Tag Archives: Kansas state government

Articles about Kansas, its government, and public policy in Kansas.

Mechanic Industry Force Muscles Workers mechanic-63201_1280

Employment in the states

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

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

It’s important to note there are two series of employment data provided by the U.S. Bureau of Labor Statistics, which is part of the U.S. Department of Labor. The two series don’t measure exactly the same thing. A document from BLS titled Employment from the BLS household and payroll surveys: summary of recent trends explains in brief: “The Bureau of Labor Statistics (BLS) has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey. … These estimates differ because the surveys have distinct definitions of employment and distinct survey and estimation methods.”

Employment in the States, Year-Over-Year Change, Private Industries, Kansas Highlighted
Employment in the States, Year-Over-Year Change, Private Industries, Kansas Highlighted
Importantly, since the CES gets its data from employers, it reports on jobs located in the state where the company is located, not where workers live. Similarly, the CPS reports data based on where people live, not where they work. For areas that straddle state lines — like the Kansas City Metropolitan Area — this is an important factor.

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

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

Employment Levels, Year-Over-Year Change, Kansas Highlighted
Employment Levels, Year-Over-Year Change, Kansas Highlighted
I’ve gathered data from BLS and made it available in two interactive visualizations. One presents CPS data; the other holds CES data. You can compare states, select a range of dates, and choose seasonally-adjusted or not seasonally-adjusted data. I’ve create a set that allows you to easily choose Kansas and our nearby states, since that seems to be relevant to the current discussion. (I included Texas in this set, as we often compare ourselves to that state.) The visualizations show indexed data, meaning that we see the relative change in values from the first date shown. There is also year-over-year changes illustrated.

Here is the visualization for Current Establishment Survey data, and here is visualization for Current Population Survey data.

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Voice for Liberty Radio: Kansas Secretary of Revenue Nick Jordan

Voice for Liberty Radio 150x150In this episode of Voice for Liberty Radio: Nick Jordan is Secretary of Revenue for the State of Kansas. He spoke to the Wichita Pachyderm Club on the topic “An Analysis of Governor Brownback’s Tax Policy” on August 22, 2014. In the shownotes for this episode you can find the link to the handout he distributed.

Here’s Kansas Secretary of Revenue Nick Jordan at the Wichita Pachyderm Club on August 22, 2014.

Shownotes

Handout: Kansas Tax Policy: Key Points
Kansas Department of Revenue
Wichita Pachyderm Club

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Kansas school claims, numbers don’t match

Kansas school spending advocates make claims of exploding class sizes that aren’t reflected in enrollment and employment data.

Mill Creek Elementary class size claim from FacebookOn Facebook, an activist makes a claim that, if accurate, is alarming:

I walked with Paul Davis yesterday. I introduced him to Mrs. Scrutin. She teaches 4th grade at Mill Creek Elementary, here in Lenexa. She has seen class sizes explode from 16, to 23, now for the 2014-2015 school year 30.

I gathered data from the Kansas State Department of Education and created an interactive visualization. (I’m not making the visualization available just yet, as there are some data consistency issues I need to address, and I hope to receive data for additional years.)

Looking at data for Mill Creek Elementary in the Shawnee Mission School District, the number of certified employees and K-12 teachers at the school has been falling. In 2014 there were 21 K-12 teachers, down from 27 in 2009.

Enrollment, too, has been on the decline, from 443 students in 2009 to 368 in 2014. The pupil-teacher ratio in 2009 was 16.2. It reached 17.1 two years later, and in another two years it fell to 16.4, and rose to 17.9 for 2014.

Pupil-teacher ratio is not equivalent to class size. It is simply the number of pupils divided by the number of teachers. Class sizes could be larger or smaller, and may vary from room to room. Although the pupil-teacher ratio rose for Mill Creek Elementary, let’s place it in context. For a hypothetical school of 1,000 students, the change that Mill Creek experienced from 2009 to 2014 means going from 62 teachers to 56 teachers.

With Mill Creek’s pupil-teacher ratio remaining almost unchanged, how do class sizes “explode from 16, to 23, now for the 2014-2015 school year 30?”

I don’t have data for the 2014-2015 school year. But if class sizes are “exploding” at the same time the pupil-teacher ratio rose only slightly, what is the explanation?

Remember, K-12 teachers are not the only employees at this school. In 2009 there were also 31 certified employees in addition to K-12 teachers. That number is down to 24 for 2014. In terms of pupil-employee ratios, the change over this time has been from 14.3 pupils per certified employee to 15.3.

Mill Creek Elementary school data

Welcome back, Gidget

Gidget stepped away for a few months, but happily she is back writing about Kansas politics at Kansas GOP Insider (wannabe).

Kansas GOP Insider (wannabe)
Kansas GOP Insider (wannabe)
One of the great things about the internet is it gives people an outlet for their writing and opinions that they probably would not have otherwise. I’d like to introduce you to someone whose writing I think you’d like to read. Well, I can’t really introduce you to her, because I don’t know who she is. On her blog she (?) goes by the name Gidget. It’s titled Kansas GOP Insider (wannabe) at insideksgop.blogspot.com.

Gidget writes anonymously, although I’m pretty sure she’s female and lives in or near Johnson County, as many of her articles concern local politics there. Being anonymous has its good and bad aspects. For one thing, most people who try to be anonymous on the internet and achieve any level of notoriety are usually exposed, eventually.

Being anonymous means there is less accountability for what you write, so people may not give your writing as much weight as they should. But anonymity gives the freedom for some people to write things that need to be said, and that’s what Gidget does very well. For example, last year she reminded readers that Bob Dole is known as the “Tax Collector for the Welfare State.” Not so much in Kansas, where he has stature just shy of sainthood. And that’s the point. If you criticize Bob Dole for the things he did that deserve criticism, you’re likely to be ostracized from the Kansas Republican Party. I can tell you, there are attack dogs.

The sometimes nasty nature of politics lead Gidget to write this earlier this year: “I have taken a much needed break from all things political during this campaign season. I know it’s bad timing, but my tender soul can only deal with so much back-biting and garbage slinging, and the 2012 primaries sent me to a dark place.” (Guess who’s back from Outer Space?)

I was sad to see that Gidget didn’t post anything for some months. But as the August primary approached, she rejoined the conversation. Here’s what she wrote about the United States Senate primary between Republicans Pat Roberts and Milton Wolf:

Sigh. This race is the most disgusting and vile thing I’ve witnessed since, well, Moran-Tiahrt. From the outside, it appears that everyone involved in the Roberts/Wolf fiasco has lost all of their senses. (Gidget’s predictions — Roberts vs. Wolf)

Later in the same article she wrote:

Finally, I am appalled, truly, sincerely appalled, that Wolf is now being investigated by the Kansas Board of Healing Arts for photos and comments he made on Facebook years ago.

Had he not run for office, his career would not be threatened. It’s that simple. Whatever you think of Wolf (and I really don’t think much of him), he doesn’t deserve to have his professional career ruined due to a Facebook post. He just doesn’t.

And it smacks of Roberts calling in a political favor. There is exactly one member of the Kansas Board of Healing Arts who is not a doctor or medical professional. That person is a political activist, appointed by Brownback, and a vocal Roberts supporter. Did she have anything to do with the Wolf investigation? She says no, and I’m inclined to take people at their word.

However, often in politics, as in real life, perception is reality. And the timely investigation of Wolf stinks. Badly. This is why good people don’t run for office.

Gidget is absolutely correct. When people consider whether they want to subject themselves to the type of attacks that the Roberts campaign launched, many people will decide not to run.

Here’s another example from the same article of Gidget writing the things that need to be said, and which party insiders don’t say:

I sincerely wish Roberts would have done the right thing a year ago — and that is decide against running for a fourth Senate term. We would have better candidates to choose from had he done so, and it’s been obvious for quite some time the direction in which the political winds were blowing. Kansans (and many around the country) had had enough of long-term federal legislators in Washington.

I contend that had Roberts really, truly cared about Kansas, the state GOP and the country, he would’ve bowed out this year. He’s a nice man, but his ego may be out-of-hand if he truly believes he’s one of only two people in the state of Kansas who can fairly, accurately and reasonably represent the Sunflower State in the U.S. Senate.

As Kansans know, the senate primary was particularly nasty. It shouldn’t be that way, and it doesn’t have to be. But there are many people who put party and personality above principle, and the results are usually not pretty. These attacks can have lasting impact. Here’s what Gidget wrote shortly after the August primary (Leaving the GOP):

I am leaving the Kansas Republican Party. While I will continue to work for candidates I like, and continue to be a registered Republican — you don’t get a choice in most of the elections otherwise — I’m out.

My disillusion with the party can not be overstated, and I simply see no reason to stay.

This fall, I will be volunteering for the Libertarian candidate, Keen Umbehr. Do I agree whole-heartedly with Keen? No. In word only, my values more closely align with what Gov. Brownback says his values are. (His actions suggest otherwise.)

I can no longer spend my time or money for a party that actively works against the people — specifically the grassroots people.

I am fairly certain I’m not the only person who has had enough of it. There’s an extraordinarily unusual lack of decorum among what I would call the Establishment of the Kansas Republican Party.

Take, for example, Gavin Ellzey, vice chair of the Third District Republican Party. A few days ago, he locked down his Twitter account, but prior to that he made numerous posts about “offending Muslims with a .45,” “only attractive women need equality,” and posts essentially calling Milton Wolf a piece of sh!t.

This is what passes for respectful discourse in Kansas politics these days. I was disgusted by his tweets, but that’s just the most public tip of the iceberg.

There were widespread rumors of many candidates making threats to individuals if they didn’t get onboard and offer their full support.

While not a huge Wolf fan, I continue to be disturbed by the way he was treated by what I would call the Kansas Establishment. He was ostracized, called names and I heard that he was uninvited to county and state GOP events.

Every Republican candidate in Johnson County attended an election night party at the Marriott Hotel in Overland Park. Wolf’s party was across the street at a different hotel. Was he not invited to participate in the county party?

I am not for one minute saying that everyone in the Republican Party has to be in lock step. But party members should welcome new faces, new candidates and fresh ideas — even if they don’t personally support some of the new people or their ideas.

That’s acceptable. It is not acceptable to act like the Republican Party is a locked boys club, where only certain people need apply.

I’m sure the Kansas Republican Party is simply a microcosm of what goes on in other states, but I don’t have the heart for it anymore.

The things I heard people say last night at the Marriott, the things I saw and heard people say in social media over the course of this campaign, I am out.

I blame our current crop of Republican politicians for this discourse. A gentle word here and there from them about Reagan’s 11th Commandment would go a long way. But those words are left unsaid, and I have to assume it’s because our most of our Republican politicians think winning is more important than anything. It baffles me that these self-professed Christians appear to believe that the ends justify the means.

They don’t.

That’s Gidget writing at Kansas GOP Insider. It’s good stuff. Take a look.

Antique elevator in Kansas Capitol

Quarterly state GDP data released

A new series of GDP data shows government growing faster in Kansas than in most states, with private sector growth near the middle of the states.

From the Bureau of Economic Analysis (part of the U.S. Department of Commerce):

Today, the U.S. Bureau of Economic Analysis released prototype statistics of quarterly gross domestic product (GDP) by state for 2005–2013. These new statistics provide a more complete picture of economic growth across states that can be used with other regional data to gain a better understanding of regional economies as they evolve from quarter to quarter.

The new data provide a fuller description of the accelerations, decelerations, and turning points in economic growth at the state level, including key information about changes in the distribution of industrial infrastructure across states. These prototype statistics are released for evaluation and comment by data users.

I gathered data from this new series of data and present it in an interactive visualization. You may view the data in tabular form, or in charts that show cumulative growth, change from previous quarter, and change from previous year. You may choose to display one or more industries, and one or more states. Click here to use the visualization.

Growth of Quarterly Gross Domestic Product by State, Government, Kansas highlighted
Growth of Quarterly Gross Domestic Product by State, Government, Kansas highlighted
Growth of Quarterly Gross Domestic Product by State, Private Industries, Kansas highlighted
Growth of Quarterly Gross Domestic Product by State, Private Industries, Kansas highlighted
Kansas Capitol

SEC orders Kansas to stop doing what it did under Sebelius and Parkinson

The Securities and Exchange Commission found that Kansas mislead bond investors. It ordered the state to implement reforms, which it has.

Kansas Capitol
Kansas Capitol
According to a press release from the Securities and Exchange Commission, the State of Kansas “failed to disclose that the state’s pension system was significantly underfunded, and the unfunded pension liability created a repayment risk for investors in those bonds.”

This refers to a series of eight debt, or bond, issues in 2009 and 2010. Collectively they were worth $273 million. The SEC press release explains:

According to the SEC’s order against Kansas, the series of bond offerings were issued through the Kansas Development Finance Authority (KDFA) on behalf of the state and its agencies. According to one study at the time, the Kansas Public Employees Retirement System (KPERS) was the second-most underfunded statewide public pension system in the nation. In the offering documents for the bonds, however, Kansas did not disclose the existence of the significant unfunded liability in KPERS. Nor did the documents describe the effect of such an unfunded liability on the risk of non-appropriation of debt service payments by the Kansas state legislature. The SEC’s investigation found that the failure to disclose this material information resulted from insufficient procedures and poor communications between the KDFA and the Kansas Department of Administration, which provided the KDFA with the information to include in the offering materials.

“Kansas failed to adequately disclose its multi-billion-dollar pension liability in bond offering documents, leaving investors with an incomplete picture of the state’s finances and its ability to repay the bonds amid competing strains on the state budget,” said LeeAnn Ghazil Gaunt, chief of the SEC Enforcement Division’s Municipal Securities and Public Pensions Unit. “In determining the settlement, the Commission considered Kansas’s significant remedial actions to mitigate these issues as well as the cooperation of state officials with SEC staff during the investigation.”

In other words, Kansas had a grossly underfunded state pension system, and did not adequately disclose that to potential purchasers of new state debt. The full text of the order gives more detail as to how Kansas was an outlier among the states, not only in the magnitude of its problem, but in its lack of disclosure:

Kansas’s practice of not disclosing the underfunded status of KPERS became increasingly inconsistent with the practice of most states issuing municipal securities, which generally provided disclosure in their CAFRs or the body of their Official Statements regarding the financial health of their pension funds. By 2008, with the exception of Kansas, the overwhelming majority of the Official Statements for state-level bond issuances at a minimum disclosed the UAAL or funded ratios of the associated state-level pension plans, particularly if those plans were significantly underfunded.

Here’s what this means to public policy:

First, the Kansas Public Employee Retirement System (KPERS) was in terrible financial condition, compared to other states.

Second, Kansas did not adequately disclose that to potential investors, according to the SEC.

Third, reforms have been implement to the satisfaction of the SEC.

Kansas Department of Administration logoFourth, the SEC was quite critical of the Kansas Department of Administration, or KDA.

Fifth, the head of KDA at the time was Duane Goossen. On his blog his biography contains: “[Goossen] was appointed by Sebelius in 2004 to concurrently serve as Secretary of the Kansas Department of Administration, the agency that manages state facilities, accounting, information services and employee programs.”

Although retired from state government, Goossen maintained a role in public affairs as former Vice President for Fiscal and Health Policy at Kansas Health Institute, and now authors a blog concerning issues related to the Kansas budget.

More reporting on this matter from Kansas Watchdog is at SEC charges Kansas with fraud for Parkinson-era omissions.

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What is truth on education finance in Kansas?

From Kansas Policy Institute.

Duane Goossen distorts the truth on education finance

By Dave Trabert

Former state budget director Duane Goossen’s recent blog post entitled “Woe to Education Finance” is yet another example of data being deliberately distorted or falsified for political gain. Mr. Goossen served as budget director under governors Graves, Sebelius and Parkinson and has been a vocal critic of anything even hinting at efficient government…let alone lower tax burdens. Indeed, his post concludes, “The fallout from the governor’s tax plan has made investment in Kansas public schools impossible.” That false claim is completely debunked on page 60 of the Division of Budget’s FY 2015 Comparison Report, showing that state funding of schools will increase by $176 million this year (not counting property taxes that will finally be recorded properly as state aid).

And that’s just the beginning of the false claims and distortions.

Goossen: “Costs for supplies, electricity, transportation, and teachers’ salaries are all increasing. But for the coming academic year, schools must cover those growing expenses with $548 less for each student than they had 6 years ago.”

Table 1 shows the most recent estimate of per-pupil spending for the year just ended. Even if the portion recorded as Federal and Local is unchanged this year, the addition of $176 million will take per-pupil expenditures to roughly $13,411. That would be $751 more per-pupil than six years ago … not $548 less.  Mr. Goossen is only telling a partial story, as shown in the next section.

What’s more, to the extent that costs are increasing for schools, they are also increasing for individual families and businesses. Mr. Goossen is essentially demanding that taxpayers give government a raise when they have no such power with their own paychecks and are facing rising costs as well. His demand for more money also presumes that districts are organized and operating efficiently, which we know is not true according to multiple Legislative Post Audit studies.

Note: The KSDE estimate for 2013-14 was provided before the addition of funding during the recent legislative session, so it is possible the actual spending will be higher than the estimate. It should also be noted that KPI’s estimate of 2014-15 utilizes data from Budget and KSDE and that there could be reporting differences between those entities that would affect the Total. This note also applies to Table 5.

Goossen: “In the 2008/2009 school year, school budgets were based on a per pupil amount of $4,400 — the high point for school finance in Kansas. For the upcoming 2014/2015 school year, lawmakers budgeted $3,852.”

Mr. Goossen writes this as though the amounts listed are all that is provided to schools. In reality, he is talking only about Base State Aid Per Pupil, which is just the beginning point for a portion of school funding. As shown above, total aid per-pupil is about three times greater than Base and that total state aid that is more than double the Base. He deliberately ignores funding that doesn’t suit his preferred narrative.

Goossen: “At its root, a school district’s budget is determined by an amount per pupil multiplied by the number of students. School districts can then add on a “local option budget” of up to 33 percent of the basic budget. Schools must run their classrooms and education programs within that total.”

“Deceptive” would be a generous interpretation of Mr. Goossen’s representation in this regard.  As shown in Table 2, he is grossly understating total aid to school districts. Multiplying Base State Aid Per Pupil times Weighted Enrollment produces an amount roughly equal to Base State Aid plus extra money provided through many weightings (At-Risk, Bilingual, Transportation, etc.); adding Local Option Budget money would lead on to believe that school funding for 2013 was about $3.2 billion.  The actual total, according to the Kansas Department of Education, was $5.8 billion.

 

Saying “schools must run their classrooms and education programs within that total” is the caveat that saves his representation from being an outright false claim. There is no official definition of “education programs” but he later provides a few examples of what he may exclude from “education programs,” saying “… school districts also receive funds for to pay for other things: the Kansas Public Employees Retirement System (KPERS), special education, school building construction, capital outlay, food service, etc. However, that funding must be used for its intended purpose.”

It is true that money for the listed spending categories must generally be used for those purposes, but his “etc.” contains a lot of unrestricted funding, the most notable of which, Supplemental General State Aid, was $339 million for 2013 and is budgeted to be $448.5 million this year.

Mr. Goossen and other “just spend more” proponents loudly proclaimed over the last few years that the Legislature should raise Base State Aid in accordance with the Supreme Court settlement over Montoy. But now that the Supreme Court has effectively reversed that ruling and says that all funding, including State, Federal, Local and even KPERS must be counted toward adequacy, they have a decidedly different — and quite hypocritical — position. They still cling to Base State Aid as their touchstone and refuse to acknowledge that, as the Supreme Court says, “… a stable retirement system is a factor in attracting and retaining quality educators — a key to providing an adequate education.”

It is also worth noting that school districts say nicer facilities lead to better student outcomes when they want more money for that purpose, but facilities suddenly don’t count when they want other money. Spending more money on facilities also makes less available for other functions, as does having district employees perform functions that could be privatized, which forces more money to be spent on KPERS.

Goossen:  “Costs for supplies, electricity, transportation, and teachers’ salaries are all increasing. But for the coming academic year, schools must cover those growing expenses with $548 less for each student than they had 6 years ago.”

The false claim about per-pupil spending being down was already debunked but Goossen also implies here that Base State Aid Per Pupil is all that schools receive to pay for supplies, electricity, transportation and teachers’ salaries, which of course is not true. Table 3 highlights other major unrestricted funding sources that Mr. Goossen and others routinely ignore in their pursuit of more money.

At-Risk funding does carry some restrictions but that funding is not required to be used for the exclusive benefit of students who generate the funding. For example, the KSDE At-Risk Guidelines say “At-Risk funds can be used to support classroom teacher salaries to the proportional percent identified at-risk students.” The guidelines merely require that at-risk students be present in the classroom.

Table 4 shows spending from the K-12 At-Risk Fund in 2013 (another $19.8 million was spent from the At-Risk 4 year-old Fund, which can be used for K-12), including money spent on each category that Mr. Goossen implied could only be funded with Base State Aid dollars. Most of the salary expenditure was for regular classroom teachers but money was also used to pay for custodians, support staff and administration.

Goossen: “The per-pupil figure has dropped because state funding has dropped.”

Table 1 shows that per-pupil funding of schools has increased. Table 5 shows that state funding has also increased each year since 2011 and is budgeted to set a new record this year. Again, Mr. Goossen does not allow the facts to get in the way of his political narrative.

Goossen: “Is the state in a position to add money to push the per-pupil amount up?

Set aside the fact that that just happened. The real issue here is that Mr. Goossen is posing the wrong question. “Just spend more” is simply about institutional demand for more money and completely disregards the educational needs of individual students. Political demand for more money also ignores these realities:

  • Every Legislative Post Audit report says districts are not operating efficiently.
  • $430 million of education funding was used to increase district cash reserves since 2005.
  • Student achievement on independent national tests is relatively unchanged despite large funding increases over the last decade.

One must wonder how much of Kansas’ and the nation’s student achievement woes are attributable to political self-interest and putting a higher priority on institutions than on the needs of individual students.

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Kansas base state aid is only a part of spending

Using base state aid per pupil as the only measure of school funding leads to an incomplete understanding of school spending in Kansas.

Much of the discussion surrounding school funding in Kansas has centered around base state aid per pupil. It’s the starting point for the Kansas school finance formula, and therefore an important number.

Base state aid per pupil has fallen in recent years. Public school spending advocates want Kansans to be aware of only this fact. For them, only this number is important.

But Kansas schools have much more to spend than just base state aid.

Ratios of school spending to base state aid.
Ratios of school spending to base state aid.
In the last school year base state aid per pupil was $3,838. But in that year total spending funded by Kansas state sources was $6,984 per pupil, or 1.82 times base state aid. Adding local and federal sources, spending was $12,781 per student, or 3.33 times base state aid.

As shown in the nearby chart, there has been a steady increase in measures of school spending when compared to base state aid.

Considering Kansas state spending only, the ratio of state spending to base state aid was 1.10 in 1998. By 2013 that ratio had risen to 1.82, an increase of 65 percent for the ratio.

For total spending, the ratio rose from 1.86 to 3.33 over the same period, an increase of 79 percent.

What’s important to realize is that the nature of Kansas school funding has changed in a way that makes base state aid per pupil less important as a measure of school spending.

Wichita City Library, 1965

What incentives can Wichita offer?

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

In making the case for an economic development fund paid for by a sales tax, the argument goes like this: “Wichita and Sedgwick County compete conservatively with incentives. The City of Wichita and Sedgwick County have a total of $1.65 million in new uncommitted funds for cash incentives this year with any unused money going back to the general fund.” (Will Wichita Accelerate Competition for Primary Jobs?, presentation made to Wichita city council.)

This statement is true only if we use a very narrow definition of the word “incentive.” By any reasonable definition, Wichita has many incentives worth much more than what is claimed by Wichita economic development officials and politicians.

In fact, the report cited above contains contradictory information about the amounts that are available for economic development incentives in Wichita. Here is an example: “The $4.5 million PEAK program incentive from the Kansas Department of Commerce was an important factor in keeping NetApp in Wichita. Locally we were able to provide $836,000 in incentives.”

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

Available incentive programs

Kansas Department of Commerce logoA letter to NetApp from the Kansas Department of Commerce laid out the potential benefits from the state. As detailed in the letter, the programs with potential dollar amounts are:

  • Promoting Employment Across Kansas (PEAK), up to $7,705,535
  • Kansas Industrial Training with PEAK, up to $160,800
  • sales tax savings of $6,880,000
  • personal property tax exemption, $11,913,682
  • High Performance Incentive Program (HPIP), $8,500,000

The total of these is $35,160,017. Some of these benefits are paid over a period of years. The PEAK benefits are payable over seven years, according to the letter, so that’s about $1.1 million per year. These are potential benefits; the company may not actually qualify for and receive this entire amount. But it’s what the state offered.

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

Local tax exemptions

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

It's important for citizens to know incentivesWhen Boeing announced in 2012 that it was closing its Wichita operations, city leaders complained that Boeing was leaving Wichita even though it had received many incentives. From 1979 to 2007, Boeing received tax abatements through the industrial revenue bond process worth $658 million, according to a compilation provided by the City of Wichita. (This is not money the city lent or gave to Boeing. IRBs provide a vehicle for granting tax abatements or exemptions.) At the time, city officials said the average amount of bonds was $120 million per year. With Wichita commercial property tax rates at 3.008 percent ($30.08 per $1,000 of appraised value), according to GWEDC, that’s a tax savings of around $3.6 million per year. To Boeing, that’s as good as receiving cash year after year.

Tax increment financing

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

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

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

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

Tax credits

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

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

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

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

STAR bonds

Last year a STAR bonds district in northeast Wichita was approved to receive $31,570,785 from these bonds. The STAR bonds are paid off with sales tax revenue that would otherwise go to the state and overlapping jurisdictions. This is sales tax collected from the business’s customers, and doesn’t cost the business anything.

Adding it up

This list is not complete. There are other programs and other beneficiaries of economic development subsidies. With this in mind, it is disingenuous for city and other officials to use the $1.65 million figure as though it was all Wichita had to offer. It’s important for citizens to know that contrary to the claims of officials, Wichita has many economic development incentive programs available, and some have substantial value to the recipients, with corresponding cost to the city and other jurisdictions.

Kansas School Finance Formula, from Kansas Policy Institute, August 2014

Kansas school finance formula explained

From Kansas Policy Institute.

Kansas Policy Institute presents the 2014-15 student weighted funding formula

By David Dorsey

The updated version of the formula that will be used by the Kansas State Department of Education to determine student weighting in the coming school year is presented below. This complex formula is the basis to adjust (increase) the number of “students” in a school district for state funding purposes.

Dissecting this complicated formula reveals those factors the state recognizes that require additional money.

Highlights include:

  • Up to 13 different factors decide what the “real” student count will be for a particular district*.
  • Seven factors (at-risk, vocational ed, bilingual ed, high-density at-risk, new facilities, high enrollment, and virtual students weighting) are calculated using percentages of student enrollment.
  • Four factors apply to all 286 districts. They include:
    • at-risk students (those who qualify for free lunch)
    • low or high student enrollment
    • special education weighting
    • transportation
  • The others vary in applicability from the vocational education weighting (267 districts in 2013-14) to declining enrollment weighting (2 districts in 2013-14).

Once all applicable factors are determined, the total weighted number of students is multiplied by the Base State Aid Per Pupil (BSAPP — $3,838 in 2013-14 and $3,852 in 2014-15) to calculate that part of the amount of state aid a district receives.

These weightings are no small affair. For example, in the Elkhart School District (USD218) last year, the weighting factors increased the student count from 502.6 (actual enrollment) to 1,668. 2, a 231.9% increase. In dollar terms, that increased Elkhart’s BSAPP funding by $4,473,573 from $1,928,979 to $6,402,552. That’s an effective BSAPP of $12,739! And that’s not an isolated case. Nearly half of Kansas’s 286 school districts realized at least a doubling of the effective BSAPP due to weighting.

People in the education establishment are quick to lament that BSAPP is down from the pre-recession figure of $4,400 in 2008-09 to the current $3,852 for the 2015 fiscal year. However, you never hear them speak of the all the weightings that significantly add to the dollars actually received. In fact, when all students statewide are included, the real BSAPP for 2013-14 was $6,640. In a recent Lawrence Journal-World article it was reported that Lawrence Superintendent Rick Doll said the district is still suffering from cuts in base state aid. According to Doll, “We are operating basically at about 1999 school funding levels.” That’s not even close to being accurate. According to KSDE, state funding per pupil in 1999 was $4,533. That figure rose to an estimated $7,052 per pupil for last school year. Local support has more than doubled since ’99 (from $2,238 to $4,809 per pupil). Likewise for federal support.

It is important to understand what a difference in the level of funding the weighting of students adds. Last school year, the weightings provided $1.3 billion over and above BSAPP to the state’s 286 districts. But some Kansas politicians, particularly those more interested in protecting institutions than serving children, and the education establishment don’t like to talk about that part of state aid to education. Instead, they like to focus only on the BSAPP figure. That’s why we hear statements made like Superintendent Doll’s.

If I were still a math teacher and they were my students, their homework assignment would be learn and understand this formula. And yes, it would be on the test.

*There is one change in the formula from the 2013-14 school year. The low-proficient, non-at-risk factor was removed during the 2014 legislative session.

Kansas School Finance Formula, from Kansas Policy Institute, August 2014
Kansas School Finance Formula, from Kansas Policy Institute, August 2014
Kansas Capitol

McGinn, as committee chair, was not for performance measures

A 2011 Kansas bill could have increased the accountability of state government, but committee chair Carolyn McGinn wasn’t in favor.

In the 2011 session of the Kansas Legislature, several bills were proposed that would streamline government and investigate opportunities for privatization.

Another proposed bill in 2011 was HB 2158, which would have created performance measures for state agencies and reported that information to the public. The supplemental note says that the bill “as amended, would institute a new process for modifying current performance measures and establishing new standardized performance measures to be used by all state agencies in support of the annual budget requests. State agencies would be required to consult with representatives of the Director of the Budget and the Legislative Research Department to modify each agency’s current performance measures, to standardize such performance measures, and to utilize best practices in all state agencies.” Results of the performance measures would be posted on a public website.

This bill passed the House of Representatives by a nearly unanimous vote of 119 to 2. But in the Senate, this bill was victim of a “gut-and-go” maneuver in a committee chaired by Carolyn McGinn. In effect, the bill died and was not considered by the entire Senate.

This bill proposed to spend modest amounts increasing the manageability of government, not the actual range and scope of government itself. It, along with the other two, would have started Kansas on a path towards spending responsibly.

As it turns out, many in the legislature — this includes Senate Republicans who initiated or went along with the legislative maneuvers that killed these bills — are happy with the operations of state government remaining in the shadows.

ballot-296577_640

Women for Kansas voting guide should be read with caution

If voters are relying on a voter guide from Women for Kansas, they should consider the actual history of Kansas taxation and spending before voting.

A political advocacy group known as Women for Kansas has produced a voting guide, listing the candidates that it prefers for Kansas House of Representatives. But by reading its “Primer on the Issues,” we see that this group made its endorsements based on incorrect information.

One claim the group makes is this regarding taxes in Kansas: “Income taxes were reduced for many Kansans in 2012 and 2013, and eliminated entirely for some, with a corresponding increased reliance on sales taxes and local property taxes. This shifted the tax burden to the less affluent and from the state to counties, cities and school districts.”

This is a common theme heard in Kansas the past few years. But let’s unravel a few threads and look at what is actually happening. First, keep in mind that the lower tax rates took effect on January 1, 2013, just 1.5 years ago.

Then, Women for Kansas may be relying on information like this: A university professor who is a critic of Sam Brownback recently wrote in a newspaper column that “Property taxes are on track to increase by more than $400 million statewide during Gov. Sam Brownback’s term in office.”

Through correspondence with the author, Dave Trabert of Kansas Policy Institute found that this claim is based on increases of $300 million plus an estimated $100 million increase yet to come. Trabert noted that this amounts to an increase of 11 percent over four years. To place that in context, property taxes increased $767 million and 29 percent during the first term of Kathleen Sebelius. Inflation was about the same during these two periods. A more accurate claim would be that Kathleen Sebelius shifted taxes to counties, cities, and school districts, and that Sam Brownback’s administration has slowed the rate of local property tax increases compared to previous governors.

Another claim made by Women for Kansas concerns school spending: “Reflecting decreased revenues due to tax cuts, per-pupil spending is down, and both K-12 and higher education are facing further reductions in the immediate future.”

The allegations that per-pupil spending is down due to tax cuts is false. The nearby chart of Kansas school spending (per pupil, adjusted for inflation) shows that spending did fall, but under budgets prepared by the administrations of Kathleen Sebelius and Mark Parkinson. Since then, spending has been fairly level. (Remember, lower tax rates have been in effect for just 1.5 years.)

Kansas school spending, per student, from state, local, and federal sources, adjusted for inflation.
Kansas school spending, per student, from state, local, and federal sources, adjusted for inflation.

If we look at other measures of school support, such as pupil teacher ratios, we find that after falling during the administrations of previous governors, these ratios have rebounded in recent years.

When spending figures for the just-completed school year become available, it’s likely that they will show higher spending than the previous year. That’s been the trend.

If you’ve received or read the voter guide from Women for Kansas, please consider the actual history of Kansas taxation and spending before voting.

Tallgrass National Prairie Preserve in the Kansas Flint Hills

The Kansas economy under guidance of moderates

Before wishing for a return to the “good old days,” let’s make sure we understand the record of the Kansas economy.

Some in Kansas are calling for a return to the “moderate” and “reasonable” policies of past leadership, with a particular nostalgia for the tenures of governors Bill Graves and Kathleen Sebelius. But before getting what we wish for, let’s make sure we understand the history of the Kansas economy.

In September 2005 the Center for Economic Development and Business Research at Wichita State University published a report titled “Measuring Economic Performance for the 50 States and the District of Columbia.” The data covers the ten years between 1994 and 2003. For context, Bill Graves became governor of Kansas in 1995 and served for eight years. Following is a sample from that document. It reads:

It is clear that the Kansas economy has not performed well over the past 10 years. With the exception of job creation (middle third), Kansas has ranked among the bottom third of states across economic performance measures. Kansas has performed below the average for the Plains States Region in 5 out of the 6 measures examined as well. (Job growth in Kansas equaled the regional average at 1.4 percent annually.)

Kansas Economic Performance, from Center for Economic Development and Business Research at Wichita State University, September 2005

Let’s be careful what we wish for in Kansas.

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

Job growth in the states and Kansas

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

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

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

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

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

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

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

Kansas Farm Scenic Sky Clouds Wheat Farmland kansas-243079_1280

Third annual Kansas Freedom Index released

From Kansas Policy Institute.

3rd Annual Kansas Freedom Index Released

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

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

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

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

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

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

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

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

Kansas expenditures, compared to others

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

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

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

Kansas political signs are okay, despite covenants

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

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

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

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

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

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

Practically: Should you display signs in your yard?

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

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

The Kansas statute

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

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

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

WichitaLiberty.TV set 2014-04-29 01 800

Wichita: We have incentives. Lots of incentives.

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

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

Government employee costs in the states

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

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

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

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

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

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

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

Using the visualization.

Tax collections by the states

Kansas state government collects more tax revenue than most surrounding states. Additionally, severance taxes are a minor contribution to collections, even in Texas.

The United States Census Bureau conducts an Annual Survey of State Government Tax Collections. It’s useful to gather figures for Kansas and some nearby states.

The data considers only tax collections by state government. It does not include cities, counties, school districts, or the many other taxing jurisdictions that states may have formed. I have computed this data on a per-person basis. Data is for 2013.

State tax collections for Kansas and some nearby states. Click for a larger version.
State tax collections for Kansas and some nearby states. Click for a larger version.
Considering total tax collections by state governments, note that Kansas, at $2,633 per person per year, is only slightly below the average for all states. For a group of nearby states, Arkansas and Iowa have higher state tax collections than Kansas. Nebraska, Oklahoma, Colorado, Texas, and Missouri are lower.

In some cases, state tax collections are substantially lower. Texas collects $1,955 per person per year, which is 25.75 percent less than Kansas.

Using the visualization.
Using the visualization.
Of note are severance taxes, which are taxes collected based on the extraction of oil, gas, and sometimes minerals. Kansas has a severance tax that produces, on a per person basis, $26 per year. In Texas the same tax produces $176 per person per year, and in Oklahoma, $134.

I’ve created an interactive visualization of this data that you may use. Click here to open the visualization in a new window.

Wind farm near Spearville, Kansas.

Kansas City Star’s dishonest portrayal of renewable energy mandate

Commentary from Kansas Policy Institute.

Kansas City Star’s dishonest portrayal of renewable energy mandate

By Dave Trabert

A recent Kansas City Star editorial criticizing opponents of Kansas’ renewal energy mandate for being disingenuous was itself a fine example of disingenuity.

Kansas law mandates that utility companies purchase specific levels of renewable energy, which means that Kansans are forced to purchase wind energy and pay higher energy prices. The degree to

Wind farm near Spearville, Kansas.
Wind farm near Spearville, Kansas.
which it is more expensive is a matter of dispute, but even the Star admits that wind is more expensive than fossil fuel alternatives. The Star describes this mandate as “consumer-friendly.”

They falsely say “these laws encourage electric facilities to supplement their use of fossil fuels with renewables.” The law does not “encourage;” it requires.

The Star touts economic gains to the wind industry but ignores the reality that those gains come at the expense of everyone else in the form of higher taxes, higher electricity prices and other unseen economic consequences.

They conclude by saying people “deserve a choice”, but mandates are the opposite of choice. Real choice would not only allow citizens to individually decide whether to purchase renewable energy, but to choose their energy supplier as well. Maybe it’s time to look at breaking up the utility monopoly in Kansas as other states have done.

Wichita City Budget Cover, 1994

Wichita property taxes compared

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.

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, March 2014″ 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 of the table is available here.

A pdf version of this table is available.
A pdf version of this table is available; click 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 pays 25 / 11.5 or 2.18 times the property tax rate as residential property. (The study reports a value of 2.263 for Wichita. The difference is likely due to the inclusion on utility property in their calculation.) The U.S. average is 1.716.

Whether higher assessment ratios on commercial property as compared to residential property is good 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 1.324 percent, while the national average is 1.508 percent. The results for a $300,000 property were similar.

Wichita commercial property tax rates compared to national average
Wichita commercial property tax rates compared to national average
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 $2,591 or 2.159 percent of the property value. For Wichita the corresponding values are $3,588 or 2.990 percent, ranking ninth from the top. Wichita property taxes for this scenario are 38.5 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.

man-digging-coins

What is the record of economic development incentives?

On the three major questions — Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? — traditional economic development incentives do not fare well.

Money GrabberJudging the effectiveness of economic development incentives requires looking for the unseen effects as well as what is easily seen. It’s easy to see the groundbreaking and ribbon cutting ceremonies that commemorate government intervention — politicians and bureaucrats are drawn to them, and will spend taxpayer funds to make sure you’re aware. It’s more difficult to see that the harm that government intervention causes.

That’s assuming that the incentives even work as advertised in the first place. Alan Peters and Peter Fisher, in their paper titled The Failures of Economic Development Incentives published in Journal of the American Planning Association, wrote on the effects of incentives. A few quotes from the study, with emphasis added:

Given the weak effects of incentives on the location choices of businesses at the interstate level, state governments and their local governments in the aggregate probably lose far more revenue, by cutting taxes to firms that would have located in that state anyway than they gain from the few firms induced to change location.

On the three major questions — Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? — traditional economic development incentives do not fare well. It is possible that incentives do induce significant new growth, that the beneficiaries of that growth are mainly those who have greatest difficulty in the labor market, and that both states and local governments benefit fiscally from that growth. But after decades of policy experimentation and literally hundreds of scholarly studies, none of these claims is clearly substantiated. Indeed, as we have argued in this article, there is a good chance that all of these claims are false.

The most fundamental problem is that many public officials appear to believe that they can influence the course of their state or local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering their expectations about their ability to micromanage economic growth and making the case for a more sensible view of the role of government — providing the foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.

Following is the full paper, or click here.

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

Kauffman index of entrepreneurial activity

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

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

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

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

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

Visualization created using Tableau Public.

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

Kansas economy has been lagging for some time

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

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

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

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

Debunking CBPP on tax reform and school funding — Part 4

From Kansas Policy Institute.

Debunking CBPP on tax reform and school funding — Part 4

By Dave Trabert

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

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

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

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

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

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

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

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

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

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

From Kansas Policy Institute.

Debunking CBPP on tax reform and school funding — Part 3

By Dave Trabert

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Wichita city hall

Contrary to officials, Wichita has many incentive programs

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

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

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

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

A sample of available incentive programs

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

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

Local tax exemptions

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

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

Tax increment financing

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

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

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

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

Tax credits

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

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

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

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

STAR bonds

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

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

Wichita City Budget Cover, 1994

Wichita’s benchmark not applicable to overlapping jurisdictions, it seems

Wichita Economic DevelopmentThe City of Wichita insists on a certain level of return on investment for its economic development incentives, but doesn’t apply that criteria to overlapping jurisdictions.

This week the Wichita City Council will consider an economic development incentive to a company. The council requires that incentive projects show a benefit-cost ratio of 1.3 to one or greater, meaning that the city expects to gain $1.30 or more for every dollar it invests in the incentive program.

For the project the city will consider on May 6, that threshold is met for the city’s general and debt service funds, and also for Sedgwick County and the State of Kansas. But for USD 259, the Wichita public school district, the benefit-cost ratio is 1.23 to one. That’s below the criteria the city requires for itself, although the policy contains many exceptions.

The program used to deliver this incentive is Economic Development Exemption (EDX) . It provides relief from property taxes based on a formula that considers job creation and capital investment. In this case, the company qualifies for a 93.25 percent real property tax exemption for up to ten years. Not 92 percent, and not 94 percent. Instead, the city has determined that precisely 93.25 percent is the correct amount of property tax exemption to be awarded. (Which reminds me of the saying that economists use a decimal point now and then to remind us they have a sense of humor.)

Furthermore, the decision to award the tax exemption is made solely by the City of Wichita. The other taxing jurisdictions have no say in the matter and no ability to object. So while Wichita requires a benefit-cost ratio of 1.3 to one or better, it’s saddling the Wichita school district with a benefit-cost ratio of 1.23 to one.

This is all the more meaningful when we consider that the Wichita school district is the largest participant in the incentive. The amount of tax revenue the school district is giving up — perhaps against its will — is almost as large as the city, county, and state put together. These are the amounts of foregone tax revenue for each jurisdiction, according to city documents.

City $14,096
State $651
County $12,738
USD 259 $24,810

Perhaps it’s time to consider laws in Kansas that would allow counties, school districts, and the state to opt out of economic development incentive decisions made by cities.

Kansas wind turbines

Renewables portfolio standard bad for Kansas economy, people

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

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

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

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

Michael Head, Beacon Hill Institute

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CBPP on Kansas schools and taxes, part 2

From Kansas Policy Institute.

Debunking CBPP on tax reform and school funding — Part 2

By Dave Trabert

We continue our debunking of the Center on Budget and Policy Priorities (CBPP) latest report entitled “Lessons for Other States from Kansas’ Massive Tax Cuts.” Part 1 dealt with state revenues. Today we debunk their claims on school funding and other state services.

CBPP claim #2 — School funding is 17 percent below pre-recession levels and funding for other services is way down and declining.

This is simply an outright fabrication — and not the first time that CBPP has done so. CBPP shows a graph of how they calculate what they claim is a reduction in school funding but, true to form, they provide no supporting data. The only source provided says “CBPP analysis of state budget documents and Kansas Governor’s Budget Reports.” CBPP routinely plays this game and they have refused to give us their data every time we requested it. I’ll get to school funding shortly but let’s start debunking this claim with a total spending review.

Here are the facts from the Governor’s Budget Reports cited by CBPP.[1] General Fund spending would decline a mere 1.8 percent this year (FY 2014) but it is still 6.3% higher than just three years ago. Next year, Kansas will set a new record for General Fund spending without even counting the education money that was just added to next year’s budget. Fiscal year 2013 was the highest level of General Fund spending on record.

The next table breaks total spending down into the primary functions listed in the Governor’s Budget Reports.

Of course, Kansas should have reduced spending last year and this year rather than spend down reserves but the fact remains that spending is not “way down and declining” as claimed by CBPP.

Their bogus claim on school funding may be grounded in an earlier collection of falsehoods published last year — and thoroughly debunked on this blog. CBPP often makes unsubstantiated claims which they attribute to their “analysis of data” but the data is not made available for review — even when requested.

The first thing to understand is that CBPP deliberately misleads readers by only talking about state funding of schools while ignoring the fact that Kansas, like many states, has a foundational funding formula that provides multiple funding sources, including local money that does not flow through the state budget.

But that is just the beginning of the deception. Their statement that “Kansas is still cutting school funding” on page four of their report is an outright lie.

This data provided by the Kansas Department of Education shows that State funding of public education has increased for four consecutive years.[2]  As CBPP is fully aware, one cannot get the full picture of school funding in state budget documents; the money reported as Local funding is provided on state authority but doesn’t run through the state budget.[3] Property taxes (including the 20 mills mandated by the Legislature) are sent directly to school districts by county treasurers.[4] Even the Kansas Supreme Court acknowledged (three weeks before CBPP’s report) that “… funds from all available resources, including grants and federal assistance, should be considered” when evaluating school funding.[5]

The following inflation comparisons are based on total school funding from the adjacent chart and shown on a per-pupil basis to also account for enrollment changes. The first comparison shows that actual school funding continues to run well ahead of inflation. Per-pupil funding increased from $6,985 per-pupil in 1998 to $12,781 in 2013; 1998 funding adjusted for inflation would be only $9,768. (Funding for the Kansas Public Employees Retirement System was not included in KSDE calculations of school funding until 2005; they provided the data for prior years and we adjusted spending accordingly.)


CBPP claims that school funding has not kept up with inflation since 2008 but that is misleading at best. Again, they provided no data to support their claim but we’ll lay it all out here.

Note that every chart shown above references “spending” instead of “funding.” KSDE arrives at their Local number each by subtracting State and Federal aid from districts’ reports of total expenditures. Total expenditures is different from total funding because districts report on a cash-basis fund accounting method and those figures do not reflect any aid received that was not spent. That information can be obtained by comparing the change in ending unencumbered cash balances of districts’ operating funds (excluding capital and debt).[6]

The above table shows that total inflation-adjusted spending between 2008 and 2013 was $85.3 million greater than actual spending, but districts could have spent $345.9 million more if they had used all of the aid provided during those years.

It should also be noted that school spending is not based on what schools need to meet required outcomes while also making efficient use of taxpayer money. To this day, not a single superintendent, legislator, KSDE employee, policy analyst or judge can identify that amount because no such analysis has been performed in Kansas. The cost study upon which previous court rulings were made was found to be deliberately skewed so as to provide the courts with inflated numbers.[7] The Kansas Supreme Court also recently abandoned the “actual cost” method of determining adequate funding in Gannon and substituted new standards (Rose), against which no cost or funding measurement has been conducted.[8]

In conclusion, CBPP’s claims about school funding in particular and state funding of services in general are merely a collection of false, misleading and inconsequential statements.

Kansas does need to reduce spending a bit in the coming years in preparation for the next tranche of tax reduction but there is ample ability to do so without reducing current services. There are tax transfers out of the General Fund that should be reconsidered and there are also multiple opportunities to significantly reduce the cost of providing current services.

The opportunities are there, and we’ll cover them separately in the coming months. The only question is whether Governor Brownback and a majority of legislators will stand up to the bureaucracy and special interests.
Stay tuned for Part 3.


[1] Kansas Division of the Budget, Governor’s Budget Report for FY 2015 published January, 2014, page 22 at http://budget.ks.gov/publications/FY2015/FY2015_GBR_Vol1–UPDATED–01-28-2014.pdf
[2] Kansas Department of Education; school years 2003-04 through 2012-13 located at http://www.ksde.org/Portals/0/School%20Finance/data_warehouse/total_expenditures/d0Stateexp.pdf. All other years provided by KSDE via email; copies in author’s possession.
[3] CBPP published a response to my September 13, 2013 blog post that provided this explanation. http://www.offthechartsblog.org/the-price-of-kansas-costly-tax-cuts/
[4] Explanation of property tax distribution with a quote from Dale Dennis at http://www.kansaspolicy.org/KPIBlog/Default.aspx?min=2013-01-01&max=2014-01-01.
[5] Gannon v. State of Kansas, page 77 at http://www.kscourts.org/Cases-and-Opinions/opinions/SupCt/2014/20140307/109335.pdf
[6] See KSDE explanation at the link for Endnote #2.
[7] Caleb Stegall, “Analysis of Montoy v. State of Kansas” published by Kansas Policy Institute in 2009 at http://www.kansaspolicy.org/ResearchCenters/Education/Studies/d65168.aspx?type=view
[8] Ibid, pages 76 and 77.

CBPP misleading Kansans on revenue

From Kansas Policy Institute.

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

By Dave Trabert

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

Kansas school spending, contrary to Paul Davis

Claims about school spending made by a Kansas Democratic Party leader don’t quite align with facts.

It is commonplace for liberal Kansas politicians and newspaper editorial pages to complain about severely cut spending on schools in Kansas. A recent example is Paul Davis in the Wichita Eagle.

kansas-school-spending-per-student-2013-10-chart-01Nearby is a chart of Kansas school spending (click it for a larger version). It’s adjusted for inflation. Spending is not as high as it was at its peak, but Davis’ claim of students who “have experienced severe budget cuts” don’t match the facts.

Now, it’s possible that Davis may want readers to consider only a portion of school spending, that being base state aid per pupil. It’s the starting point for the Kansas school finance formula, and therefore an important number.

Ratios of school spending to base state aid.
Ratios of school spending to base state aid.
Base state aid per pupil has fallen in recent years. Because of this, public school spending advocates claim that spending has been cut. But that’s not the case. As shown in the nearby chart, there has been a steady increase in measures of school spending when compared to base state aid.

In the last school year base state aid per pupil was $3,838. That’s the figure often used as the level of school spending. But in that year total Kansas state spending per pupil $6,984, or 1.82 times base state aid. Adding local and federal sources, spending was $12,781 per student, or 3.33 times base state aid.

Considering Kansas state spending only, the ratio of state spending to base state aid was 1.10 in 1998. By 2013 that ratio had risen to 1.82, an increase of 65 percent for the ratio. For total spending, the ratio rose from 1.86 to 3.33 over the same period, an increase of 79 percent.

What’s important to realize is that the nature of Kansas school funding has changed in a way that makes base state aid per pupil less important as an indicator of school spending.

Kansas Judicial Center
Kansas Judicial Center
The Kansas Supreme Court had something to say about this in its recent Gannon opinion that sent part of the case back to the lower court with instructions: All funding sources are to be considered: “In the panel’s assessment, funds from all available resources, including grants and federal assistance, should be considered.”

I wonder: Those who call for a return to the level of base state aid of 20 years ago (adjusted for inflation, of course): Would they also accept returning to the same ratios of total spending to base state aid?

Kansas Capitol

In Kansas, tax giveaways for job creation found ineffective

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

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

By Travis Perry, Kansas Watchdog

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

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

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

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

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

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

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

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

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

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

Prof. Nathan Jensen

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

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

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

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

Then he did it again.

Jensen said what he found was incredibly unsurprising.

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

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

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

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

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

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

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

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

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

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

Seal of the State of Kansas

Two versions of the Kansas income tax cuts

From Kansas Policy Institute.

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

By Steve Anderson

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

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

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

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

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

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

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

Kansas-division-budget-kpi-2014-04

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

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

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

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

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

Kauffman paper on local business incentive programs

Do Local Business Incentive Programs Really Create Jobs? Better Data Needed to Know for Sure, Says New Kauffman Paper

Kansas City, Mo. (PRWEB) April 17, 2014

Financial incentives are a key strategy for nearly every U.S. city and state to attract firms, and jobs, to their area. But while incentives can be credited with attracting firms to one region or another, how can we be sure they are generating the promised returns in terms of job creation?

The paper “Evaluating Firm-Specific Location Incentives: An Application to the Kansas PEAK Program,” released today by the Ewing Marion Kauffman Foundation introduces a proposed evaluation method and applies it to Promoting Employment Across Kansas (PEAK), one of that state’s primary incentive programs.

In the paper, researcher Nathan Jensen, associate professor of political science at Washington University in St. Louis, identifies a need for more comprehensive data to determine the effectiveness of incentive programs in creating jobs. Currently, states and cities provide limited data about companies receiving incentives, and many don’t keep information about firms that apply for incentives but don’t receive them.

“The data most often used to evaluate incentive programs tells only one part of one side of the story,” Jensen said. “To understand how much job creation can be directly attributed to incentives, and how much would have happened anyway, we need to pursue more granular data that provides better context.”

The proposed evaluation model, as applied to the PEAK program, uses National Establishment Time Series (NETS) data to capture employment and sales data for PEAK and non-PEAK firms in Kansas. To accurately assess results, the identified PEAK firms are compared to a control group of five “nearest neighbors,” firms similar in structure and sector to the PEAK firms.

Jensen cautioned that better access to more detailed data is necessary to make conclusive evaluations, but said the model highlights the need to reform the collection, management and sharing of data about incentive programs and recipients.

“Greater transparency and public sharing of data will allow much more sophisticated analysis of these programs’ value,” said Dane Stangler, Kauffman Foundation vice president of Research and Policy. “Understanding what types of incentives work, and how well they work, will help our cities and states make smart investments in programs that create jobs and drive economic growth.”

About the Kauffman Foundation

The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation that aims to foster economic independence by advancing educational achievement and entrepreneurial success. Founded by late entrepreneur and philanthropist Ewing Marion Kauffman, the Foundation is based in Kansas City, Mo., and has approximately $2 billion in assets. For more information, visit www.kauffman.org, and follow the Foundation on www.twitter.com/kauffmanfdn and www.facebook.com/kauffmanfdn.

WichitaLiberty.TV set 2014-03-03 1200

WichitaLiberty.TV: Kansas school finance and reform, Charles Koch on why he fights for liberty

In this episode of WichitaLiberty.TV: The Kansas legislature passed a school finance bill that contains reform measures that the education establishment doesn’t want. In response, our state’s newspapers uniformly support the system rather than Kansas schoolchildren. Then, in the Wall Street Journal Charles Koch explains why liberty is important, and why he’s fighting for that. Episode 39, broadcast April 20, 2014. View below, or click here to view at YouTube.

apple-chalkboard-books

In Kansas City, private schools seen as ‘a perversion’

If you’ve ever wondered about the difference between public schools and private schools, a top Kansas school administrator knows the difference:

David A. Smith, