, 2014

WichitaLiberty.TV: Citizen activists and the proposed Wichita sales tax

In this episode of WichitaLiberty.TV: Two activists join host Bob Weeks to discuss activism at the local level. Then, what about the proposed sales tax increase in Wichita? View below, or click here to view at YouTube. Episode 51, broadcast July 13, 2014.

United States Capitol, July 2011

Congress is better without earmarks

Controversy over the timing and efficacy of an earmark divert attention from the fact that earmarks are bad government. Congress is better without the practice.

United States Congressional candidate Todd Tiahrt calls for a return to earmark spending in Congress, pointing to a million-dollar grant he obtained for Wichita to help defray costs of the Wichita Police Department in investigating and capturing serial killer Dennis Rader, or BTK. The Daily Caller has a report, as does the Wichita Eagle. Neither story is supportive of Tiahrt’s claim that earmarks were responsible for the capture of the BTK killer.

Speaking to the Wichita Pachyderm Club on May 16, Tiahrt defended the earmarking process, telling the audience “By the way, earmarks don’t raise spending. Earmarks never increase the budget. They simply redirect the funding.” (The complete broadcast of his talk is available at Voice for Liberty Radio: Todd Tiahrt.)

United States Capitol, July 2011
United States Capitol, July 2011
This is the standard argument: Earmarks simply direct the spending of money that is already authorized to be spent. Therefore, earmarking does not increase the amount spent. But this reasoning bypasses the fact that it is Congress that authorizes a certain amount to be spent. If Congress is concerned that too much is being spent, it could authorize less.

This notion that discretionary spending is on a trajectory that can’t be controlled; that all a hapless Congress can do is control where it is spent by earmarking: This is nonsense. Nonsense on stilts. Some of the problems with earmark spending are contained in For Tiahrt, earmarks are good government.

Logrolling, or the selling of earmarks

Many Members of Congress sell earmarks to the home district as a beneficial way to have the country as a whole to pay for our needs. It’s usually presented as though it is free money. Taxpayers across the country are paying for something in the home district, members say.

But as most people know in their hearts, there really is no free lunch. If Members of Congress expect other members to vote for their earmarks, they know they’re expected to vote for the earmarks of other members. This is precisely what happens.

The BTK earmark happened in 2005. In 2007 a group of House Members offered 50 amendments to remove earmarks from appropriations bills. Club for Growth compiled the following list, along with a scorecard of votes for each member. I’ve presented the list of amendments below, and you can view the project at The 2007 Club for Growth RePORK Card. It includes items like $150,000 for the Bremerton Public Library restoration in Washington, $129,000 for the Mitchell County Development Foundation for the home of the “perfect Christmas tree” project, and $100,000 for the Kansas Regional Prisons Museum in Lansing.

So two years after the BTK earmark for the Wichita Police Department, there were 50 opportunities for our representatives to make a simple up-or-down vote on wasteful pork barrel spending projects. Only one of these amendments passed.

Todd Tiahrt voted against all of these amendments. He, along with 81 Democrats and 23 other Republicans, could find no good reason to vote against any of these projects.

So while Wichita received help paying for a police investigation, we in the fourth congressional district had to pay for all these other projects. After all, how could Tiahrt ask his congressional colleagues to support his own earmarks if he did not support theirs?

Congress is better without earmarks

While there has been a ban on earmarks since 2010, some members and candidates call for a return to earmarking. But a recent Wall Street Journal editorial explains the benefit of the ending of earmarks and a return to accountability in legislative decision-making:

Congressional cries to restore earmarks are mounting, and a new favorite argument is that the spenders need the pork authority to properly exercise their Constitutional power of the purse. But if you look at what’s happening inside Congress, the opposite is true: The earmark ban is producing more spending accountability and oversight. … When Senate Democratic Whip Dick Durbin now pines for the days when earmarks were the “glue” holding bills together, what he’s really missing is leadership’s power to dole out home-state patronage. Pork-barrel Republicans who say the earmark ban has transferred spending power to the President are excusing their own unwillingness to set priorities. … This process put House Members in control of spending decisions, even as it required them to choose on the basis of fact and analysis — rather than logrolling.

(“Logrolling” is the practice of supporting others’ projects in order to gain support for yours. Vote trading, in other words.)

At the same May 2014 Pachyderm Club meeting, Tiahrt said that earmark spending is still happening, but now it’s directed through the executive branch. Congress has given President Obama a “blank check,” Tiahrt told the audience. The Wall Street Journal editorial board disagrees.

Following is the list of 50 amendments that would have canceled pork barrel spending projects in 2007.

House Vote 559 — Bars funding of $150,000 for the Clover Bend Historic Site in Arkansas. Amendment failed, 98-331.

House Vote 560 — Bars funding of $100,000 for the St. Joseph’s College Theatre Renovation in Indiana. Amendment failed, 97-328.

House Vote 561 — Bars funding of $150,000 for the Maverick Concert Hall preservation in New York. Amendment failed, 114-316.

House Vote 562 — Bars funding of $150,000 for the Bremerton Public Library restoration in Washington. Amendment failed, 98-333.

House Vote 565 — Bars funding of $140,000 for the Wetzel County Courthouse in West Virginia. Amendment failed, 104-323.

House Vote 566 — Bars funding of $150,000 for equipment for the Conte Anadromous Fish Laboratory. Amendment failed, 97-330.

House Vote 567 — Bars funding of $150,000 for the W.A. Young and Sons Foundry in Pennsylvania. Amendment failed, 104-328.

House Vote 568 — Bars funding of $100,000 for the Ohio Association of Professional Firefighters to renovate a hall in Ohio. Amendment failed, 66-364.

House Vote 569 — Bars funding of $1,200,000 for projects related to the Southwestern Pennsylvania Heritage Route. Amendment failed, 86-343.

House Vote 590 — Bars funding of $231,000 for the Grace Johnstown Area Regional Industries Incubator and Workforce Development program in Pennsylvania. Amendment failed, 87-335.

House Vote 591 — Bars funding of $500,000 for a project in the Barracks Row area of Washington, D.C. Amendment failed, 60-361.

House Vote 592 — Bars funding of $231,000 for the San Francisco Planning and Urban Research Association’s SPUR urban center. Amendment failed, 102-317.

House Vote 593 — Bars funding of $129,000 for the Mitchell County Development Foundation for the home of the “perfect Christmas tree” project. Amendment passed, 249-174.

House Vote 594 — Bars funding of $231,000 for the West Virginia University Research Corporation’s renovation of a small-business incubator. Amendment failed, 101-325.

House Vote 595 — Bars funding of $231,000 for the Abraham Lincoln National Airport Commission. Amendment failed, 107-318.

House Vote 597 — To remove 148 requested earmarks from the bill. Amendment failed, 48-372.

House Vote 636 — Bars funding of $1,000,000 for the Center for Instrumented Critical Infrastructure in Pennsylvania. Amendment failed, 98-326.

House Vote 637 — Bars funding of $1,500,000 for the South Carolina Historically Black Colleges and Universities Science and Technology Initiative. Amendment failed, 70-357.

House Vote 638 — Bars funding of $500,000 for the Emmanuel College Center for Science Partnership in Massachusetts. Amendment failed, 79-337.

House Vote 639 — Bars funding of $1,000,000 for nano-structured fuel cell membrane electrode assembly in California. Amendment failed, 81-348.

House Vote 640 — Strikes numerous earmarks from the bill. Amendment failed, 39-388.

House Vote 654 — Bars funding of $34,000,000 for the Alaska Native Education Equity program and other programs. Amendment failed, 74-352.

House Vote 663 — Strikes all earmarks in the bill. Amendment failed, 53-369.

