In this episode of WichitaLiberty.TV: Does the elimination of sales tax exemptions hold the solution to Kansas budget problems? We have a problem with overcriminalization and the criminal justice system. Then, is there a difference between government and charity? View below, or click here to watch in high definition at YouTube. Episode 96, broadcast September 27, 2015.
Government promotes and promises transparency, but finds it difficult to actually provide.
In this excerpt from WichitaLiberty.TV, I give some examples of how little information government actually shares with us, despite its proclamations. Click here to view in high definition at YouTube. Following, the script for this video excerpt.
During the campaign for the one cent per dollar Wichita city sales tax last year, a city document promised this if the tax passed: “The process will be transparent, with reports posted online outlining expenditures and expected outcomes.” The “Yes Wichita” campaign promised “Reports will be measured and reported publicly.”
These are good ideas. The city should implement them even though the sales tax did not pass. We were promised a website if the tax passed. If it’s good for citizens to have this type of information if the sales tax had passed, it’s good for them to know in any circumstance.
Why is this information not available? Is the city’s communications staff overwhelmed and have no time to provide this type of information? During the sales tax campaign Wichita city staff had time to prepare news releases with titles like “City to Compete in Chili Cook-off” and “Jerry Seinfeld Returns to Century II.”
Since then the city has hired additional communications staff, adding a Strategic Communications Director in March. Now, while the city’s Facebook page has some useful information, there is also time to promote Barry the Bison playing golf.
Now Wichitans have to wonder: Was transparency promised only to get people to vote for the sales tax? Or is it a governing principle of our city? I think I know the answer.
Here’s another example. The Wichita transit system is a matter of interest right now. Funding for the system has been a problem for some years, and money for the bus system was part of the sales tax last year that Wichita voters rejected. So what is the city and the transit system doing to make information available? The answer is: not much. Some of the fundamental documents of government agencies are agendas, agenda reports, and minutes of meetings. And there is such a thing as the Wichita transit advisory board. But good luck finding agendas and minutes for this board. They do not exist. Well, I’m sure they exist somewhere. But they’re not available on the city’s website, or on the transit system’s’ own website. I’m sure that if you call or write someone will send these documents to you. But that takes time, both for citizens and government workers.
It is not difficult to do this, making documents available. There are many city agencies that make documents available, like the city council and airport advisory board. Earlier this year a local activist mentioned the lack of agendas and minutes for the transit board, bemoaning that there was no part-time web person to post the documents. Well, you don’t need a web person to do it. It is so simple that anyone can do it for free.
Here’s an example. This summer as Sedgwick County was preparing and debating its budget, I wanted to do some research on past budgets. But on the county’s website, the only budgets available were for this year and last year. There was nothing else.
So I asked for budgets and other financial documents. I received them on CD. Then I created a shared folder using Google Drive and uploaded the documents. Now, these documents are available to the world. They can be found using a Google search. Oh, and here’s something a little ironic. These old budgets had been on the Sedgwick County website at one time. Someone made the decision to remove them.
Creating this depository of budget documents cost nothing except a little bit of time. Well, if you have a lot of data to share, you might have to pay Google a little, like ten dollars per month for each agency or person. But it is so simple that there is no excuse for the failure of agencies like Wichita Transit to make documents like agendas and minutes available. You don’t need specialized personnel to do this work. All you need is the will and desire to make the documents available.
Here’s another example of how simple it can be to achieve transparency. These days live and archived video of governmental meetings is commonplace. Commonplace, that is, except for the Wichita public schools. If you want to see a meeting of the Wichita school board, you must either attend the meetings, or view delayed broadcasts on cable TV. There’s a simple and low-cost way to fix this. It’s called YouTube.
When the Sedgwick County Commission was faced with an aging web infrastructure for its archived broadcasts, it did the sensible thing. It created a YouTube channel and uploaded video of its meetings. Now citizens can view commission meetings at any time on desktop PCs, tablets, and smartphones. This was an improvement over the old system, which was difficult to use and required special browser plug-ins. I could never get the video to play on my Iphone.
The Wichita school district could do the same. In fact, the district already has a YouTube channel. Yes, it takes a long time to upload two or three hours of video to YouTube, but once started the process runs in the background without intervention. No one has to sit and watch the process.
Earlier this year I asked why the district does not make video of its meetings available archived online. The district responded that it “has a long-standing commitment to the USD 259 community of showing unabridged recordings of regular Board of Education meetings on Cox Cable Channel 20 and more recently AT&T U-verse Channel 99.” The meetings are broadcast seven times starting the day after each meeting. Two of the broadcasts start at 1:00 am.
Showing meetings delayed on cable TV is okay. It was innovative at one time. But why aren’t meetings shown live? What if you can’t watch the meeting before it disappears from the broadcast schedule after a week? What if you don’t want to pay cable television bills? What if you want to watch meetings on your computer, tablet, or smartphone? I don’t think the fact that meetings are on cable TV means they can’t also be on YouTube.
There are two elements of irony here, if that is the correct term. One is that earlier this year the Wichita school district considered hiring a marketing firm to “gauge its reputation and suggest new branding strategies.” Here’s an idea: Act as though you care about people being able to view the district’s board meetings.
Second: In August the Wichita school district raised property taxes. The mill levy will rise by 2.86, an increase of about five percent from its present level. The projected cost is an additional $33 per year for a home worth $100.000. That is quite a large increase. That’s bad. What’s also bad is the district’s lack of respect for taxpayers. As I’ve just told you, it’s difficult to view a meeting of the school board, which is a sign that the district prefers to operate in the shadows as much as possible. The board will raise your taxes, and at the same time keep it difficult for you to see them do it.
Just for the sake of completeness, let’s not let the state of Kansas off the hook. Currently, the proceedings of the Kansas Senate and House of Representatives are not available on video. The audio is broadcast on the internet, but it’s live only. No archiving. You must listen live, or figure out some way to record it on your own.
But for eight dollars per month the legislature could make its audio proceedings available to listen to at any time. For eight dollars per month at least one podcast hosting company offers an unlimited plan. Unlimited storage, and unlimited bandwidth. That is just what is needed. And since the audio of the proceedings of the House and Senate is broadcast on the internet, it must pass through a computer somewhere. That computer could also be recording the audio. Once recorded, the process of uploading the audio to the podcast host is a trivial procedure.
But neither Kansas legislative chamber records their proceedings, according to the Secretary of the Senate and the Chief Clerk of the House. I asked. Recordings of sessions are not available because they are not made. It would be simple to record audio of the Kansas House and Senate and make it available for anyone to listen to at any time. It is almost without cost. It would have great benefit.
Oh, and I can’t forget the federal government. In January I requested a document from the United States Department of Energy. I had several conversations and emails with a records clerk. We came to agreement as to what I would receive, or at least what I am requesting to receive. But I’ve received nothing so far. I don’t know if the document will be made available to me at no charge, or will I have to pay thousands of dollars. The Department of Energy is working on my request, they say. Our congressman Mike Pompeo and his office have intervened on my half. But after nine months: nothing.
All these levels of government — city, county, school district, state, and federal — say they value open records and transparency. But let me ask you: Do you think they really mean it?
Here is an interactive visualization of private nonfarm employment in Kansas, for each county. Data is from Bureau of Economic Analysis, part of the U.S. Department of Commerce. Click here to open the visualization.
The sample below shows job growth for the state as a whole, along with the five largest counties. Click it for a larger version.
In this episode of WichitaLiberty.TV: Do our governmental agencies really want to share data and documents with us? Community Improvement Districts and homeowners compared. And, the last episode of “Love Gov” from the Independent Institute. View below, or click here to view in high definition at YouTube. Episode 95, broadcast September 20, 2015.
Why can’t Kansas public school spending advocates — especially a former Kansas state budget director — tell the truth about schools and spending, wonders Dave Trabert of Kansas Policy Institute.
Kansas Center for Economic Growth abuses the truth on school funding … again
Dave Trabert, Kansas Policy Institute
The Kansas Center for Economic Growth and Duane Goossen steadfastly refuse to publicly debate school finance and state budget issues with us, as their work is so easily shown to be false, misleading and otherwise distorted (see here, here, here, and here for examples). Mr. Goossen’s most recent piece is another fine example of how they abuse the truth.
He has a table called State Aid and Enrollment that is sourced to page 60 of Kansas July Comparison Report, but much of the information in his table does not appear on page 60. The total amount of $4.059 billion is there and two of the smaller items but not the rest. A few items — KPERS payments, Local Option Budget Aid and Capital Outlay Aid — are close to what we found in other documents but not the $2.639 billion he calls General Classroom Aid. And you can’t find that anywhere because there is no such thing as “General Classroom Aid.”
KCEG and other “just spend more” proponents often make reference to “classroom aid” in ways to make it appear that the Legislature is not providing enough “classroom aid” but here’s the dirty little secret you (and especially teachers) aren’t supposed to know: only local school boards and superintendents decide how much money is spent on instruction. The Kansas State Department of Education has an official definition of “Instruction” spending which is often used interchangeably with “classroom” but there is no official aid classification for “classroom.” Mr. Goossen and friends are just making it up for political purposes.
Under both the old school formula and the temporary block grant system, districts get several different types of aid but they alone decide how much of the multiple discretionary amounts received are used for Instruction, Administration, Student Support, Maintenance and other cost centers. Even Capital Outlay Aid (contrary to Goossen’s implication) can used for Instruction purposes (and is) as set forth in the KSDE Accounting Manual.
Here are a few more examples of the truth being tortured by Mr. Goossen:
- “The Kansas Supreme Court ordered lawmakers to increase [equalization] aid …” Not true. The Supreme Court said the legislature could increase equalization funding or they could write a new equalization formula and not spend more money. Legislators chose to spend $109 million more. Even the District Court, which didn’t get much right about Gannon, acknowledged this point.
- State Special Education Aid is shown as a decline of $6 million but it is really an increase of $46 million. The original posting of the July Comparison Report didn’t include $52 million in Federal ARRA pass through but a former state budget director should know that the total was more than the amount listed for state aid. He also understated the increase in state aid by another $53 million for Federal ARRA money included in General State Aid.
- KPERS is included in the amounts listed under block grants and while it has gone up, he says “… school districts must still pay the bill.” That’s true, but some of that money goes for KPERS benefits of current employees, and local school boards chose to increase employment more than 8% over the last ten years while enrollment grew by just 4%. That forces money to be diverted from regular aid to pay the higher KPERS cost, which also happens when school boards choose to have district employees perform functions that could be done in the private sector.
- Capital Improvement Aid helps some districts “… with bond payments for buildings but [does] nothing to cover enrollment increases.” That’s true, but again, Goossen fails to mention that district choices to construct new buildings … sometimes larger or sooner than needed … diverts money that could otherwise be used for general aid.
- “State aid for classrooms has actually gone down…” That is a false statement because there is no such thing as “state aid for classrooms” but actual Instruction spending increased by $214 million or 7.3% between 2011 and 2014 even without counting a dollar of KPERS. Of course, Instruction spending could have gone up even more if districts had chosen to direct some of the increased spending on other operating areas to Instruction, chosen to operate other areas more efficiently and spent the savings on Instruction or used some of their unused aid from prior years instead of holding it in cash reserves.
Goossen says the block grant system is “not a recipe for creating world-class schools” as though that is some sort of revelation. The block grant system is only a temporary funding mechanism put in place to allow time to build a new student-focused funding system, replacing a dysfunctional, institution-focused system that most certainly was not a recipe for creating world-class schools.
Here’s what the old system produced after the injection of nearly $2 billion over the last ten years:
- Only 32% of the 2015 graduating class who took the ACT test are considered college-ready in English, Reading, Math and Science. ACT test scores have barely changed.
- Only 38% of 4th grade students are Proficient in Reading on the National Assessment of Educational Progress (NAEP), a test that the Kansas Department of Education declared to be valid and reliable in a November 1, 2011 press release.
- Low Income 4th graders are almost 2 years’ worth of learning behind others in Math (NAEP).
- Only 24% of Low Income 8th graders are Proficient in Math (NAEP) and at the current pace, it will take 240 years for them to catch up to other students, only 54% of whom were Proficient on the last exam.
- 27% of students who graduated from Kansas high schools in 2013 and attended university in Kansas signed up for remedial training (Kansas Board of Regents); no data is available on students who went out of state or attended a private college.
It will always cost a lot of money to fund public education but it’s how the money is spent that makes a difference — not how much. For example, Instruction spending accounts for just 55% of total education spending; $2 billion and ten years ago it was 54%. Here’s another discouraging fact: enrollment increased by 4% over the last ten years, while classroom teacher employment increased by 5% and non-teacher employment increased by 10%.
Outcomes apparently don’t really matter to KCEG and others (including many school districts and their taxpayer-paid lawyers) who continue to say there was nothing wrong with the old system … it just needed more money! Just look at what happened when more money was poured into the system.
Scores barely changed while per-pupil spending jumped from $6,985 per pupil to an estimated $13,343 last year, which is $3,223 more per-pupil than if funding had been increased for inflation since 1998. Reading proficiency remains below 40% and Math Proficiency is still less than 50%.
This is not an indictment of the many good people working hard in schools but an indictment of the old funding system. It is no one’s fault that achievement is unacceptable but it is everyone’s responsibility to acknowledge that fact and work toward a funding mechanism that puts students and outcomes first and uses efficiency savings to drive more resources to instruction and increase pay for effective teachers.
Can eliminating sales tax exemptions in Kansas generate a pot of gold?
Advocates of eliminating sales tax exemptions in Kansas point to the great amount of revenue that could be raised if Kansas eliminated these exemptions, estimated at some $5.9 billion per year. Analysis of the nature of the exemptions and the amounts of money involved, however, leads us to realize that the additional tax revenue that could be raised is much less than spending advocates claim, unless Kansas was to adopt a severely uncompetitive, and in some cases, unproductive and harshly regressive tax policy.
A recent advocate for eliminating some sales tax exemptions is Phillip Brownlee of the Wichita Eagle editorial board. In a previous op-ed on this topic he wrote ” And with each added exemption, the state is losing out on more revenue — $5.9 billion this fiscal year, according to the Kansas Department of Revenue. That’s money the state could be using to cover its budget shortfalls, increase funding to public schools or further reduce its income-tax rates.” At least he mentioned reducing other tax rates. Usually advocates of closing sales tax exemptions simply want more tax money to spend.
$5.9 billion dollars, by the way, is a lot of money, almost as much as the state’s general fund spending. But we need to look at the nature of these exemptions. I’ve prepared a simplified table based on data from the Kansas Department of Revenue. I simplified because there are many deductions that probably should be eliminated, but they represent very small amounts of money.
Some sales tax exemptions are for categories of business activity that shouldn’t be taxed, at least if we want to constrain the state to a retail sales tax only. An example is exemption 79-3606 (m), described as “Property which becomes an ingredient or component part of property or services produced or manufactured for ultimate sale at retail.” The tax that could be collected, should the state eliminate this exemption, is given as $3,083.24 million ($3,083,240,000).
But this exemption isn’t really an “exemption,” at least if the sales tax is a retail sales tax designed to be levied as the final tax on consumption. That’s because these goods aren’t being sold at retail. They’re sold to manufacturers who use them as inputs to products that, when finished, will be sold at retail. Most states don’t tax this type of sales. If Kansas decided to tax these transactions, it would place our state’s manufacturers at a severe disadvantage compared to almost all other states.
There are two other exemptions that fall in this category of inputs to production processes, totaling an estimated $632 million in lost revenue. Another similar exemption is “Machinery and equipment used directly and primarily in the manufacture, assemblage, processing, finishing, storing, warehousing or distributing of property for resale by the plant or facility.” Its value is nearly $159 million.
Together, these exemptions account for $3,874 million of the $5,900 million in total exemptions.
Another big-dollar exemption is “items already taxed” such as motor fuel. This is an estimated $318.90 million loss in revenue. Other exemptions are purchases made by government, or purchase made by contractors on behalf of government. These account for an estimated $624.90 million in lost revenue. If these two exemptions were eliminated, the government would be taxing itself.
Not taxing prescription drugs means lost revenue estimated at $96.49 million. If the state started taxing residential and agricultural use utilities, it could gain an estimated $169.98 million. These taxes, like the sales tax on food and the motor fuel tax, fall hardest on low-income families. As Kansas is one of the few states to tax food, do we want to make life even more difficult for low-income households?
Adding these exemptions comes to about $5,084 million. There are other exemptions for which we could make similar arguments for their retention. What’s left over — the exemptions that really should not exist — isn’t much at all. The entire category of “Exemptions to Charitable Organizations by Name.” amounts to $3.05 million in exempted sales tax. These represent the organizations where a lawmaker has crafted an exemption like “Property and services purchased by Jazz in the Woods and sales made by or on behalf of such organization.”
So when the Eagle’s Brownlee writes “As is, favored groups are saving billions of dollars a year, worsening the tax burden for everybody else” he must be including broad categories of business like “All Kansas manufacturing companies” as a “favored group.” Or maybe he means prescription drug users are a “favored group.” Or families struggling to pay utility bills.
But there are more problems. Brownlee describes these sales tax exemptions as a “cost in lost revenue of $5.9 billion last fiscal year.” The only way this makes sense is if one thinks that our property (our money) first belongs to the state, and that in order to spend it, we have to give the state its cut. That’s an opinion — ideology, if you will — that you may agree with, or you may oppose. What’s remarkable — shocking, really — is that in his previous career Brownlee was a Certified Public Accountant. He ought to understand the nature of sales taxes meant to be applied to retail sales, not components of manufactured goods.
Kansas schools could receive $21 million annually in federal funds if the state had adequate information systems in place.
One of the nuggets buried in a policy brief released last year by Kansas Policy Institute is that the state is not capturing all federal funds to which it is entitled. That is, would be able to capture if the state had adequate information systems in place. Here’s a section of the policy brief:
Capture federal reimbursement of K-12 KPERS costs
States are entitled to be reimbursed by the federal government for the pension costs of school employees engaged in the delivery of federally-funded services, such as Special Education and Food Service. Kansas, however, foregoes federal reimbursement because many school districts’ payroll systems lack the ability to properly capture the necessary information. (Estimates are not permitted; the information must flow through payroll systems.) The State should require that school districts utilize a single state-provided or outsourced payroll system to capture annual federal reimbursement of $21 million.
Here is a sum of money that Kansas schools could receive if only Kansas had the necessary information systems infrastructure in place. A side benefit would likely be better management of school systems’ payroll if such a system was in place.
Is $21 million a significant sum when the state spends several billions on schools each year? The Kansas school spending establishment contends that a tax credit scholarship that might divert $10 million from the state to private schools is something that schools can’t afford. But here’s an example of twice that amount being available if Kansas school leadership had the will to obtain it.
The Kansas Policy Institute policy brief “A Five-Year Budget Plan for the State of Kansas: How to balance the budget and have healthy ending balances without tax increases or service reductions” is just ten pages in length. It may be downloaded from KPI here or alternatively from Scribd here (may work better on mobile devices). A press release from KPI announcing the policy brief is at 5 Year Budget Plan Outlines Path To Protect Essential Services and Tax Refom.
An audit finds that a handful of Kansas teachers have accumulated KPERS service credits while working for teachers unions.
Should Kansas schoolteachers who take time off to work for teachers unions accumulate state pension benefits credits at the same time? An audit from Kansas Legislative Division of Post Audit finds this has been happening. The audit is titled “KPERS: Evaluating Controls to Detect and Prevent Fraud and Abuse.” The full audit report is here, and highlights are here.
In summary, the audit found this: There were teachers who weren’t teaching, but who were working for an “education association.” Each school district reported the teachers as still working for the school district. Therefore, the non-teachers accumulated pension credits that will increase their benefits after retirement.
The report notes that “KNEA and its local affiliates are advocacy organizations for educators and are not KPERS-covered employers.” (In case you didn’t know, the “education associations” mentioned above are teachers unions.) It also states this practice has been going on for many years.
The report observes: “Second, if that [giving non-school district employees KPERS credit] were happening, the state (rather than the schools) would bear the cost of the additional employer contributions. That is because the state has historically paid the school districts’ share of the KPERS obligation.” This hints at the source of the problem: Someone else was paying. School districts don’t pay for KPERS. Instead, the state does. That, of course, means the state’s taxpayers pay. Recent reforms in the way KPERS is treated may help change this.
There’s no need for Kansas state government to exaggerate the value of agriculture to the Kansas economy.
A recent press release from the office of Kansas Governor Sam Brownback quoted the governor thusly: “Agriculture is our largest economic driver, bringing more than $63 billion into the Kansas economy.” (Governor Sam Brownback visits will reinforce the importance of Kansas agriculture, August 17, 2015.)
$63 billion is a lot of output. It’s about 43 percent of the Kansas economy. A document supplied by the Kansas Department of Agriculture provides more detail: “As shown in the above table, agriculture, food, and food processing supports 229,934.1 jobs, or 12% of the entire workforce in the county [sic]. These industries provide a total economic contribution of approximately $62.8 billion, roughly 43% of Gross Region Product (GRP).” (Estimated Economic Impact of Agriculture, Food, and Food Processing Sectors, May 7, 2015.)
The document explains how such a large number is obtained. It includes three components, explained here: “Direct, indirect, and induced effects sum together to estimate the total economic contribution in the state. Direct effects capture the contribution from agricultural and food products. Indirect effects capture the economic benefit from farms and agricultural businesses purchasing inputs from supporting industries within the state. Induced effects capture the benefits created when employees of farms, agricultural businesses, and the supporting industries spend their wages on goods and services within the state.”
This method of reckoning economic impact is from a model called IMPLAN. It is a proprietary system with methodology and assumptions not open to inspection. It often used by those who are asking government for money or tax breaks. IMPLAN comes up with some real whoppers as to how important an industry is to the economy. When shown these figures, government officials are usually swayed to grant incentives.
There’s a problem, however. Agriculture cannot possibly be responsible for 43 percent of Kansas GDP. The U.S. Bureau of Economic Analysis (BEA) has figures for each state showing the contribution to GDP for industry categories. I’ve gathered the data and calculated percentages for each industry. As you can see, the category “Agriculture, forestry, fishing, and hunting” accounts for $8,136 million or 5.5 percent of Kansas GDP. There are seven other industry categories that rank above agriculture.
5.5 percent is a long way from the governor’s claim of 43 percent. It is true that the title of the paper is “Estimated Economic Impact of Agriculture, Food, and Food Processing Sectors.” So consider these industry subsectors:
Food and beverage and tobacco products manufacturing of $3,463 million (2013 value; 2104 not available)
Food services and drinking places $2,776 million (Also 2013 value)
If we add these to agriculture, we have production worth 9.8 percent of Kansas GDP. This is being overly generous to agriculture. It counts all bars and restaurants as part of the agriculture industry, something that makes no sense.
So how do we take these numbers and pump them up to 43 percent? IMPLAN, that’s how. It’s true that when an industry causes economic activity to occur, it spawns other economic activity. These are the indirect and induced effects that IMPLAN produces. But these numbers are hugely inflated. And when we take all industries, economic activity is counted more than once.
Recall there are seven industry categories ranking above agriculture. When it suits its needs, each of these uses IMPLAN to boost its importance to the state. Consider manufacturing, which at 13.1 percent of GDP is the third-largest industry in Kansas. When manufacturing companies appeal to state or local government for subsidies, they use IMPLAN or related mechanisms to inflate their importance. Almost everyone does this. It’s standard procedure.
Except: When everyone claims the same indirect and induced economic activity, such analysis becomes meaningless. If we added up the IMPLAN-calculated value of each industry to the Kansas economy, we’d end up with a value several times larger than the actual value.
This is what the Kansas Department of Agriculture and Governor Sam Brownback have done. We expect this behavior from companies or local economic development agencies when they appeal for economic development incentives. They need to inflate their importance to gullible government bureaucrats and elected officials. But Governor Brownback doesn’t need to do this, and neither does the Kansas Department of Agriculture. From them, all we want is the truth, and nothing more.
A second study finds that Kansas uses low standards for evaluating the performance of students in its public schools.
What is the relative strength of weakness of the standards your state uses to evaluate students? A new study provides answers to this question. The report is Why Proficiency Matters. It is a project of the Foundation for Excellence in Education.
This study is important because the most widely-reported source of data about student achievement is a state’s own assessment tests. But there are problems, as explained in the report:
A proficiency cut score is an actual number (score) on an assessment that draws the line determining where a student is proficient. States use different tests and set different proficiency cut scores to determine the proficiency level for knowledge and skill mastery. When proficiency cut scores are set too low, it conveys a false sense of student achievement.
Each state has its own tests, and each state sets the bar for what is considered “proficient,” as well as for other descriptive measures such as “basic.” It’s not surprising that states vary in the rigor of their standards:
The difference between NAEP and individual states’ proficiency expectations are wide and varied. Therefore, state-reported proficiency is not equivalent to proficiency on NAEP. This is referred to as the “proficiency gap”. States with large proficiency gaps are setting the bar too low for the proficiency cut score, leading parents and teachers to believe students are performing better than they actually are.
This study looks at the results students on tests in each state and compares them to a national standard, the National Assessment of Educational Progress (NAEP). By doing so, the study evaluates the strength or rigor of the standards used by each state. This does not judge the actual performance of the student. Rather, it assesses the decisions made by the state’s school administration as to what standards they will hold students.
This is not the only effort to assess state standards. The National Center for Education Statistics (NCES), which is part of the U.S. Department of Education, also performs a similar analysis. See Kansas school standards evaluated.
Results for Kansas
The results of the analysis show that Kansas holds students to low standards of achievement. Kansas says students are “proficient” at a very low level of accomplishment, relative to other states. This is consistent with the separate analysis performed by National Center for Education Statistics.
These are the findings for Kansas:
Grade 4 reading: Kansas standards are ranked 39 out of 50 states.
Grade 8 reading: 45 of 50 states.
Grade 4 math: 36 of 50 states.
Grade 8 math: 36 of 50 states.
In this episode of WichitaLiberty.TV: Americans for Prosperity is one of the largest grassroots political action groups. Its motto is “Economic Freedom in Action.” Rodger Woods, deputy state director for AFP-Kansas, joins me to explain AFP’s mission and goals, and some specific issues. View below, or click here to view at YouTube. Episode 92, broadcast August 16, 2015.
AFP’s website is Americans for Prosperity.
Kansas school funding has been growing much faster inflation and enrollment, but for some, it will never be enough, and they will continue to use taxpayer money to press their monetary demands, writes Dave Trabert of Kansas Policy Institute.
Even by KASB standards, school operating spending is $3.9 billion ahead of inflation
By Dave Trabert
A recent blog post by the Kansas Association of School Boards (KASB) Associate Executive Director Mark Tallman says “Total school district funding is, in fact, at an all-time high, expected to top $6.1 billion this year” but “… the part of school funding available for day-to-day operating costs is not keeping up with inflation and enrollment.” There are several misleading aspects to his statement and the data does not support the intended message, but let’s first give credit for the courage to contradict education officials who say funding has been cut. Bravo!
KASB’s definition of operating costs does not comport with the official definition used by the Kansas Department of Education or the U.S. Department of Education1, but for the sake of argument, let’s say that it’s correct. Let’s also assume that their definition of current operating funding represents the amount needed to efficiently operate schools and achieve the required outcomes, even though the facts refute any such claim.
By increasing the KASB-defined operating spending for inflation (the calculation for 2006 is $6,928 times (191.41 ÷ 185.14) = $7,162), we find that schools received a lot more money each year than if KASB’s 2005 amount had been increased each year for inflation. The margin of difference is getting closer over the next two years (if one doesn’t count all of the funding), but funding will have exceeded inflation by almost $3.9 billion since 2005.
KASB uses a different methodology in their inflation analysis. They show prior years’ spending in 2014 inflation-adjusted (constant) dollars; i.e., $X spending in 2014 has the same buying power as $Y in prior years. That methodology is common for restating buying power but it is irrelevant to the question of whether schools are or have been adequately funded.
The Kansas Constitution says the legislature must make suitable provision for the finance of public education; it does not say that schools must be given whatever they want to spend or that efficient use of taxpayer money cannot be taken into account. The honest truth is that no one knows what schools need to achieve the necessary outcomes while making efficient use of taxpayer money, because no such analysis has ever been undertaken in Kansas. We do know, however, that every Legislative Post Audit has found schools to be operating inefficiently and school superintendents openly acknowledge that they choose to spend more than is necessary in many circumstances. We also know that school districts haven’t even spent all of the money they’ve received over the last ten years, as about $400 million has been used to increase operating cash reserves.
There may be ways to demonstrate that today’s funding has less buying power than a particular point in time but that doesn’t mean that each year’s funding didn’t keep up with inflation and enrollment — as shown above, per-pupil funding as defined by KASB was $3.9 billion more than an inflationary increase.
The gap is even greater for total funding, which would have been $6 billion less over the last ten years if per-pupil funding for the 2005 school year had been increased each year for inflation. School districts received large funding increases beginning in 2006 from a Supreme Court Montoy ruling based on a cost study that has since been abandoned by the Supreme Court in Gannon.
The Shawnee County District Court may believe that schools are not adequately funded, but they ignored the Kansas Supreme Court in arriving at what amounts to little more than a political perspective. School funding has been growing much faster inflation and enrollment, but for some, it will never be enough … and they will continue to use taxpayer money to fund KASB justifications (and attorneys) for their monetary demands.
1KSDE and the U.S. Department of Education say operating expenditures “…do not include equipment (700 object codes), Capital Outlay or Bond & Interest. [700 object codes include expenditures for acquiring fixed assets, including land or existing buildings; improvements of grounds; initial equipment; additional equipment; and replacement of equipment.]” The KASB definition also excludes Food Service and employee retirement costs but they don’t disclose that their definition is not the official definition and it also does not comport with the Kansas Supreme Court, which says all funding sources, including retirement costs, should be considered as part of adequate funding.
An often unappreciated mechanism throughout the Kansas budget severely limits the ability of legislators and governors to adapt to changing state priorities. A new paper from Kansas Policy Institute explains.
Federal Rules Serve as “Worms” Buried in Promises of “Free Money”
July 30, 2015 — Wichita — An often unappreciated mechanism throughout the Kansas budget severely limits the ability of legislators and governors to adapt to changing state priorities. These Maintenance of Effort (MOE) requirements are highlighted in a new paper by Kansas Policy Institute and is authored by former state budget director Steve Anderson. MOE stipulations force state and local governments to maintain a constant level of funding for several federal grant programs, most notably Medicaid and the Elementary and Secondary Education Act, two major components of Lyndon Johnson’s “Great Society;” in FY 2014 these two programs accounted for over two-thirds of Kansas general fund expenditures.
Dave Trabert, president of Kansas Policy Institute, offered the following in conjunction with the release of the paper, “Maintenance of Effort requirements are an end-run on the U.S. Constitution, which prohibits the federal government from dictating how states operate. The feds use MOE to create contractual obligations that effectively control large chunks of states’ budgets and limit legislators’ ability to make appropriate decisions for their constituents.”
Unfortunately, policy makers are bound by MOEs regardless of the state’s budget situation, changing priorities, or new-found efficiencies. A previous legislature can effectively tie the hands of future elected officials. Sometimes it is even agency bureaucrats who sign up for “free federal dollars” apart from the normal appropriations process with little legislative input.
Steve Anderson, author of the “Maintenance of Effort: The Federal Takeover of State Budgets” and current Senior Fiscal Policy Fellow with KPI, said, “The constitutional right of a state to control the appropriation of their citizens’ tax dollars is too often being abrogated by the federal government’s MOE requirements. This takeover of the state budgets is like an addictive drug from which withdrawal is painful. Unlike a drug, this addiction can be created by prior legislatures, governors or even bureaucrats. The pervasiveness of MOE goes to almost every function of state government.”
The report outlines several strategies that can be utilized by state governments to mitigate the negative effects of MOEs. One proposal may prove difficult with existing programs but brings some common sense to policy making moving forward — avoid federal funds as much as possible. Conversely, a similar recommendation would be that all new grant programs be approved by the state legislature.
In conclusion KPI President Trabert said, “MOE requirements are not about improving outcomes, but dictating how states operate. Until Congress puts a stop to this practice state legislators must say no to the promise of ‘free money’ from the feds and avoid the problems brought by MOEs.”
As our electric utility asks for a rate increase, let’s first ask that it stop blatant waste.
Westar, our state-regulated electric utility, is asking for a rate increase. As part of any increase, we ought to insist that the utility do a better job of controlling blatant waste.
Streetlights burning unnecessarily in the middle day in downtown Wichita is an ongoing problem. See In Wichita, wasting electricity a chronic problem and Waste in Wichita, the seen and probably unseen for examples.
The problem may not be solved soon. No one has much motivation to solve the problem. The city pays Westar a fixed fee for each streetlight. The use of electricity is not metered, at least as far as the city’s bill is concerned. So if the city notices the lights wasting electricity during the middle of the day, well, it’s of no cost to the city. The city is concerned that working with Westar to turn off street lights during the day may not be cost-effective, according to Ken Evans, the city’s director of strategic communications. That’s the attitude he expressed in a recent City of Wichita Facebook dialog with citizens. But the city has run a campaign asking people to turn off appliances like microwave ovens and alarm clocks when not in use. This saves a vanishingly small amount of electricity, and at a large cost in convenience.
Westar, on the other hand, is a highly-regulated utility that operates much like a governmental agency. How strong is the profit motive to Westar? Not strong, it seems. Most individuals or private business firms would seek to reduce the waste that Westar seems unconcerned about.
But before granting Westar a rate increase, its regulators ought to insist that the utility work to control blatant waste. This may be the only way to get attention to this problem.
In this episode of WichitaLiberty.TV: The sales tax increase is harmful and not necessary. Kansas school standards are again found to be weak. The ASR water project is not meeting expectations. Then, the Independent Institute has produced a series of videos that illustrate the nature of government. View below, or click here to view at YouTube. Episode 88, broadcast July 19, 2015.
The “Love Gov” series of videos from the Independent Institute can be found here: Love Gov: From first date to mandate.
A new edition of an ongoing study shows that Kansas school standards are weak, compared to other states. This is a continuation of a trend.
Last week the National Center for Education Statistics (NCES) published a new version of its ongoing study Mapping State Proficiency Standards Onto NAEP Scales: Results From the 2013 NAEP Reading and Mathematics Assessments. As was also found in past years, the standards that the state of Kansas uses to evaluate students are low.
This study is important because states set their own standards for evaluating students, as the report explains: “Because each state set its own standards, there was no assurance that students who met the standards of one state would be able to meet the standards of another state, and one could not compare the effectiveness of schools across states in terms of the percentages of students reported to meet the standards.”
There is a national test that is the same in all states, the National Assessment of Educational Progress (NAEP). Again, from the report: “NAEP provided a common scale on which the stringency of the various state criteria for proficiency could be compared.” The purpose of the study is to map each state’s standards to a common standard. By doing this, we can determine whether a state uses a stringent or weak standard to evaluate students. This study does not evaluate the performance — good or bad — of a state’s students. Rather, the study evaluates the state and its standards.
The two-page summary for Kansas is here.
The summary is this:
For reading in grades four and eight, the answer to the question “How do Kansas’ reading standards for proficient performance at grades 4 and 8 in 2013 map onto the NAEP scale?” is “below basic.”
For math in grades four and eight the answer to the same question is “basic.”
This means that the state of Kansas says students are “proficient” when by NAEP standards the students are “basic” or “below basic.”
Especially in reading, Kansas standards are low. For grade four reading, 26 states (including Kansas) are in the “below basic” category. For grade eight reading, only nine other states besides Kansas fall into the “below basic” category.
Following, charts excerpted from the study showing how Kansas measures against the other states. In some cases, there are few states with lower standards than Kansas. In no case is Kansas above the middle. Click charts for larger versions.
An ongoing study reveals that generally, property taxes on commercial and industrial property in Wichita are high. In particular, taxes on commercial property in Wichita are among the highest in the nation, although Wichita has improved comparatively.
The study is produced by Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence. It’s titled “50 State Property Tax Comparison Study, April 2015” and may be read here. It uses a variety of residential, apartment, commercial, and industrial property scenarios to analyze the nature of property taxation across the country. I’ve gathered data from selected tables for Wichita. (A pdf version is available here.)
In Kansas, residential property is assessed at 11.5 percent of its appraised value. (Appraised value is the market value as determined by the assessor. Assessed value is multiplied by the mill levy rates of taxing jurisdictions in order to compute tax.) Commercial property is assessed at 25 percent of appraised value, and public utility property at 33 percent.
This means that commercial property faces 2.18 times the property tax rate as residential property. (The study reports a value of 2.173 for Wichita. The difference is likely due from deriving the value from observations rather than statute.) The U.S. average is 1.710.
Whether higher assessment ratios on commercial property as compared to residential property is desirable public policy is a subject for debate. But because Wichita’s ratio is high, it leads to high property taxes on commercial property.
For residential property taxes, Wichita ranks below the national average. For a property valued at $150,000, the effective property tax rate in Wichita is 1.253 percent, while the national average is 1.490 percent. The results for a $300,000 property were similar.
Looking at commercial property, the study uses several scenarios with different total values and different values for fixtures. For example, for a $100,000 valued property with $20,000 fixtures (table 25), the study found that the national average for property tax is $2,519 or 2.099 percent of the property value. For Wichita the corresponding values are $3,289 or 2.741 percent, ranking fourteenth from the top. Wichita property taxes for this scenario are 30.6 percent higher than the national average.
In other scenarios, as the proportion of property value that is machinery and equipment increases, Wichita taxes are lower, compared to other states and cities. This is because Kansas no longer taxes this type of property.
Kansas legislative and executive leaders must realize that a shift to consumption taxes must be accompanied by relief from its disproportionate harm to low-income households.
While Kansas legislative leaders and the governor praise the shift from income taxes to sales taxes, they ignore the severely regressive effect of sales taxes in Kansas. That is, a sales or consumption tax affects low-income families in greatest proportion relative to their incomes. The primary reason for the harshness of the Kansas sales tax is its application to food purchased in grocery stores. Few states tax food, and many of those that do apply a lower tax rate to food.
During the debate over a proposed sales tax increase in Wichita last year, I gathered data from the U.S. Census Bureau regarding expenditures on various categories for five different levels of household income. My findings were that if the city raised sales tax by one cent per dollar, the lowest income class of families would experience an increase nearly four times the magnitude as would the highest income families, measured as a percentage of after-tax income. Others produced similar results. This is the regressive nature of sales taxes.
At the national level the Fair Tax is a program whereby income taxes are replaced by consumption taxes. Proponents believe it would be a positive factor for economic growth. In recognition of the regressive nature of sales taxes, the Fair Tax plan includes a “prebate” to compensate households for the sales tax paid on necessities like food. In effect, there would be no tax on food and other necessities, up to the poverty level.
During the legislative session this year, Kansas Legislative Research told legislators that increasing the sales tax from 6.15 percent to 6.50 percent would generate $164,200,000 in additional revenue to the state. This implies that a one percent increase in the sales tax rate would generate about $469 million in revenue. (This is based on static analysis, and therefore does not account for the changes in behavior that the higher sales tax would induce, however large or small the effect.)
It’s thought that the present sales tax on food results in about $390 million in tax collections. While these two values — 469 and 390 — are not equal to each other, the $469 million figure is close to the gap between revenues and expenses. (The tax bill the legislature passed will raise about $400 million, but it is widely believed the governor will have to make an additional $50 million in cuts.)
So what would have happened if the legislature had raised the sales tax by one cent per dollar and eliminated the sales tax on food? The answer is the sales tax in Kansas would be less regressive.
I modified my worksheet to allow for adjustment of the sales tax rate for general purchases, and for food separately. I gathered the results for three scenarios and present the results in a chart. I use the sales tax rates that Sedgwick County residents would experience. This includes a one cent per dollar county-wide tax in addition to the statewide rate. (Most counties and cities add to the statewide rate. The unweighted average sales tax rate for Kansas cities is 7.835 percent, based on Kansas Department of Revenue figures.)
The blue line, labeled “Sales tax at 7.15% on all purchases” is the current tax in effect in Sedgwick County. Note that the lowest quintile of households pay nearly seven percent of their after tax income in sales taxes. For the highest quintile the value is less than two percent.
The gold line (“Sales tax at 7.50% on all purchases”) represents the rates that will be in effect after July 1. Note that the vertical distance between the blue and gold lines is larger for low-income households than for high-income households, again illustrating the regressive nature of sales taxes.
The red line (“Sales tax at 8.15%, food at 0%”) illustrates the situation had the legislature raised the sales tax by one cent per dollar and eliminated the sales tax on food. Notice that the vertical distance between the red and gold lines is greatest for lower-income households, and becomes less as income increases. This means that under this policy, the sales tax is less regressive. But the Kansas Legislature did not do this. Instead, it implemented a sales tax changes that increases its regressive nature.
Kansas has a food sales tax refund program. It has been altered several times in recent years. Even if households can — and do — claim it, it doesn’t cover their likely cost of sales tax on food. At a rate of 7.50 percent, the lowest quintile of households pay an estimated $263 in sales tax, which is far above the maximum refund.
Kansas legislative leaders have said that food sales tax could be an issue to tackle next year. One proposal this year had the tax on food falling to 4.90 percent. That is welcome, and would reduce the harsh regressive nature of Kansas taxation. But Kansas would still have a high tax rate on food. Kansas legislative and executive leaders must realize that a shift to consumption taxes must be accompanied by relief from its disproportionate harm to low-income households.
In this episode of WichitaLiberty.TV: Radio talk show host Joseph Ashby joins host Bob Weeks to discuss his interview with Kansas Governor Sam Brownback, the end of the legislative session, and Republican presidential candidates. Episode 87, broadcast June 21, 2015. View below, or click here to view at YouTube.
In its campaign to convince voters to raise taxes, the Auburn-Washburn school district deceives voters. David Dorsey explains.
Eight reasons why the Auburn-Washburn (USD 437) LOB election increase is a ruse
By David Dorsey, Kansas Policy Institute
Auburn-Washburn USD 437 is in the midst of a Local Option Budget (LOB) election, asking district voters to approve an up-to three mill increase in their taxing authority. As part of the effort to convince us to support their request, I received, along with every other USD 437 resident, a propaganda card via USPS last week. The card (of which I have provided both front and back) includes virtually every deceptive tactic used by school districts to cajole voters into supporting a tax increase, including the implication that without this extra money, the futures of little Evan and Clare are in doubt.
I must preface the following remarks by saying that I have largely supported the district’s expansion in the past, having enthusiastically voted in favor of building a new elementary school (Farley) several years ago. I also recognize that as school districts go, USD 437 is well run. Their administrative costs are below the state per-pupil average and are 17th lowest among the 25 largest districts statewide. And undoubtedly the relative quality of USD 437 plays a role in increasing property values in the district. Having said that, it doesn’t detract from the fact that this election is just plain unwarranted. Below is the flip side of the card followed by eight reasons why the election is truly needless.
- They already have the money. As the table shows, USD 437 has a consistent cash reserve balance of about $9 million each July 1. The card says they are going to use cash reserves to cover part of the “Block Grant reductions,” but the $386k in taxes they tell us they need represents less than five percent of the district’s cash reserves. If they pulled the $386k from those reserves (taxes they received in prior years but didn’t spend), they would still have several million more than in 2008 and prior years, and the district didn’t say they lacked sufficient reserves during those years.
- They don’t spend the money they budget. In the 2013-14 school year, USD 437 spent nearly $2 million less than budgeted. Do they really expect the voters to believe they need another $386 thousand (out of a total budget of over $65 million – roughly six-tenths of a percent) to “maintain our excellent schools?”
- They use misleading tactics to imply they have, and will continue to suffer budget cuts under the block grant funding formula. They say (in bold, nonetheless) that the state reduced cash support by over $1.1 million for the current school year. Actually, the truth is under the three-year block grant funding law, USD 437 will get an increase in state aid of $1.4 million from $30.5 million to $31.9 million (4.3%).
- They act as if they have no authority over spending. According to the card “expenses are expected to rise next year by $1,252,000.” They speak of costs as if they are analogous to flood waters; that they are simply at their mercy and have no control over them. And this argument gets to the heart of the prevailing mentality that instead of trying to be more efficient with taxpayer money, school districts feel they are justly entitled to more taxpayer money.
- It’s simply a last-chance cash grab. Under block grant funding, districts must have LOB elections prior to July 1, 2015 or wait two years.
- It’s another false choice, right from the give-us-more-or-we’ll-have-to-cut playbook. The card itemizes six potential ways they “will consider” increasing fees/charges to students and five rather vague ways to reduce expenses. Do they really believe it will take a 1% increase in the LOB (again, that’s six-tenths of one percent of the total budget) to keep from increasing class sizes or from having to “Cut Programs (TBD)?”
- Kansas taxpayers are already overburdend and will experience yet another tax increase at the state level. School districts don’t operate in a vacuum. As USD 437 is asking their residents to pony up more money at a local level, the state legislature will be increasing taxes statewide by as much as $470 million. Those of us who will foot this bill can’t simply demand a pay raise to cover our increased food, insurance, transportation, or housing costs. So why should school districts be able to?
- It will not improve student outcomes. I saved the most important reason for last. Regardless of the dire implications, the result of this election will have exactly zero effect on the educational outcomes of little Evan and Clare when they enter kindergarten — three years from now!
Examining tax collections by the states shows that Kansas collects more tax than many of our neighbors, and should put to rest some common myths.
Of a selection of nearby states, Kansas collects more taxes than most, on a per-person basis. The nearby table shows total tax collections, and tax collections per person. The chart shows collections grouped by major category, and one special category, which is severance taxes.
Some of the data regarding specific taxes is revealing and should shape the debate over taxes in Kansas. Consider severance taxes, which are taxes levied on extracting materials like oil, gas, and coal. The common narrative in Kansas is that states like Texas are sitting atop a sea of oil, with the severance taxes funding a major portion of state government. The data shows that Texas collected $223 per person in severance taxes in 2014. For Kansas the figure is $43. This difference — $180 — doesn’t account for the difference in total tax collections between the states. Texas collects $2,050 in total taxes per person, while Kansas collects $2,526, a difference of $476.
We also commonly hear that Kansas doesn’t have the tourism of states like Florida, and therefore doesn’t have the flood of tourism spending and accompanying sales tax. Again, looking at the data, se see that Florida collected $1,460 in Sales and Gross Receipt Taxes per person for 2014. Kansas collected $1,340. This is a difference of $120, while the difference between total tax collections for Florida ($1,779) and Kansas ($2,526) is $747.
You may use this interactive visualization to customize the table to fit your own needs. Click here to open the visualization. Data is from the U.S. Census Bureau, Survey of State Government Tax Collections and Bureau of Economic Analysis, along with author’s calculations. Visualization developed using Tableau Public. Data is expressed on a per person basis, not adjusted for inflation.
A critical look at the statements coming from one of the largest school districts in Kansas leads to wonder if the Kansas City school superintendent is uninformed, misinformed, or simply lying. Dave Trabert of Kansas Policy Institute reports.
USD 500 Kansas City misleads on school funding and budget claims
By Dave Trabert, Kansas Policy Institute
At a time when many school districts are issuing misleading statements about school funding to parents, teachers and legislators, recent claims by USD 500 Kansas City set a new transparency low. A story in the Kansas City Star outlined the district’s plans to reduce spending, which Superintendent Cynthia Lane blamed on “…years of low state funding, rising costs and the loss this year of $2 million in state money because of a new block grant funding measure….”
Citizens are also dealing with rising costs, and school districts would like to inflict even higher costs on them — more taxes — to fund districts’ financial desires. “Years of low state funding” is a matter of opinion but data from the Kansas Department of Education and the Kansas Division of the Budget show that state funding and total funding of schools are setting new records this year.
Part of the 2015 increase in state aid ($522 million according to block grant files prepared by KSDE) is money that had been inappropriately recorded as Local aid in prior years (20 mills mandated by the Legislature for all districts) but state aid is still at an all-time high with that adjustment. Total taxpayer support of public education will also set a new record this year.
Contrary to Supt. Lane’s implication, however, USD 500 is not getting $2 million less in state aid with the block grant, it is gaining $12.8 million in state aid this year without counting any increases for KPERS, Bond & Interest or Special Education. What she is really saying — but doesn’t want you to know — is that she wanted an even larger increase and says the district is being “cut” because it didn’t get as much of an increase as it desired.
That is just the beginning of the district’s conscious efforts to mislead parents, teachers and legislators. “We have cut more than $50 million,” Lane said. “There is no longer any fat left. … I frankly think there is very little left to cut that doesn’t dramatically impact what we do for our kids.”
Budget cut claims don’t hold up
The district has definitely not reduced spending by more than $50 million as implied by Supt. Lane. They may have budgeted for and spent less than they would like (which is what Supt. Lane is really saying) but they most certainly have not cut spending recently (as she wants you to think). This comparison of the district’s budget and actual spending over the last ten years shows that spending less than the amount budgeted is rather common but doesn’t necessarily mean that spending was actually reduced; most often, it means that their plan to spend more was reduced. Districts openly admit that they budget more than they plan to spend to avoid having to re-publish a budget … but conveniently forget to mention that fact when claiming that their budget was cut.
Operating budgets were at record-highs in Kansas City this year and the two previous years; actual spending on current operating costs set records the last two years and likely will do so again this year.
Operating spending increases between 2005 and 2014 in the Kansas City district have been very large across all cost centers; capital spending also jumped but debt service has been stable. Administration spending “only” increased by 23 percent but it was well above average in 2005 and was the second highest spender among large districts last year (profligate USD 501 Topeka wins that prize at $1,568 per-pupil). Shawnee Mission, by comparison, spends $942 per-pupil on administration; spending at that level would save $9.4 million in the Kansas City district, which could be spent on Instruction or returned to taxpayers.
Listening to administrators and media reports, one would think the district is suffering from extreme austerity but district financial reports show otherwise. And these spending comparisons only reflect what has actually been spent. USD 500 also boosted operating cash reserves by $26.7 million over the period, going from $25.1 million in 2005 to $51.8 million in 2014. Operating reserves increase when more money is collected than is spent.
“Very little left to cut” is a farce
Supt. Lane may claim that there is very little left to cut but a July 2013 Legislative Post Audit report on the district says differently; page after page lists recommendations to bring district spending in line with market conditions and reduce costs. One recommendation was “Reduce Custodial and Maintenance Positions and Salaries” since some salaries were found to be more than 20% higher than paid in the private sector and the district had more staff than comparable districts. The district response is listed in the audit: “The community and staff will resist any reduction in staff or salaries. The custodians might unionize if staff positions or salaries are reduced.”
Here is a sampling of maintenance, custodian and bus driver pay taken from an Open Records request of the 2014 school year payroll. This list reflects the highest paid in these positions and reflects total pay (wages, overtime, bonuses, etc.) but do not include any benefits. The position titles are shown as provided by the district.
The simple solution would be to outsource this type of work to private sector companies as is done by some districts. Private sector companies are fully capable of providing these services at the same or better quality and at a better price.
The LPA audit also recommended reducing administrative salaries to market wages through attrition; the district responded by saying “staff would resist any reduction in salaries.” This table shows pay increases given to the highest paid district employees, all of whom are administrators who mostly received double-digit pay increases over the last two years.
Supt. Lane told the Star “I absolutely believe if you have to cut people, you have got to start at the top.” She was referring to the dismissal of Edwin Hudson, chief of Human Relations, and “… 30 assessment managers hired three years ago to keep track of state assessment scores so teachers and principals could concentrate more on school instruction.” Loading up on managers to track state assessment scores that are released once per year (except last year when no scores were released because of technical issues) is symptomatic of district hiring practices.
Over the last ten years, USD 500 increased its management staff by 18.8 percent; management is a KPI-defined label that includes superintendents, assistant superintendents, principals, assistant principals, directors, managers, supervisors and instruction specialists. Maintenance, transportation and food workers jumped by 45.6 percent, teacher aides more than doubled and a variety of employment categories we lumped into All Other shot up by 42.7 percent. Enrollment, meanwhile, increased by just 7.2 percent.
Non-teaching staff jumped by a third and total employment is 24.4 percent higher. The district has one full time equivalent employee for every 5.9 students.
USD 500 has one manager for every 125 students, which is very inefficient compared to other districts. Shawnee Mission, for example, had one manager for every 210 students last year and has since reduced its administrative footprint because Superintendent Jim Hinson felt it was too large. If Kansas City had the same pupil/manager load as Shawnee Mission (before it was reduced), they would have 66 fewer managers … and those costs could be made available for instruction instead of suing citizens for more money.
Here’s another example of misleading information from USD 500. The employee count in the above table comes from official KSDE personnel reports with data provided by each school district. But USD 500 may have many more employees. The LPA efficiency audit shows that the district was significantly under-reporting employment to KSDE. Lest anyone suggest that the KSDE report doesn’t contain categories that capture all of the district’s staff, it should be noted that the Certified Personnel and Non-Certified Personnel reports each have an “Other” category for such purpose. Consciously and consistently underreporting employment by more than 200 employees fits the district’s pattern of providing misleading information.
Misrepresentation by design
The district’s financial position is much different than represented by management, but it should be noted that staff, students and parents are likely experiencing legitimate resource issues. Frankly, that’s part of a pattern across many school districts, which is intended to gain sympathy and support for higher spending at the expense of others. USD 259 in Wichita, for example, is telling staff and media that they are suffering a $4.8 million “cut” with the block grants this year when in reality, they plan to spend $87 million more this year.
The Kansas City district even takes misrepresentation into the courtroom. I was in the courtroom when Supt. Lane testified that lack of funding was the reason that many of the district’s students weren’t adequately prepared for college and career, but she is on record placing the blame elsewhere, months before she made her court appearance.
When the U.S. Department of Education denied a portion of the district’s proposal to raise standards in a requested waiver from the Kansas Approved Accountability Plan from USDOE, Supt. Lane responded by saying, “The Kansas assessment is not rigorous enough to guarantee that our students are on-track with where they need to be. We have asked to raise standards for our students by administering the MAP, which is a more rigorous assessment, and USDOE is telling us ‘No!'”
The district newsletter in which this quote appears makes no mention of funding; the blame for academic issues is placed solely on sub-standard assessment issues. Supt. Lane may say that funding is also an issue but the point here is that the story routinely is crafted to maximize sympathy for the desired outcome.
That’s a disservice to staff, parents, legislators and most important, to students.
In this episode of WichitaLiberty.TV: Is Wichita risking a Soviet-style future? A look at Wichita property taxes, uninformed and misinformed elected officials, tax increment financing, and social security. View below, or click here to view on YouTube. Episode 86, broadcast June 7, 2015.
Kansas public schools ought to thank the governor and legislature for failing to give parents the power of school choice.
The public school establishment in Kansas is angry with the governor and legislature over school finance. Really, the public schools ought to be grateful for Governor Sam Brownback. In many states with conservative Republican governors, school choice programs have grown. In the summer of 2011 the Wall Street Journal reported on what it called “The Year of School Choice.”
Some governors have been warriors for school choice. Not Kansas Governor Sam Brownback, however. He signed a small school choice bill when it landed on his desk. But he has not vocally advocated for expanded school choice. There are several Kansas legislators who are in favor of school choice, but not enough, certainly not in leadership.
As public schools and their unions despise any form of school choice and the accountability it provides, they should be grateful for our governor and legislature. Kansas public schools operate without much competition, and that’s the way public schools and their unions like it.
School choice in Kansas
How little school choice exists in Kansas? One implementation of school choice that is popular in some states is the charter school. According to National Alliance for Public Charter Schools, Kansas has a poor charter school law. That is, Kansas law makes it difficult to start and maintain a charter school. Of the 43 states that have charter schools, Kansas ranked 42. Kansas public schools are effectively shielded from the diversity and competition that charter schools provide.
Others have also found the Kansas charter school law to be very restrictive. The Center for Education Reform found the Kansas charter school law to be the worst in the nation.
Governor Brownback signed a tax credit scholarship program. The Kansas program is small and restrictive, earning the grade of “D” from Center for Education Reform. Kansas has no school voucher program.
Altogether, Kansas parents have little power to choose schools for their children. The primary power Kansas parents have is to choose where they live. If a family can afford to, it can live in a district where the public schools are not as bad as they are in other districts. Given that these desirable districts almost always cover higher-income areas, poor parents don’t have this possibility.
School choice won’t fix everything, but it goes a long way. Here’s a portion of the 2011 Wall Street Journal article “The Year of School Choice.”
Choice by itself won’t lift U.S. K-12 education to where it needs to be. Eliminating teacher tenure and measuring teachers against student performance are also critical. Standards must be higher than they are.
But choice is essential to driving reform because it erodes the union-dominated monopoly that assigns children to schools based on where they live. Unions defend the monopoly to protect jobs for their members, but education should above all serve students and the larger goal of a society in which everyone has an opportunity to prosper.
This year’s choice gains are a major step forward, and they are due in large part to Republican gains in last fall’s elections combined with growing recognition by many Democrats that the unions are a reactionary force that is denying opportunity to millions. The ultimate goal should be to let the money follow the children to whatever school their parents want them to attend.
Two research papers illustrate the need to maintain low taxes in Kansas, finding that high taxes are associated with reduced income and low economic growth.
As Kansas legislators seek to balance the state’s budget, most Kansas opinionmakers are urging higher taxes instead of spending restraint. Many claim that government taxation and spending are the driving forces behind growing the Kansas economy. An example is the motto of the Kansas Economic Progress Council, which is “… because a tax cut never filled a pothole, put out a fire or taught a child to read.”
Two research papers illustrate the need to maintain low taxes in Kansas, finding that high taxes are associated with reduced income and low economic growth. Research such as this rebuts the presumption of government spending advocates that low taxes have killed jobs in Kansas.
One paper is The Robust Relationship between Taxes and U.S. State Income Growth by W. Robert Reed, published in the National Tax Journal in March 2008. The abstract to this paper states:
I estimate the relationship between taxes and income growth using data from 1970 – 1999 and the forty-eight continental U.S. states. I find that taxes used to fund general expenditures are associated with significant, negative effects on income growth. This finding is generally robust across alternative variable specifications, alternative estimation procedures, alternative ways of dividing the data into “five-year” periods, and across different time periods and Bureau of Economic Analysis (BEA) regions, though state-specific estimates vary widely. I also provide an explanation for why previous research has had difficulty identifying this “robust” relationship. (emphasis added)
In his introduction, Reed writes that previous studies had found: “To the extent a consensus exists, it is that taxes used to fund transfer payments have small, negative effects on economic activity.” His paper found a stronger relationship.
Reed issues a caution on the use of his conclusions: “It needs to be emphasized that my claim for robustness should be understood as applying only within the context of U.S. state income growth. It should not be interpreted as being more widely applicable to other contexts, such as employment growth, manufacturing activity, plant locations, etc., or to the relationship between taxes and income growth outside the U.S.”
This illustrates one of the ways we focus on the wrong measure of growth. Politicians focus on jobs. But to business, jobs are a cost. One of the better goals to seek, as Art Hall specifies in his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, is income growth, along with population density and population migration, productivity growth, capital investment, gross business starts and expansions, and customer service and throughput measures of state economic development agencies. Hall writes: “If Kansas performs well in the measures provided, it will also perform well in terms of job count.”
Another example of research finding a negative impact of taxation is State Taxes and Economic Growth by Barry W. Poulson and Jules Gordon Kaplan, published in the Winter 2008 Cato Journal. In the introduction to the paper, the authors write: “The analysis reveals a significant negative impact of higher marginal tax rates on economic growth. The analysis underscores the importance of controlling for regressivity, convergence, and regional influences in isolating the effect of taxes on economic growth in the states.” (emphasis added)
In its conclusion, the paper states:
The analysis reveals that higher marginal tax rates had a negative impact on economic growth in the states. The analysis also shows that greater regressivity had a positive impact on economic growth. States that held the rate of growth in revenue below the rate of growth in income achieved higher rates of economic growth.
The analysis underscores the negative impact of income taxes on economic growth in the states. Most states introduced an income tax and came to rely on the income tax as the primary source of revenue. Jurisdictions that imposed an income tax to generate a given level of revenue experienced lower rates of economic growth relative to jurisdictions that relied on alternative taxes to generate the same revenue. (emphasis added)
Ernie Goss is Jack A. MacAllister Chair in Regional Economics and Professor of Economics at Creighton University and an expert on the Midwest economy. Following is his assessment of the Kansas economy in recent years. The full report is here.
Kansas Cuts Taxes and Expands the Economy: Earnings Growth Four Times That of U.S. and Neighbors Since Passage
From the Mainstreet Economy Report, Creighton University, October 2014.
In 2012, Kansas Governor Brownback pushed the Legislature to whack individual tax rates by 25%, to repeal the tax on sole proprietorships, and to increase the standard deduction. In 2013, the Legislature cut taxes again. Since passage in 2012, how has the Kansas economy responded to these dramatic tax cuts? Post Tax-Cut Earnings: Since QIV, 2012, Kansas grew its personal income by 2.92% which was higher than the U.S. gain of 2.85%, and was greater than the growth experienced by each state bordering Kansas, except Colorado. Additionally in terms of average weekly earnings, Kansas experienced an increase of 4.82% which was almost four times that of the U.S., more than four times that of Missouri, approximately seven times that of Nebraska, and nearly four times that of Oklahoma.
Of Kansas’ neighbors, only Colorado with 4.82% average weekly wage growth outperformed Kansas.
Post Tax-Cut Job Performance: Between the last quarter of 2012 and August 2014, the U.S. and each of Kansas’ neighbors, except for Nebraska, experienced higher job growth than Kansas. However, much of Kansas’ lower job growth can be explained by the fact that during this period, Kansas reduced state and local government jobs by 1.4% while all of Kansas’ neighbors and the combined 50 U.S. states increased state and local government employment. In terms of unemployment, Kansas August 2014 joblessness rate was 4.9% compared to rates of 6.1% for the U.S., 5.1% for Colorado, 6.3% for Missouri, 3.6% for Nebraska, and 4.7% for Oklahoma.
Kansas job and income data since the tax cut show that, except for Colorado, the state economy has outperformed, by a wide margin, that of each of its neighbors and the U.S. To remain competitive, expect Kansas’ neighbors to reduce state and local taxes in the years ahead. Ernie Goss.
To balance the budget, there are many things Kansas lawmakers could do other than raising taxes.
In congratulating Kansas lawmakers for passing a pro-growth tax cut, American Legislative Exchange Council (ALEC) reminds everyone that there is more than one way to balance a budget. Spending needs to be addressed:
However, as budget realities need to be addressed, the spending side of the fiscal coin is a good place to start. ALEC has conducted non-partisan research on how states can make government more efficient. In the State Budget Reform Toolkit, case studies and policy options are examined that allow the state to maintain core services of government at a lower cost. One example is to eliminate positions in state agencies that have been vacant for more than six months, or to adopt a sunset review process for state agencies, boards and commissions. These examples and many more can be found on our website for your review.
Some of the ideas in the State Budget Reform Toolkit have been considered and rejected by the Kansas Legislature. Others have not been considered, as far as I know. Most take more than one year to implement. These ideas remind us that when the Kansas Legislature and Governor Brownback cut taxes for everyone, they did not start planning for lower spending.
In this episode of WichitaLiberty.TV: The failure of Kansas lawmakers to reform state spending means you will pay. A newspaper editorial excuses bad behavior by government. Then: What do classical liberals and libertarians believe? View below, or click here to view at YouTube. Episode 85, broadcast May 24, 2015.
Why won’t Kansas Center for Economic Growth show its calculations and explain its data sources? Dave Trabert of Kansas Policy Institute explains.
KCEG misleads on job growth — again
By Dave Trabert
The latest misleading claim on job growth from the Kansas Center for Economic Growth is loaded with misleading and irrelevant information; they don’t fully disclose their methodology and at this writing they have ignored our request to explain it. Sadly, this is not the first, second or even third time that KCEG has published misleading information and declined to produce documentation.
Here are the questions we posed to Annie McKay, executive director at KCEG:
We received a ‘read’ receipt but no reply, so we attempted to replicate their methodology to arrive at what they call “private sector job growth since tax changes” which they measure between January 2013 and March 2015. Based on tests of Kansas and national data, it appears that KCEG is using seasonally adjusted jobs but we couldn’t find a 6-state region including all of Kansas’ neighbors to match their number.
KCEG has the national average increasing 5.2% and Kansas 3.8%, so we assume they are comparing January 2013 to March 2015. This is not a true measure of post-tax reform activity, however; the base month of a point-to-point comparison should be the last month of the old tax system, which was December 2012. Comparing Kansas to the 5-state region does show that Kansas is slightly behind (4.0% vs. 4.2%) but by not showing the performance of individual states, KCEG hides the fact that Kansas beat three of its four neighbors.
While Kansas is outperforming three of its neighboring states on this measurement, point-to-point comparisons are problematic; one or both points can be unusual spikes or declines, making the data less reliable. The Bureau of Labor Statistics also publishes average annual employment, which minimizes the impact of any single data point.
The more stable comparisons of average annual employment show job growth trends for Kansas to be much more competitive since tax reform. Private sector jobs grew just 2.2% between 1998 and 2012, which ranked Kansas at #38, but Kansas moved up to #27 in 2013 and last year moved up again to #21. That’s still not good enough and it will take perhaps another decade to fully understand the impact of tax reform, but the early trend is very encouraging. Kansas still trails Colorado, but has improved its competitive position. The table below shows Kansas trailed Colorado by a factor of five (2.2% vs. 10.6%) between 1998 and 2012 but has since closed the gap to a factor of two.
KCEG noted that Utah and Idaho have higher taxes on “the wealthy” and better job growth than Kansas, but of course they don’t tell the whole story. Kansas does have a lower marginal rate than both states but that is a recent development; Kansas was higher than Utah until 2013 and much closer to Idaho when the marginal was 6.45%. Kansas’ lower rates are helping to reverse trends but it will take much more time to catch up to states that historically grew much faster – like Utah and Idaho.
Here’s the rest of the story that KCEG doesn’t want you to know. According to the Tax Foundation, the corporate income tax rate in Kansas is 40% higher than Utah’s and just slightly below Idaho’s. State sales tax rates are comparable but Kansas has much higher local sales tax rates.
Utah and Idaho also have much lower property taxes on commercial and industrial real estate. Kansas has the 10th highest effective tax rate on urban property and the worst in the nation on rural property! Part of the reason that Kansas has very high effective tax rates is baked into the State Constitution, where Commercial and Industrial property is assessed at 25% of appraised value but Residential is assessed at 11.5%.
The other major factor driving up property taxes is that Kansas has too much government. Kansas and Utah have about the same population but Kansas has 1,997 cities, counties and townships whereas Utah has only 274. Idaho has just 244. Extra government means extra government employees (and higher taxes to pay for all of that government); Kansas is ranked #47 in government employees per 10,000 residents (i.e., the 3rd worst in the nation) but Utah is ranked #15 and Idaho is #9.
These truths about private sector job growth and relevant competitive issues with Utah and Idaho are typical of KCEG efforts to mislead citizens and legislators – and probably explain why they refuse to engage KPI in public debates on tax, spending and education issues.
The Topeka public school district is using scare tactics to persuade voters to raise taxes. David Dorsey of Kansas Policy Institute explains.
Topeka schools use scare tactics to justify LOB election
By David Dorsey
The USD 501 school board voted unanimously on April 29 to hold an election to increase the district’s local option budget (LOB). They claim the $3 million that could be raised with voter approval is necessary “in the face of state budget cuts.” The district held three public meetings to discuss how to deal with what they called a $1.6 million cut in state funding this year and $2 million over the next two years. KPI has shown in this blog that Topeka Public Schools will actually get a total increase in state aid of 6.5% over the three years of the new block grant funding law.
But that’s not how a school district sees things. To the educrats, a cut means getting a smaller increase than they had planned.
If I were the suspicious type, I might think the meetings were just a ruse, using the implicit threat of cutting school programs in order to scare the public into supporting an override election to raise more money.
The purpose here is not to revisit the increase vs. decrease debate. The purpose here is to discuss the spending side of the equation and show just how easy it would be for USD 501 to meet their self-defined shortfalls – and without having any impact on students.
First, here’s a little perspective on the realities between what is budgeted and how much is actually spent. The adjoining table shows the millions that have gone unexpended for the last four years. Given this recent history, it’s hard to imagine that a $1.6 million “cut” from the budgeted $203 million 2014-15 budget is even a concern, let alone cause for an election.
Even if one concedes the point of a revenue shortfall, should the taxpayers of USD 501 (in the name of full disclosure, I do not live in the district, so I don’t have a dog in this hunt) shell out more money to the district? Or could the district find ways to reduce spending and operate more efficiently (a concept foreign to any government organization)? As a former employee of USD 501 I can attest that finding a savings of what amounts to $114 per pupil should be pretty easy to accomplish.
I offer these three opportunities that would reduce spending far in excess of what the district calls a cut and save local taxpayers the burden of providing more financial support to a district that won’t look seriously at reducing spending.
Reduce a bloated administration
As the table shows, Topeka Public Schools has the highest per pupil administrative costs of the 25 largest districts in the state. A glance at their own budget document reveals the costs are trending significantly higher. The 2013-14 costs were a 14% increase from the previous year. The USD 501 2014-15 budget for administration and support of $28,301,407 is a whopping 25% higher than 2013-14! That’s an increase from two years ago of 41.8% when administration costs were just under $20 million.
Some of that increase can be explained by the decision made by the USD 501 school board to drastically increase salaries of the administrative staff by $435,400 in the summer of 2013 in the name of being competitive with other districts. Perhaps if USD 501 was “competitive” in terms of administrative costs per pupil, there would be no issue.
I’m guessing these facts didn’t come up at the public meetings.
Put literacy and math coaches back in the classroom
Little-known to the public is that in every USD 501 school there are licensed teachers who do NOT teach students. They are known as math coaches and literacy coaches. Each school has at least one coach and most have more than one. What is their job, you ask? They are in the buildings to help classroom teachers do a better job. Furthermore, USD 501 forbids the coaches from directly teaching students, except in special circumstances. They are there to teach the teachers.
There are several reasons the practice of having licensed teachers be coaches should end.
- “Teaching the teachers” is what professional development is supposed to do.
- Dealing with ineffective teachers should be the job of the principals, not other teachers.
- Since coaches have no contractual authority over teachers, teachers do not have to utilize coaches. In practice, that means teachers who are least effective don’t solicit assistance from the coaches, so the coaches end up spending most of their time with the most effective teachers.
- Many coaches use the position as a stepping-stone toward getting into administration.
- Most of the coaches are among the best teachers in the district and should be with students, not other teachers.
To be fair to USD 501, math and literacy coaches are an educational trend and most districts now employ them. However, it doesn’t stray from the fact that money spent on coaches doesn’t directly benefit students. In fact, students lose out anytime a quality teacher chooses to become a coach and leaves the classroom.
Putting just one coach per building back in the classroom through attrition would go a long way toward dealing with the budget “cut.”
The district could easily deal with any short-term budget issue simply by using their current operating cash reserves. The following table shows USD 501’s cash reserves for the past ten years. The table not only shows the district had in excess of $24 million from which to draw at the beginning of this school year, but that is 56.2% more than a decade ago. I doubt they explained that fact to the patrons at the public meetings.
I now present a rather conservative approach to dealing with the “budget cut.” A 5% reduction in administration, returning just one coach in each building to the classroom, and tapping 10% from the operating cash reserves, hardly Draconian measures, would generate nearly twice as much as they could take from the voters.
|Savings Category||Spending reduction|
|5% reduction in administration costs||$1.41 million|
|Returning 1 coach to the classroom (through attrition) in each traditional public school building – 26 X $60,000 (salary/benefits)||
|10% from operating cash reserves||$2.47 million|
Board member Patrick Woods was quoted as saying K-12 funding is a “state responsibility.” Maybe it’s time the state starts taking responsibility for how the money gets managed.
In this excerpt from WichitaLiberty.TV: What recourse do citizens have when elected officials are not responsive? Initiative and referendum are two possibilities. View below, or click here to view at YouTube. Originally broadcast May 3, 2015.
In this excerpt from WichitaLiberty.TV: The Kansas Legislature has had several years to come up with plans for reforming government spending. But it didn’t do that. Now, it is most likely you will be asked to pay more taxes to compensate for the legislature’s failure. View below, or click here to view on YouTube. Originally broadcast May 3, 2015.
The top school finance official in Kansas says that says that state aid for schools has risen for the current year. From Kansas Policy Institute.
KSDE confirms that state aid to schools is increasing this year
By Dave Trabert
While some school districts and special interests claim state aid to schools is declining this year, Kansas State Department of Education Deputy Commissioner for Finance Dale Dennis confirms that state aid to schools is increasing.
KSDE published spreadsheets comparing block grant equivalent funding for the 2013-14 school year with block grant funding for this year and the next two school years. SF15-092 shows total funding last year was $3.263 billion including KPERS and $2.951 billion without KPERS. SF15-109 shows total funding this year of $3.408 billion including KPERS and $3.093 billion without. Even excluding KPERS, state aid to schools under the block grants will increase by $142 million.
Kansas legislators are struggling to balance the state’s budget. In 2012 the legislature passed a tax cut, although it was unevenly applied. But in the intervening years, the legislature has not taken serious steps to cut state spending to match. Legislators failed to consider bills to streamline and outsource government functions, although the bills had passed in a previous session. The legislature has also failed to consider budgetary process reform as explained below in an article from May 2012.
Leaders in the Kansas legislature and executive branch tell us the only way to balance the Kansas budget this year is by raising more revenue through taxation. That may be true, as reforming spending and budgeting takes time to accomplish. We had the time. But our legislature and executive branch squandered that opportunity. Now, they ask you for more tax revenue.
This year Kansas made a leap forward in reducing income tax rates. The next step for Kansas is to reduce its spending, both to match the reduced revenue that is forecast, but also to improve the efficiency of Kansas government and leave more money in the hands of the private sector. Specifically, Kansas needs to improve its budgeting process and streamline state government.
In Kansas, like in many states, the budgeting process starts with the previous year’s spending. That is then adjusted for factors like inflation, caseloads, and policy changes that necessitate more (or rarely, less) spending. The result is that debates are waged over the increment in spending. Rarely is the base looked at to see if the spending is efficient, effective, or needed.
There are several approaches Kansas could take to improve on this process. One is zero-based budgeting. In this approach, an agency’s budget set to zero. Then, every spending proposal must have a rationale or justification for it to be added to the budget.
Zero-based budgeting can be successful, but, according to the recent paper Zero-base Budgeting in the States from National Conference of State Legislatures, it requires a large commitment from the parties involved. It also can take a lot of time and resources. Kansas could start the process with just a few agencies, and each agency could go through the process periodically, say once every five or six years. Some states have abandoned the zero-based budgeting process.
In its State Budget Reform Toolkit, American Legislative Exchange Council advocates a system called priority-based budgeting. This process starts with deciding on the core functions of state government. That, of course, can be a battle, as people have different ideas on what government should be doing.
ALEC reports that “In 2003, Washington state actually implemented priority based budgeting to close a budget deficit of $2.4 billion without raising taxes.”
The spending cuts Kansas needs to balance the budget are not large. Kansas Policy Institute has calculated that a one-time cut of 6.5 percent next year would be sufficient to bring the budget to balance.
The problem that Kansas will face in reducing state spending and streamlining its government is that there are those who are opposed. Streamlining often means eliminating programs that aren’t needed, aren’t performing as expected, or are very costly. These programs, however, all have constituencies that benefit from them — the concept of concentrated benefits and dispersed costs that public choice economics has taught us. These constituencies will be sure to let everyone know how harmful it will be to them if a program is scaled back or ended.
Streamlining also means that there may be fewer state employees. Some will say that the loss of state employees means a loss for the economy, as the state workers will no longer be receiving a paycheck and spending it. This reasoning, however, ignores the source of state workers’ pay: the taxpayers of Kansas. With fewer state employees, taxpayers will have more money to spend or invest. The problem is that it is easier to focus on the employees that may lose their jobs, as they are highly visible and they have vocal advocacy groups to watch out for them. This is an example of the seen and unseen, as explained by Henry Hazlitt.
Here is a collection of charts comparing aspects of Kansas and its economy to the United States. These charts are from the Federal Reserve Bank of St. Louis, which gathers the data from a variety of sources. The graphs are interactive in a variety of ways and should always be current with the most recent data.
Click here to view the charts.
An incentives deal for a Wichita company illustrates a capacity problem and the need for reform.
Next week the Wichita City Council will consider an economic development incentives package intended to enable a local manufacturing company to expand its operations.
City documents give some detail regarding the amounts of property tax to be forgiven on an annual basis, for a period of up to ten years. In the past, city documents have often mentioned other incentive programs that will benefit the company, but that information is missing. Other sources mention two state programs — PEAK and HPIP — the company may benefit from, but amounts are not available.
In order to prepare the incentives package, several events took place. There was a visit to the company. Then another visit and tour. Then economic development officials helped the company apply for benefits from the Kansas Department of Commerce. Then these officials worked closely with Wichita city staff on an incentive package.
City documents state that the expansion will create 28 jobs over the next five years. Obtaining these jobs took a lot of effort from Wichita and Kansas economic development machinery. Multiple agencies and fleets of bureaucrats at GWEDC, the City of Wichita, Sedgwick County, and the State of Kansas were involved. Wichita State University had to be involved. All this to create 5.6 jobs per year for five years.
The jobs are welcome. But this incident and many others like it reveal a capacity problem, which is this: We probably need to be creating 5.6 jobs every working hour of every day in order to make any significant progress in economic growth. If it takes this much effort to create 28 jobs over five years, how much effort will it take to create the many thousands of jobs we need to create every year?
This assumes, of course, that the incentives are necessary to enable the company to expand. City documents state that the tax exemption is necessary to make the project “viable.” It’s likely that the mayor or city council members will say that if we don’t award the incentives, the company won’t be able to expand. Or perhaps the company will expand in some other city. So the incentives really don’t have any cost, they will tell citizens.
This only hints at a larger problem. If companies can’t afford to make investments in Wichita unless they receive exemptions from paying taxes, we must conclude that taxes are too high. (An ongoing study reveals that generally, property taxes on commercial and industrial property in Wichita are high. In particular, taxes on commercial property in Wichita are among the highest in the nation. See here.) It’s either that, or this company simply doesn’t want to participate in paying for the cost of government like most other companies and people do.
To top it off, this expansion and the new jobs seem far from certain. City documents state the company is “bidding on a new work package” and the “expansion project would be completed in phases
based upon the timing and demand of the work package.”
Civic leaders say that our economic development policies must be reformed. So far that isn’t happening. Our leaders say that cash incentives are on the way out. This deal does not include grants of cash, that is true. But forgiveness of taxes is more valuable to business firms than receiving cash. That’s because cash incentives are usually taxable as income, while forgiveness of taxes does not create taxable income. Each dollar of tax that is forgiven adds one dollar to after-tax profits. 1
The large amount of bureaucratic effort and cost spent to obtain a small number of speculative jobs lets us know that we need to do something else in order to grow our local economy. We need to create a dynamic economy, focusing our efforts on creating an environment where growth can occur organically without management by government. Dr. Art Hall’s paper
Embracing Dynamism: The Next Phase in Kansas Economic Development Policy provides much more information on the need for this.
Another thing we can do to help organically grow our economy and jobs is to reform our local regulatory regime. Recently Kansas Policy Institute released a study of regulation and its impact at the state and local level. This is different from most investigations of regulation, as they usually focus on regulation at the federal level.
The study is titled “Business Perceptions of the Economic Impact of State and Local Government Regulation.” It was conducted by the Hugo Wall School of Public Affairs at Wichita State University. Click here to view the entire document.
Following is an excerpt from the introduction by James Franko, Vice President and Policy Director at Kansas Policy Institute. It points to a path forward.
Surprising to some, the businesses interviewed did not have as much of a problem with the regulations themselves, or the need for regulations, but with their application and enforcement. Across industries and focus group sessions the key themes were clear — give businesses transparency in what regulations are being applied, how they are employed, provide flexibility in meeting those goals, and allow an opportunity for compliance.
Sometimes things can be said so often as to lose their punch and become little more than the platitudes referenced above. The findings from Hugo Wall are clear that businesses will adapt and comply with regulations if they are transparent and accountable. Many in the public can be forgiven for thinking this was already the case. Thankfully, local and state governments can ensure this happens with minimal additional expense.
A transparent and accountable regulatory regime should be considered the “low hanging fruit” of government. Individuals and communities will always land on different places along the continuum of appropriate regulation. And, a give and take will always exist between regulators and the regulated. Those two truisms, however, should do nothing to undermine the need for regulations to be applied equally, based on clear rules and interpretations, and to give each business an opportunity to comply. (emphasis added)
Creating a dynamic economy and a reformed regulatory regime should cost very little. The benefits would apply to all companies — large or small, startup or established, local or relocations, in any industry.
Our civic leaders say that our economic development efforts must be reformed. Will the path forward be a dynamic economy and reformed regulation? Or will it be more bureaucracy, chasing five jobs at a time?
- Site Selection magazine, September 2009. 2015. ‘INCENTIVES — Site Selection Magazine, September 2009’. Siteselection.Com. Accessed May 1 2015. http://www.siteselection.com/issues/2009/sep/Incentives/ ↩