House Vote 664 — Bars funding of $300,000 for its Bay Area Science Teacher Recruitment, Retention and Improvement Initiative. Amendment failed, 89-341.

House Vote 667 — Bars funding of $300,000 for the On Location Entertainment Industry Craft and Technician Training project at West Los Angeles College in Culver City, CA. Amendment failed, 114-316.

House Vote 668 — Bars funding of $150,000 for the American Ballet Theatre in New York City for educational activities. Amendment failed, 118-312.

House Vote 669 — Bars funding of $150,000 for the South Carolina Aquarium in Charleston, S.C. Amendment failed, 70-360.

House Vote 670 — Bars funding of $100,000 for the Kansas Regional Prisons Museum in Lansing, Kan. Amendment failed, 112-317.

House Vote 671 — Bars funding of $200,000 for the Corporation for Jefferson’s Popular Forest in Forest, VA. Amendment failed, 68-360.

House Vote 678 — Bars funding of $2,000,000 for the Charles B. Rangel Center for Public Service at the City College of New York in New York City. Amendment failed, 108-316.

House Vote 679 — Bars funding of $200,000 for the American Jazz Museum in Kansas City, MO. Amendment failed, 96-327.

House Vote 698 — Bars funding of $300,000 for the Belmont Complex in Kittanning, PA. Amendment failed, 87-335.

House Vote 699 — Bars funding of $400,000 for the North Central Wisconsin Regional Planning Commission in Wausau, WI. Amendment failed, 68-356.

House Vote 700 — Bars funding of $50,000 for the National Mule and Packers Museum in Woodlake, CA. Amendment failed, 69-352.

House Vote 701 — Bars funding of $300,000 for the Friends of Cheat Rails-to-Trails Program in West Virginia. Amendment failed, 81-342.

House Vote 702 — Bars funding of $300,000 for the Houston Zoo in Texas. Amendment failed, 77-347.

House Vote 705 — Bars funding of $150,000 for the Edmonds Center for the Arts in Edmonds, WA. Amendment failed, 97-327.

House Vote 706 — Bars funding for “parking facilities”. Amendment failed, 86-338.

House Vote 735 — Bars funding of $200,000 for the Lobster Institute at the University of Maine in Orono, Maine. Amendment failed, 87-328.

House Vote 736 — Bars funding of $250,000 for the East Coast Shellfish Research Institute in Toms River, NJ. Amendment failed, 77-337.

House Vote 809 — Bars funding of $878,046 for the Catfish Pathogen Genomic Project in Auburn, AL. Amendment failed, 74-357.

House Vote 810 — Bars funding of $628,843 for grape genetics research in Geneva, NY. Amendment failed, 76-353.

House Vote 811 — Bars funding of $400,000 for the alternative uses of a tobacco grant in Maryland. Amendment failed, 94-337.

House Vote 812 — Bars funding of $489,000 for Ruminant Nutrition Consortium in Montana, North Dakota, South Dakota and Wyoming. Amendment failed, 74-355.

House Vote 813 — Bars funding of $6,371,000 for the wood utilization grant in Mississippi, North Carolina, Minnesota, Maine, Michigan, Idaho, Tennessee, Arkansas and West Virginia. Amendment failed, 68-363.

House Vote 839 — Bars funding of $2,500,000 for the Presidio Trust national park in San Francisco, CA. Amendment failed, 94-311.

House Vote 842 — Bars funding of $2,000,000 for the “Paint Shield for Protecting People from Microbial Threats.” Amendment failed, 91-317.

House Vote 843 — Bars funding of $1,500,000 for the Doyle Center for Manufacturing Technology in Pittsburgh, PA. Amendment failed, 98-312.

House Vote 844 — Bars funding of $3,000,000 for the Lewis Center for Education Research in Apple Valley, CA. Amendment failed, 57-353.

House Vote 845 — Bars funding of $39,000,000 for the National Drug Intelligence Center in Johnstown, PA. Amendment failed, 109-301.

Quasi-lobbyist runs as earmarker in Kansas GOP primary

Quasi-lobbyist runs as earmarker in Kansas GOP primary

Washington Examiner writer Tim Carney notices the curious stance of a Republican candidate in the Kansas fourth district primary: He likes earmarks.

Washington Examiner senior political columnist Timothy P. Carney knows how Washington works. Of his 2006 book The Big Ripoff: How Big Business and Big Government Steal Your Money, Paul A. Gigot, who is Editorial Page Editor of the Wall Street Journal wrote “Politicians like to say that government is on the side of the little guy. But with impressive documentation and persuasive examples, Tim Carney shows how government power and regulation are typically used to assist the powerful.”

On the contest in the Kansas fourth district between Mike Pompeo and Todd Tiahrt, Carney observed “Kansas’s 4th District features one of the oddest fights yet of the counter-Tea Party effort: a quasi-lobbyist running running on a pro-earmark platform.”

Quasi-lobbyist runs as earmarker in Kansas GOP primaryCarney isn’t the first to notice the pro-earmark stance of Tiahrt. It’s not a secret, as the candidate himself speaks in favor of earmarks. His voting record reflects his support. In 2007 Club for Growth, whose motto is “Prosperity and Opportunity through Economic Freedom,” compiled a list of 50 votes that canceled what it called wasteful earmarks, explaining as follows:

The Club for Growth has compiled a RePORK Card of all members’ votes on all 50 anti-pork amendments. “Taxpayers have a right to know which congressmen stand up for them and which stand up for the special interests,” said Club for Growth President Pat Toomey. “Unfortunately, the Club for Growth RePORK Card shows that most congressmen care more about lining their buddies’ pockets than they care about protecting American taxpayers.”

Analyzing the results, Club for Growth noted that 16 members voted for all these amendments. These members were all Republicans. The average Republican score was 43%. The average Democratic score was 2%. The average score for appropriators — these are members of the Committee on Appropriations like Tiahrt — was 4%.

Where was Todd Tiahrt on this list? Tied for last place at 0%. He voted for none of these amendments that would have blocked earmark spending. Of the group that Tiahrt voted with, Club for Growth noted “105 congressmen scored an embarrassing 0%, voting against every single amendment. The Pork Hall of Shame includes 81 Democrats and 24 Republicans.”

Club for Growth created a similar tally in 2009, selecting 68 votes. That year, Tiahrt did better, voting for 20 of the 68 measures.

Quasi-lobbyist runs as earmarker in Kansas GOP primary

By Timothy P. Carney, Washington Examiner

Former Rep. Todd Tiahrt is a man on a mission — to reclaim the Republican Party for earmarkers.

Tiahrt represented Kansas’ 4th district for 16 years, and for 14 of those years he sat on the House Appropriations Committee. From that perch, Tiahrt was a prolific porker, dealing out earmarks as if they were playing cards.

Continue reading at Quasi-lobbyist runs as earmarker in Kansas GOP primary.

water fountain gargoyles fountain-197334_640

Examining Wichita’s water future

From Kansas Policy Institute.

water fountain gargoyles fountain-197334_640A proposal before the Wichita City Council would raise the sales tax in the city by 1% to fund several projects. The biggest piece of the proposal would be to fund additional water capacity for users of the city water system.

On Thursday 17 July, come hear from the City of Wichita and others on the scope of the problems, possible solutions, and the perspectives of several experts in the debate.

Click here to register for this event.

Date: Thursday 17 July
When: 7:30 a.m. registration and 8:00 a.m. start to presentations
Where: Wichita State University MetroPlex Room 132 ( 29th and Oliver)
Cost: Free with Advance Registration

A light breakfast will be served. The session will conclude by 12:15 p.m.

Speaker Line-up and Agenda:
7:30 a.m. — Registration and Breakfast
8:00 a.m. — Kansas Water Office on scope of water usage/needs in SCKS
9:00 a.m. — City of Wichita Proposal: Alan King, Dir. of Public Works, accompanied by Councilman Pete Meitzner
10:00 a.m. — Are Water Markets Applicable in Kansas?: Dr. Art Hall, executive director of the Center for Applied Economics at the University of Kansas
11:00 a.m. — Wichita Chamber of Commerce Water Task Force Findings: Karma Mason, president of iSi Environmental

KPI is not taking a position of the water proposal before the City Council. This event is to provide a forum for relevant parties to present their perspective on the issue with the public. Each presenter will have 30 minutes for a presentation followed by an Q&A.

This is the first in a series of KPI-sponsored forums of this nature on the different aspects of the sales tax proposal. Future forums will be held on the economic development and street and transit proposals.

For more information about this event contact Kansas Policy Institute at 316.634.0218. To register, click here.

WichitaLiberty.TV set 2014-04-29 01 800

WichitaLiberty.TV: Vampires on the prowl in Wichita and the city council’s treatment of citizens.

In this episode of WichitaLiberty.TV: The City of Wichita urges citizens to take steps to stop “vampire” power waste. But before hectoring people to introduce inconvenience to their lives in order to save small amounts of electricity, the city should tackle the real monsters of its own creation. Then proceedings of a recent Wichita City Council meeting are instructive of the factors citizens should consider if they want to interact with the council and city government at a public hearing. Episode 49, broadcast June 29, 2014. View below, or click here to view at YouTube.

For Kansas Senator Roberts, earmark reform not worthy of his vote

Kansas Senator Pat Roberts promotes his fiscal conservatism, but failed to vote in favor of earmark reform in a recent close vote.

In 2012 an amendment to a Senate bill was offered that would have dramatically reformed the earmark process.

United States Senator Pat Roberts of Kansas.
United States Senator Pat Roberts of Kansas.
The vote was On the Amendment S.Amdt. 1472 to S.Amdt. 1470 to S. 2038 (Stop Trading on Congressional Knowledge Act of 2012).

The purpose of the amendment, according to Congress.gov, is “to prohibit earmarks.” Although offered in 2012, the short title of the amendment was “Earmark Elimination Act of 2011″

United States Senator from Kansas Pat Roberts voting with Democrats and against Republicans on earmark reform. 2012.
United States Senator from Kansas Pat Roberts voting with Democrats and against Republicans on earmark reform. 2012.
The nub of the amendment was “It shall not be in order in the Senate to consider a bill or resolution introduced in the Senate or the House of Representatives, amendment, amendment between the Houses, or conference report that includes an earmark.”

The amendment was rejected by a vote of 59 to 40. Among Democratic Party members, the vote was 44 to 7 against the amendment. For Republican Party members, the vote was 33 to 13 in favor of the amendment.

One of the 13 Republicans who voted against this reform-minded amendment was Pat Roberts of Kansas.

For Tiahrt, earmarks are good government

Appearing today on The Joseph Ashby Show, candidate for United States House of Representatives Todd Tiahrt defended the practice of earmarking federal spending.

Joseph Ashby Show 2014-06-30The ending of earmarks, he said, has shifted responsibility for allocating funds from Congress to the executive. Earmarks do not increase spending, he said.

United States Capitol, July 2011
United States Capitol, July 2011
He said that Congress should take away the president’s pen, and should do that by allocating funding properly. When pressed by the host, Tiahrt repeated that earmarks do not increase spending.

This is the standard argument: Earmarks simply direct the spending of money that is already authorized to be spent. Earmarking does not increase the amount spent. Which, of course, bypasses the fact that Congress authorizes a certain amount to be spent. If Congress is concerned that too much is being spent, it could authorize less.

There is broad agreement among limited-government conservatives that earmarks are harmful. Taxpayers for Common Sense concludes:

Earmarks reflect a broken budget process. Too often earmarks reward parochial interests at the expense of national needs. The earmarking process also often subverts established merit-based, competitive, or formula-driven budget processes without debate. Ultimately earmarks may fund projects many people consider “good” projects, but the earmark process does not guarantee these are the most beneficial and worthwhile projects.

At The Heritage Foundation, commentary on a Harvard Business school study opened with:

What happens when a state is lucky enough to have one of their Senators ascend to one of the three most powerful committee chairmanships? According to a new study by three Harvard Business School the average state then experiences a 40 to 50 percent increase in earmark spending (the figure is a smaller 20% for powerful House committees). So this new government spending is then a boon to the state right? The public spending stimulates economic growth right? Wrong. Turns out, increased federal spending is connected with a decrease in corporate capital expenditures and employment.

It should be noted that while in Congress, Tiahrt served on the Committee on Appropriations, one of the “powerful House committees” referred to. Further evidence of Tiahrt’s attitude is that today on Ashby’s show he referred to Jim DeMint, the former senator, anti-earmark crusader, and now president of Heritage, as a failure.

At The Cato Institute, Tad DeHaven wrote that earmarks are a symptom of a larger problem:

There just isn’t much difference between the activities funded via earmarking and the activities funded by standard bureaucratic processes. The means are different, but the ends are typically the same: federal taxpayers paying for parochial benefits that are properly the domain of state and local governments, or preferably, the private sector. As a federal taxpayer, I’m no better off if the U.S. Dept. of Transportation decides to fund a bridge in Alaska or if Alaska’s congressional delegation instructs the DOT to fund the bridge.

Therefore, earmarking is a symptom of the problem. The problem is the existence of programs that enables the federal government to spend money on parochial activities.

Also at Cato, Dan Mitchell makes the most important argument:

Last but not least, earmarks are utterly corrupt. The fact that they are legal does not change the fact that they finance a racket featuring big payoffs to special interests, who give big fees to lobbyists (often former staffers and Members), who give big contributions to politicians. Everyone wins … except taxpayers.

Wichita’s monsters on display, again

While the City of Wichita asks citizens to inconvenience themselves by saving “vampire” electrical waste, the city still lights up its own monsters.

Wichita Transit Center, June 27, 2014, 2:03 pm.
Wichita Transit Center, June 27, 2014, 2:03 pm.
Last Friday afternoon most downtown Wichita street lights were switched off. But not all, as can be seen by the many lights switched on at the Wichita Transit Center. They were on Friday afternoon, just as they are on many days.

While waste like this is not acceptable, it is all the more striking considering that Wichita’s transit system is out of money. The city council has recommended that Wichitans vote for higher sales taxes, part of which would fund the transit system. That would include, I suppose, the wasteful spending on burning street lights in the middle of the day. This is indicative of the attitude of the city as explained in Forget the vampires. Let’s tackle the real monsters.

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

Wichita downtown street lights 2014-06-27 11.20.30The lights illustrated in this photograph are, undoubtedly, a small portion of the city’s spending. But you don’t have to look very hard to find waste like this, and we know that small examples of waste are multiplied many times. So when city leaders tell us that there is nowhere left to cut in the budget, that everything that can be done to trim the fat has already been done, and that the only thing we can do is raise taxes — well, think of this photograph and others illustrated in Wichita advances in the field of cost savings, Another Friday lunch, and even more lights are on, To compensate, Wichita switched on the street lights, In Wichita, the streetside seating is illuminated very well, In Wichita, the rooftops are well-lit and On a sunny day in downtown Wichita you can see the street lights.

This is not to say that waste like this does not occur in the private sector. Of course it does. But businesses and individuals have a powerful incentive to avoid waste that isn’t present in government: Businesses and people are spending their own money. And even if they waste money, it’s their money, not ours.

State and local direct general expenditures, per capita, growth since 1991. Kansas is the dark line.

Kansas expenditures, compared to others

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

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

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

WichitaLiberty.TV: Where’s Wichita’s water?

In this excerpt from WichitaLiberty.TV: To solve water supply problems, the City of Wichita seeks to impose austerity on its citizens and force them to pay for others to install water-efficient appliances that save vanishingly small amounts of water. Plus, what happened to past assurances that we had plenty of water? Originally broadcast on March 9, 2014. View below, or click here to view at YouTube.

For more on this issue, see Where’s Wichita’s water?

kansas-policy-institute-2014-04-willing-to-fund

To fund government, Wichitans prefer alternatives to raising taxes

In this excerpt from WichitaLiberty.TV: Wichita voters told pollsters they prefer adjusting spending, becoming more efficient, using public-private partnerships, and privatization to raising taxes. View below, or click here to view on YouTube. For more on this topic, see To fund government, Wichitans prefer alternatives to raising taxes.

Two street lights in downtown Wichita, June 20, 2014.

Forget the vampires. Let’s tackle the real monsters.

Public service announcements on Facebook and Wichita City Channel 7 urge Wichitans to take steps to stop “vampire” power waste. But before hectoring people to introduce inconvenience to their lives in order to save small amounts of electricity, the city should tackle the real monsters of its own creation.

Public service announcement crawler on Wichita's cable channel network, June 17, 2014.
Public service announcement crawler on Wichita’s cable channel network, June 17, 2014.
People are probably vaguely aware that many modern electrical and electronic devices consume electricity even when switched off. One source estimates that a cell phone charger consumes 0.26 watts of electrical power even when a phone is not plugged in. While in sleep mode, a flat panel computer display consumes 1.39 watts. A clock radio uses 2.01 watts. A microwave oven while not in use and with its door closed uses 3.08 watts. (These are average values.) A large Samsung smart television on standby uses 0.3 watts.

While appearing to be wasteful, this “vampire” power consumption often has a benefit. If you unplug your clock radio when you leave for work in the morning, you save a few dozen watts of power. But, you have to reset the clock when you want to use it again. If I unplug my Samsung smart television, I’ll probably have to reprogram it to my preferences. If I want save the power my microwave oven wastes, I’ll have to wrench my back lifting it out of the way so I can reach the outlet it plugs in to. That action, naturally, unleashes a cloud of dust bunnies to dirty my counters and floor.

Wichita city government Facebook page public service advice regarding "vampire" power waste.
Wichita city government Facebook page public service advice regarding “vampire” power waste.
Nonetheless, the City of Wichita uses its Facebook page and cable television network to urge its citizens take steps like these in order to save small amounts of electricity.

How much electricity do you suppose a city street light consumes? It depends on the type of light, but common street lights use from 100 to 200 watts. During the hours when the sun does not shine, we’re generally willing to pay for that in order to obtain the benefits of lighted streets and sidewalks.

But when street lights are burning in the middle of a day, they provide absolutely no value. Street lights turned on during the day provide none of the convenience of “vampire” power usage, such as not needing to reset your clocks and move your microwave oven every day.

Bench lights and street lights in downtown Wichita switched on in the middle of the day.
Bench lights and street lights in downtown Wichita switched on in the middle of the day.
So while the City of Wichita uses its television channel to hector citizens into adding inconvenience to their lives in order to save vanishingly small amounts of electricity, the city apparently has no misgivings about using large amounts of electricity to needlessly illuminate the noonday sky, week after week.

As I’ve shown, the city often has street lights turned on at noon on days with no clouds in the sky. (See here for examples.) Yesterday dozens of city street lights were turned on at 2:30 in the afternoon on a sunny day for many blocks in downtown Wichita. This is not an isolated mistake. It is a pattern. (Even if it is cloudy and raining, the street lights add no discernible illumination during daylight.)

There’s something else. Each of us can choose the balance between “vampire” power waste and inconvenience based on our own values. If we choose to use “vampire” power in order to add convenience to our lives, we have to pay for it.

Two street lights in downtown Wichita, June 20, 2014.
Two street lights in downtown Wichita, June 20, 2014.
But the Wichita city hall bureaucrats who burn street lights in the noonday sun week after week are spending your money, not theirs.

(Yes, city hall bureaucrats pay taxes to the city just like you and I, so their tax money is also wasted. But because the cost of this waste is spread over the entire city, the motivation for any one person to take steps to eliminate the waste is small. Especially if, like a city hall bureaucrat would, you’d have to actually work in order to achieve savings. But these same bureaucrats and politicians urge you to work harder in your home in order to save small amounts of “vampire” electricity.)

The wasteful expenditures on street lights I’ve been illustrating for several weeks are located in districts of the city represented by Janet Miller and Lavonta Williams. Both express concern for the environment and criticize the purported harm man has caused the earth by emitting greenhouse gases. Here’s an opportunity for them to act on their beliefs.

city-council-chambers-sign-800

In Wichita, a public hearing with missing information

The Wichita City Council is holding a public hearing, but citizens don’t have information that would be useful if they’re interested in conducting oversight.

Wichita City Library, 1965Wichita’s facade improvement program provides for the financing of the exterior faces of buildings in certain areas of the city. The money that is advanced to the developers, along with interest charges, are added to the property tax bills for the property, spread over 15 years. In this respect the program is similar to when the city builds streets and sewers in new areas of town and allows homeowners to pay these costs over 15 years. Except, the facade improvement program is for repair of existing buildings, not construction of new infrastructure. Additionally, the work financed by the facade improvement program is owned by the private property owner. When the city constructs streets and sewers in new neighborhoods, the city owns them.

There’s another difference. In the item to be considered today, there is a grant of $20,000. This is a gift of cash with few strings attached, except that it be spent on something the owner must spend anyway.

City documents indicate this is a project with a cost of $2,500.000.

Here’s the public policy angle. City documents state, regarding this item:

In 2009, the Facade Improvement Program was revised to require that private funding for overall project costs be at least equal to public funding and that applicants show a financial need for public assistance in order to complete the project, based on the owner’s ability to finance the project and assuming a market-based return on investment.

Later on, the same document states

The Office of Urban Development has reviewed the economic (“gap”) analysis of the project and determined a financial need for incentives based on the current market.

In other words, without the benefit of the facade improvement loan and grant, the project would not be economically feasible. Which, to me, seems curious. A $20,000 grant for a $2,500,000 Economists use a decimal pointproject is 0.8 percent of the project. The lower interest rate for the $156,034 being financed under the program provides some small additional benefit. These values are small compared to the scope of the project. It is not possible to forecast future revenues and expenses with the precision necessary to conclude that the facade improvement program boosts this project over the bar of economic feasibility, whatever that is.

We’ll probably not know what that bar is. I asked for the “gap” analysis. It doesn’t appear that it will be available before today’s meeting. I asked for it Thursday evening, and the city’s public information officer has followed up with me to see if I received the document, but I do not have it. The public doesn’t have it. I doubt if city council members have it.

The item today is a public hearing. The law requires it to be held so that the council can receive input from the public. Whether the public is informed — that’s a different matter.

Who reads the agenda

The agenda packet for the previous week contained a mistake. It was a mistake that is easy to make and not of any serious consequence. The wrong pages appeared for an item, and the correct pages were not in the packet. When I inquired about this late Monday afternoon — not long before the Tuesday meeting — the city’s public information office thanked me for bringing this to the city’s attention. A correction was promptly published.

Which leads me to wonder: Had anyone else read the agenda with sufficient attention to notice that mistake?

At least the street light in the background was turned off.

Wichita advances in the field of cost savings

When Wichita city leaders tell us that the budget and spending have been cut to the bone, that everything that can be done to save money has already been done, remember my Friday trips to downtown for lunch.

With two of the four sidewalk bench lights illuminating the sidewalk despite the cloudless midday sky, there is good news: The street light in the background was not switched on. Neither were other nearby street lights. This is progress for Wichita.

At least the street light in the background was turned off.
At least the street light in the background was turned off.
The lights illustrated in this photograph are, undoubtedly, a small portion of the city’s spending. But you don’t have to look very hard to find waste like this, and we know that small examples of waste are multiplied many times. So when city leaders tell us that there is nowhere left to cut in the budget, that everything that can be done to trim the fat has already been done, and that the only thing we can do is raise taxes — well, think of this photograph and others illustrated in Another Friday lunch, and even more lights are on, To compensate, Wichita switched on the street lights, In Wichita, the streetside seating is illuminated very well, In Wichita, the rooftops are well-lit and On a sunny day in downtown Wichita you can see the street lights.

This is not to say that waste like this does not occur in the private sector. Of course it does. But businesses and individuals have a powerful incentive to avoid waste that isn’t present in government: Businesses and people are spending their own money. And even if they waste money, it’s their money, not ours.

kansas-policy-institute-2014-04-q01-01

Wichita voter opinion on city spending and taxation

In this excerpt from WichitaLiberty.TV: Wichita voters give their opinions on city spending, subsidies for economic development, and their willingness to pay higher taxes for certain services. Since this episode was recorded, the Wichita City Council has given tentative approval for a one cent sales tax to be used for water supply, street maintenance, economic development, and transit. View below, or click here to view on YouTube.

For more from this survey, see

Wichita government prefers rebates to markets

Today the Wichita City Council may decide to revive a program to issue rebates to persons who purchase water-saving appliances. The program was started last summer, but less than half the allocated rebate money was claimed. The city will argue that this program has no cost, as the funds are left over from last year’s program. Except: The city could use the money not spent on rebates to either reduce water rates or retire water system debt. Following is an article from last year on this topic.

Wichita begins rebates and regulation

Instead of relying on market forces, Wichita imposes a new tax and prepares a new regulatory regime.

Equus BedsAt today’s meeting of the Wichita City Council, the city decided to spend up to $1 million this year on rebates to encourage people to buy water-efficient appliances. This will save a vanishingly small amount of water at tremendous cost.

The worst realization from today’s city council meeting is how readily citizens, politicians, and bureaucrats will toss aside economic thinking. The antimarket bias that Bryan Caplan explains in The Myth of the Rational Voter: Why Democracies Choose Bad Policies was in full display — even by the conservative members of the council.

It’s also clear that some council members want to go down the road of austerity rather than abundance.

What did we learn today? Many speakers used the terms “conservation” and “judicious.” Conservation is good. Judicious use is good. But each person applies different meanings to these concepts. A great thing about living in a (relatively) free economy is that each person gets to choose to spend their time and money on the things that are important to them, and in the amounts they want. We make these choices many times each day. Sometimes we’re aware of making them, and sometimes we’re not.

For example: If you’re watching television alone in your home, and you go to the kitchen to get a snack, do you turn off the television for the moment that you’re not watching it? No? Well, isn’t it wasting electricity and contributing to global warming to have a switched-on television that no one is watching, even for just a moment?

Some people may turn off the television in this scenario. But most people probably decide that the effort required to save a minute’s worth of electricity consumption by a television isn’t worth the effort required.

(By the way, the type of television programs you watch each evening: Is it worth burning dirty coal (or running precious water through dams, or splitting our finite supply of uranium atoms, or spoiling landscapes and killing birds with wind turbines) just so you can watch Bill O’Reilly or Rachel Maddow rant? Or prison documentaries? Or celebrity gossip? Reruns of shows you’re already seen? And I’ve seen you fall asleep while watching television! What a monumental waste. We should require sleep sensors on all new televisions and rebates to retrofit old sets.)

But when people leave their homes empty to go to work, almost everyone turns off the television, lights, and other appliances. Many may adjust their thermostats to save energy. People make the choice to do this based on the costs of leaving the lights on all day versus the cost of turning them on and off. No one needs to tell them to do this. The relative prices of things do this.

(You may be noting that children have to be told to turn off televisions and lights. That’s true. It’s true because they generally aren’t aware of the prices of things, as they don’t pay utility bills. But adults do.)

In most areas of life, people use the relative prices of things to make decisions about how to allocate their efforts and consume scarce resources. Wichita could be doing that with water, but it isn’t.

The conservation measures recommended by speakers today all have a cost. Sometimes the cost is money. In some cases the cost is time and convenience. In others the cost is a less attractive city without green lawns and working fountains. In many cases, the cost is shifted to someone else who is unwilling to voluntarily bear the cost, as in the rebate program.

At least we’ll be able to measure the cost of the rebate program. For most of the other costs, we’re pretending they don’t exist.

Instead of relying on economics and markets, Wichita is turning to a regulatory regime. Instead of pricing water rationally and letting each person and family decide how much water to use, politicians and bureaucrats will decide for us.

All city council members and the mayor approved this expansion of regulation and taxation.

(Yes, it’s true that the rebates will be funded from the water department, but that’s a distinction without meaningful difference.)

The motion made by Mayor Carl Brewer contained some provisions that are probably good ideas. But it also contained the appliance rebate measure. Someone on the council could have made a substitute motion that omitted the rebates, and there could have been a vote.

But not a single council member would do this.

It’s strange that we turn over such important functions as our water supply to politicians and bureaucrats, isn’t it?

WichitaLiberty.TV set 2014-04-29 01 800

Wichita: We have incentives. Lots of incentives.

In this excerpt from WichitaLiberty.TV: Wichita government leaders complain that Wichita can’t compete in economic development with other cities and states because the budget for incentives is too small. But when making this argument, these officials don’t include all incentives that are available. View below, or click here to view on YouTube. More information on this topic is at Contrary to officials, Wichita has many incentive programs.

Three of four bench lights are switched on near noontime, as well as street lights for two blocks.

Another Friday lunch, and even more lights are on

When Wichita city leaders tell us that the budget and spending have been cut to the bone, that everything that can be done to save money has already been done, remember my Friday trips to downtown for lunch.

Three of four bench lights are switched on near noontime, as well as street lights for two blocks.
Three of four bench lights are switched on near noontime, as well as street lights for two blocks.
Last Friday at lunchtime two of the four sidewalk bench lights were illuminating the midday sidewalk. Yesterday three of four were turned on. You can also see that the street lights for two city blocks were also switched on, and one photograph shows that lights on the top floor of the city-owned parking garage were also turned on.

Near noon on a cloudy day, Wichita turns on bench lights, street lights, and in the distance, the lights on the roof of its parking garage.
Near noon on a cloudy day, Wichita turns on bench lights, street lights, and in the distance, the lights on the roof of its parking garage.
Driving through downtown, there were many other blocks on which the street lights were switched on in the middle of a day. Well, it was cloudy.

The lights illustrated in this photograph are, undoubtedly, a small portion of the city’s spending. But you don’t have to look very hard to find waste like this, and we know that small examples of waste are multiplied many times. So when city leaders tell us that there is nowhere left to cut in the budget, that everything that can be done to trim the fat has already been done, and that the only thing we can do is raise taxes — well, think of this photograph and others illustrated in To compensate, Wichita switched on the street lights, In Wichita, the streetside seating is illuminated very well, In Wichita, the rooftops are well-lit and On a sunny day in downtown Wichita you can see the street lights.

This is not to say that waste like this does not occur in the private sector. Of course it does. But businesses and individuals have a powerful incentive to avoid waste that isn’t present in government: Businesses and people are spending their own money. And even if they waste money, it’s their money, not ours.

WichitaLiberty.TV set 2014-04-29 01 800

WichitaLiberty.TV: Government accounting, Government ownership of infrastructure, and Wichita commercial property taxes

In this episode of WichitaLiberty.TV: Government leaders tell us they want to run government like a business. But does government actually do this, even when accounting for its money? Then, is it best for government to own all the infrastructure? Finally, taxes on Wichita commercial property are high, compared to the rest of the nation. Episode 46, broadcast June 8, 2014. View below, or click here to view at YouTube.

State and Local Government Employees, Kansas and Nearby States 2014-06

Government employee costs in the states

The states vary widely in levels of state government and local government employees and payroll costs, calculated on a per-person basis. Kansas ranks high in these costs, nationally and among nearby states.

Two states have annual payroll costs of over $4,000, calculated by taking the total payroll cost and dividing by population. Many states operate on little more than half that. Only ten states have total government employee payroll costs greater than Kansas, on a per-person basis. (This does not include federal government employees.)

State and Local Government Employees, Kansas and Nearby States 2014-06When looking at a selection of nearby states, we see that only Nebraska has higher payroll costs for state and local government employees, when calculated on a per-person basis using the state’s population.

This data is from the U.S. Census Bureau for 2012, the most recent year available. Using Tableau Public, I created an interactive visualization. I show the full-time equivalent employees divided by the population for each state. Also, the annual payroll divided by population. (The Census Bureau supplies payroll data for only one month, the month of March, so I multiply by 12 to produce an approximation of annual payroll cost.)

Using the visualization: Sorting and selecting.
Using the visualization: Sorting and selecting.
There are two series of data, “Local government” and “State government.” The first series refers to the number of local government employees in each state, such as city and county employees. The second series refers to the number of state government employees in each state. Check boxes allow you to include either or both series in the chart.

By clicking on column headers or footers (“State,” “Annual payroll per person,” Full-time equivalent employees per person”) you can sort by these values.

Click here to open the visualization in a new window. Data is from United States Census Bureau, Government Employment & Payroll, released March 2014.

Wichita Streetlights 5-30-2014 11-20-52 AM

To compensate, Wichita switched on the street lights

When Wichita city leaders tell us that the budget and spending have been cut to the bone, that everything that can be done to save money has already been done, remember my Friday trips to downtown for lunch.

Wichita Streetlights 5-30-2014 11-20-52 AMAt 11:20 am on a Friday with the sun brightly accentuating the fluffy clouds, it’s a good thing that only two of the four bench lights are lit. The other two, however, have probably expired from having been switched on all day for the past month.

But to compensate for the loss of those two, it appears the city decided to switch on the nearby overhead street lights.

Wichita Streetlights 5-30-2014 11-24-15 AMThe lights illustrated in this photograph are, undoubtedly, a small portion of the city’s spending. But you don’t have to look very hard to find waste like this, and we know that small examples of waste are multiplied many times. So when city leaders tell us that there is nowhere left to cut in the budget, that everything that can be done to trim the fat has already been done, and that the only thing we can do is raise taxes — well, think of this photograph and others illustrated in In Wichita, the streetside seating is illuminated very well, In Wichita, the rooftops are well-lit and On a sunny day in downtown Wichita you can see the street lights.

This is not to say that waste like this does not occur in the private sector. Of course it does. But businesses and individuals have a powerful incentive to avoid waste that isn’t present in government: Businesses and people are spending their own money.

‘Earmark Distribution Agency,’ dealer of pork, proposed for elimination

From the office of United States Representative Mike Pompeo, an example of Rep. Pompeo opposing corporate and business welfare that benefits a few parties at detriment to the rest of the economy. Video of Pompeo speaking on the floor of the House on this matter is here, or below.

Congressman Mike Pompeo, R-Kansas, offered an amendment to H.R. 4660, the Commerce, Justice, Science, and Related Agencies Appropriations Act for Fiscal Year 2015, to eliminate the Economic Development Administration (or the “Earmark Distribution Agency”). The amendment would send EDA’s total funding — $247 million in FY 2015 — to the Deficit Reduction Account, saving up to $2.5 billion over 10 years based on current levels.

“We need to solve America’s debt crisis before it is too late, and that means reducing wasteful spending, no matter the agency or branch of government,” said Rep. Pompeo. “The EDA should be called the ‘Earmark Distribution Agency,’ as it continues to spend taxpayer dollars on local pet projects in a way similar to congressional earmarks — which have already been banned by the House.” Examples of the “Earmark Distribution Agency” spending taxpayer dollars wastefully:

    Harry Reid Research Park
  • In 2008, the EDA provided $2,000,000 to begin construction of the UNLV Harry Reid Research and Technology Park in Las Vegas, NV. Currently the UNLV Harry Reid Research & Technology Park features a paved road and a website claiming the first anticipated tenant would move in in 2010. (There’s nothing there.)
  • In 2010, $25,000,000 was spent by the EDA for a Global Climate Mitigation Incentive Fund and $2,000,000 for a “culinary amphitheater,” wine tasting room and gift shop in Washington State.
  • In 2011, the EDA gave a New Mexico town $1,500,000 to renovate a theater.
  • In 2013, the EDA also gave Massachusetts $1.4 million to promote new video games.
  • Back in the 1980s, the EDA used taxpayer dollars to build replicas of the Great Wall of China and the Egyptian Pyramids in the middle of Indiana. They were never completed—it is now a dumping ground for tires.

Rep. Pompeo concluded: “EDA has for too long been the dumping ground for taxpayer money. The road to America’s return to fiscal sanity starts with abolishing this agency.

Wichita City Budget Cover, 1967

In Wichita, everything that can be done has been done, except this

Discussions of Wichita’s deteriorating infrastructure and economy should lead us to ask: Who has been in charge, and is this all we can do?

Recently the City of Wichita decided to use a new method to measure the condition of city streets. The new method is Remaining Service Life (RSL). It’s a measure of the condition of city streets. The city has also used a Pavement Condition index.

A recent white paper from the city held this analysis of the city’s streets and their future condition:

The model demonstrated that, with the current level of $8 million in annual funding, the City’s street network would decline in value from the current $444.9 million to $79.6 million over the 40-year period. In addition, the current RSL value of 42,213 lane mile years would fall to 5,524 lane mile years. In other words, the continuation of past strategies with the current level of funding would result in a deterioration of the Wichita street infrastructure in the long term. However, over the same 40-year period, utilizing new strategies, the current level of funding would result in streets in basically the same condition as today, with the Network Service Value increasing by $14 million (to $458.3 million) and the RSL slightly higher at 42,898.

Wichita Pavement Condition Index, from the city's 2012 Performance Measure Report
Wichita Pavement Condition Index, from the city’s 2012 Performance Measure Report
The takeaway from this passage is that the city has not been maintaining its streets adequately. The city’s analysis finds that at current funding levels, the overall condition of Wichita’s streets will continue to decline. This message is not new. As you can see in this chart from the city, the Pavement Condition Index has been deteriorating, and as of its publication in the 2012 Performance Measures Report was projected to continue to decline. The black line running horizontally near the top of the chart is the city’s benchmark as to where it would like the pavement condition index to be.

In its explanation, the Performance Measure Report says “Because many streets in residential areas have deteriorated significantly, an increased investment in street maintenance will be necessary to raise Wichita’s street condition to the benchmark.” This represents future spending that will be required in order to correct the city’s lack of care for its capital assets.

Political leadership and long-term thinking

On these and other issues, the Wichita Eagle recently quoted Wichita Mayor Carl Brewer: “We’ve put them off for too long. We didn’t want the challenges. We didn’t want the tax bills. But now, to maintain our quality of life, we’ve got to catch up.”

Carl Brewer as bystanderIt’s often said that business is interested only in short term results. Driven by the pressures of profit, business firms can’t invest for the long term. Investments and decisions involving a long time horizon, it is contended, must be left to government.

But here we see the city failing to maintain the assets we need to survive. Instead of proactively managing its assets, we have Wichita’s mayor telling us that we have to raise taxes to “catch up” with what we haven’t been doing. That is lack of long-term thinking and decision making.

When discussing the deteriorating condition of city assets or the city’s poor economy, Mayor Carl Brewer speaks as though he was a bystander. But he’s been mayor for over seven years, and was on the city council before that time. During that time, he and other city leaders have boasted of not increasing property taxes. While the property tax rate has been stable (in fact it has risen slightly), property tax revenue has increased due to development of new property and rising assessment values. Even with this rising revenue, the city has a huge backlog of deferred maintenance. The way to interpret this is that the city has really been engaging in deficit spending under Brewer’s leadership. The city didn’t spend what was needed to maintain its assets — assets like streets, water, and sewer infrastructure — and now the mayor tells us we need to increase taxes and spending to make up for this.

The economist Milton Friedman told us that it’s more important to look at government spending rather than the level of taxation. That’s because spending must eventually be paid for, either through current taxes or future taxation. The federal government generate deficits and can pay for spending through creating inflation. Fortunately, cities and states can’t do that.

But as we’ve seen, cities like Wichita can incur costs without paying for them. This is a form of deficit spending. By deferring maintenance of our infrastructure, the city has pushed spending to future years. The magnitude of this deferred spending is huge.

This form of deficit spending is “off the books” and doesn’t appear in city financial statements. But it’s real, as the mayor now admits.

Everything that can be done, has been done

City leaders often tell us that budgets have been cut, services have been pared, salaries have been frozen, and there’s nothing more the city can do except to raise taxes.

But now and then, the city lets us know that there are alternatives. From the recent white paper: “Using the new model, street maintenance will be done more efficiently, matching treatment options to streets in the most efficient manner possible.”

Can we conclude that everything that can be done has been done, except operating more efficiently?

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For Wichita, water supply decisions loom

Now that the Wichita City Council has all but recommended that voters raise taxes in order to spend $250 million for water supply enhancements, citizens need to consider recent history and how current decisions are made.

Through the Community Investments Plan process and by other means, citizens have told the City of Wichita they’re concerned about future water supply.

Those who have been paying attention might be surprised that there is a water crisis. That’s because when Bob Knight was mayor, he was told that Wichita had sufficient water for the next 50 years. That was about eleven years ago.

Wichita area future water supply coverMore recently, the city prepared a document in March 2013 titled Wichita Area Future Water Supply: A Model Program for Other Municipalities. It touts an expensive investment that is part of a “plan to ensure that Wichita has the water it needs through the year 2050 and beyond.”

The project boasted of is the City of Wichita Aquifer Storage and Recovery Program or ASR. Its cost, so far for Phases I and II, is $247 million. According to the document, two more phases are contemplated.

City of Wichita Aquifer Storage and Recovery Program schematic diagram.
City of Wichita Aquifer Storage and Recovery Program schematic diagram.

Reading the document, published just last spring, one might be led to believe that everything is fine, water-wise: “In 1993 the Wichita City Council adopted an Integrated Local Water Supply Plan that identified cost effective water resources that would be adequate to meet Wichita’s water supply needs through the year 2050.”

But earlier this year the Wichita Eagle reported “Wichita’s $240 million aquifer storage and recovery program — promoted to taxpayers in the early 1990s as a way to supply the city with water for 50 years — could soon be relegated to serving as a bit player in the city’s long-term water future.”

Later in the same article, the newspaper reported “The ASR project has been plagued by problems, city officials said, including equipment failures and a significant drought that idled the project because of low water levels in the Little Arkansas River.”

Economic vs. political thinking

It appears the plan the city council favors is to expand the ASR project at a cost of $250 million, thereby doubling the amount spent on this project. Some council members have noted the low utilization of the ASR and see its expansion as a way to wring greater efficiency from the plant.

But this mode of thinking is not rational. What has been spent on the ASR is now properly classified as sunk costs. These are costs that have been spent and can’t be recovered. Sunk costs are not relevant to future decisions. Instead, the city needs to focus on the marginal improvements that can be made, and how to get the best value for these future costs.

That’s the economic way of making decisions. But, of course, decisions on Wichita’s future water supply are being made in the political sphere.

How did Wichita get in this position?

It’s vitally important that Wichita develop a plan for an abundant water supply. At the same time, we ought to be asking, as does Johnny Stevens, how this problem developed. The Wichita Business Journal reported this last summer:

Wichita officials — thanks to a couple of weeks of rain — said they were able this week to dodge possible water restrictions and punitive measures as a means of coping with the ongoing drought.

But Wichita developer Johnny Stevens voiced to me today something I have heard from others in the community recently.

“How did it even get to this point?” Stevens said. “It shouldn’t have gotten this far.”

Stevens thinks poor leadership is to blame and can’t understand how elected officials ever let the community seemingly come so close to the edge of such a critical issue.

He said long-term solutions are needed, but he also warns that they have to be made using solid data. Continue reading at Developer Johnny Stevens on water issue: How did it get to this?

Long-term thinking: This is not characteristic of political leaders, whose time horizon rarely extends beyond the next election season. Are there other ways to secure water for Wichita? Is Wichita considering private-sector solutions?

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It was a little cloudy, so maybe that’s why

Wichita city leaders tell us that the budget and spending have been cut to the bone. Except for the waste, that is.

At 11:27 am, it was a little cloudy and rain threatened. So maybe that’s why these lights were switched on. Or maybe not — other similar lights and streetlights nearby were not lit.

The lights illustrated in this photograph are, undoubtedly, a small portion of the city’s spending. But Wichita 2014-05-23 11.27.17you don’t have to look very hard to find waste like this, and we know that small examples of waste are multiplied many times. So when city leaders tell us that there is nowhere left to cut in the budget, that everything that can be done to trim the fat has already been done, and that the only thing we can do is raise taxes — well, think of this photograph and others illustrated in In Wichita, the streetside seating is illuminated very well, In Wichita, the rooftops are well-lit and On a sunny day in downtown Wichita you can see the street lights.

This is not to say that waste like this does not occur in the private sector. Of course it does. But businesses and individuals have a powerful incentive to avoid waste that isn’t present in government: Businesses and people are spending their own money.

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Intrust Bank Arena: Not accounted for like a business

Proper attention given to 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. It’s a business-like way of accounting, but a well-hidden secret.

Sedgwick County Working for YouThe 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.

An example of the incomplete editorializing comes from Rhonda Holman of the Wichita Eagle, 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 did not mention depreciation expense, either.

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, was $255,678. Presumably that’s after deducting the cost of producing an oversize check for the television cameras.

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 2013 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 at Sedgwick County in 2013. 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 that opened on January 9, 2010. 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. The Arena had an operating loss of $4.7 million. The loss can be attributed to $5.3 million in depreciation expense.

Financial statements in the same document show that $5,295,414 was charged for depreciation in 2013, bringing accumulated depreciation to a total of $21,190,280.

Depreciation expense is not something that is paid out in cash. Sedgwick County didn’t write a check for $5,295,414 in depreciation expense. Instead, depreciation accountingit 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 some don’t 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.”

Intrust Bank Arena commemorative monument
Intrust Bank Arena commemorative monument
The contention of Unruh and other arena boosters such as the Wichita Eagle editorial board is that the capital investment of $183,625,241 (not including an operating and maintenance reserve) on 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 his view. This attitude, however, disrespects the sacrifices of the people of Sedgwick County and its visitors to raise those funds.

Any honest accounting or reckoning of the performance of Intrust Bank Arena must take depreciation into account. While Unruh is correct in 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.

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.

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WichitaLiberty.TV: Alternatives to raising taxes, how to become involved in politics, and bad behavior by elected officials

In this episode of WichitaLiberty.TV: Wichita voters tell pollsters that they prefer alternatives to raising taxes. Then, how can you get involved in politics? A deadline is approaching soon. Finally, some examples of why we need to elect better people to office. Episode 44, broadcast May 25, 2014. View below, or click here to view at YouTube.

china-home-4315_1280

Missing from Wichita’s white papers: China

The City of Wichita has recently prepared a group of white papers examining issues facing Wichita, such as water supply, infrastructure, and “quality of life” improvements such as a new library, and convention center. These white papers may be found under the “Workshops” tab on this page at wichita.gov.

Mayor - Investors in China are interested in Wichita projects 2013-12-19 pageThere’s something missing from these papers. When Mayor Carl Brewer returned from a recent trip to China, he told us that Chinese investors could be a source of funds for Wichita’s needs. The city council now seems posed to recommend that Wichita voters approve a sales tax increase to pay for these items. The possibility of foreign investors cannot be found in these white papers, as far as I can see.

Here’s what the Wichita Eagle reported in December:

Chinese investors stand ready to plow money into Wichita, Mayor Carl Brewer told The Eagle on Wednesday: investing in commercial real estate, aviation businesses and – much to the mayor’s surprise — city projects like the Century II renovation or rebuild, water and sewer improvements, libraries and a new water source.

Sometime in 2014, two groups of potential Chinese investors — aviation investors and private partners with the city — will be in Wichita to examine opportunities. Then, a reciprocal trip of Wichita business people will be organized, said Brewer and Karyn Page, president of Kansas Global Trade Services. (Mayor: Chinese investors interested in Wichita December 18, 2013 Wichita Eagle)

Now, just six months after the mayor’s trip to China, the possibility of Chinese investors in Wichita’s projects like a new water source, water and sewer improvements, libraries, and convention center seems to be forgotten.

Wichita City Budget Cover, 1975

To fund government, Wichitans prefer alternatives to raising taxes

Wichita City Budget Cover, 1975Wichita voters prefer adjusting spending, becoming more efficient, using public-private partnerships, and privatization to raising taxes.

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

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

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

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

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

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Debunking CBPP on tax reform and school funding — Part 4

From Kansas Policy Institute.

Debunking CBPP on tax reform and school funding — Part 4

By Dave Trabert

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

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

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

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

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

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

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

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

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

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

From Kansas Policy Institute.

Debunking CBPP on tax reform and school funding — Part 3

By Dave Trabert

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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In Wichita, the streetside seating is illuminated very well

Wichita city leaders tell us that the budget and spending have been cut to the bone. Except for the waste, that is.

Wichita street lights 2014-05-09 11.32.09The street lights illustrated in this photograph are, undoubtedly, a small portion of the city’s spending. But you don’t have to look very hard to find waste like this, and we know that small examples of waste are multiplied many times. So when city leaders tell us that there is nowhere left to cut in the budget, that everything that can be done to trim the fat has already been done, and that the only thing we can do is raise taxes — well, think of this photograph and others illustrated in In Wichita, the rooftops are well-lit and On a sunny day in downtown Wichita you can see the street lights.

This is not to say that waste like this does not occur in the private sector. Of course it does. But businesses and individuals have a powerful incentive to avoid waste that isn’t present in government: Businesses and people are spending their own money.

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WichitaLiberty.TV: Examining surveys about the future of Wichita

In this episode of WichitaLiberty.TV: What do Wichitans want for their city’s future? Surveys from the City of Wichita and Kansas Policy Institute are examined. Episode 42, broadcast May 11, 2014. View below, or click here to view at YouTube.

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Contrary to officials, Wichita has many incentive programs

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

The document Will Wichita Accelerate Competition for Primary Jobs? contains contradictory information about money available for economic development incentives in Wichita. The usual argument that officials make is represented by this quotation from the report: “Wichita and Sedgwick County compete conservatively with incentives. The City of Wichita and Sedgwick County have a total of $1.65 million in new uncommitted funds for cash incentives this year with any unused money going back to the general fund.”

But the same report contains this: “The $4.5 million PEAK program incentive from the Kansas Department of Commerce was an important factor in keeping NetApp in Wichita. Locally we were able to provide $836,000 in incentives.”

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

A sample of available incentive programs

Kansas Department of Commerce logoA letter to NetApp from the Kansas Department of Commerce laid out the potential benefits from the state. As detailed in the letter, the programs with potential dollar amounts are: Promoting Employment Across Kansas (PEAK), up to $7,705,535; Kansas Industrial Training with PEAK, up to $160,800; sales tax savings of $6,880,000; personal property tax exemption, $11,913,682; and High Performance Incentive Program (HPIP), $8,500,000. The total of these is $35,160,017. Some of these benefits are paid over a period of years. The PEAK benefits are payable over seven years, according to the letter, so that’s about $1.1 million per year. These are potential benefits; the company may not actually qualify for and receive this entire amount. But it’s what the state offered.

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

Local tax exemptions

Besides sales tax exemptions, the city has other types of tax exemptions it regularly offers. These exemptions can have substantial value. In 2008 as Drury contemplated Broadview Hotel 2013-07-09 020purchasing the Broadview Hotel, the city allowed the hotel to escape paying much of the taxes that the rest of us have to pay. According to city information, Drury planned to spend $22,797,750 on the hotel. If we use this as the appraised value for the property when it is complete, the annual property taxes due for this property would be $22,797,750 times .25 times 126.323 divided by 1000, or $719,970. This calculation may be rough, but it gives us an idea of the annual operating subsidy being given to this hotel for the next ten years. Remember, city officials complain of an incentives budget of only $1.65 million per year.

It's important for citizens to know incentivesWhen Boeing announced in 2012 that it was closing its Wichita operations, city leaders complained that Boeing was leaving Wichita even though it had received many incentives. From 1979 to 2007, Boeing received tax abatements through the industrial revenue bond process worth $658 million, according to a compilation provided by the City of Wichita. At the time, city officials said the average amount of bonds was $120 million per year. With Wichita commercial property tax rates at 3.008 percent ($30.08 per $1,000 of appraised value), according to GWEDC, that’s a tax savings of around $3.6 million per year. To Boeing, that’s as good as receiving cash year after year. Remember, city officials say the incentives budget is $1.65 million per year.

Tax increment financing

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

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

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

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

Tax credits

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

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

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

The tax credits for this project are historic preservation tax credits. They have the same economic impact as a cash payment. The federal tax credits are available across the country, while the Kansas tax credits, of course, are a state program. In this case the hotel developers received an upfront payment of $3.8 million from the state in a form that’s as good as cash. Remember, city officials say the incentives budget is $1.65 million per year.

STAR bonds

There are more programs the city and state use to provide incentives. Last year, according to city documents, a STAR bonds district in northeast Wichita was approved to receive $31,570,785 from these bonds. The STAR bonds are paid off with sales tax revenue that would otherwise go to the state and overlapping jurisdictions. This is sales tax collected from the business’s customers, and doesn’t cost the business anything. Remember, city officials say the incentives budget is $1.65 million per year.

This list is not complete. There are other programs and other beneficiaries of economic development subsidies. It’s important for citizens to know that contrary to the claims of officials, Wichita has many economic development incentive programs available, and some have substantial value to the recipients, with corresponding cost to the city and other jurisdictions.

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Wichitans willing to fund basics

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

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

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

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

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

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

Following is the complete text of the questions:

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

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

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

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

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

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

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In Wichita, opinion of city spending consistent across party and ideology

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

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

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

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

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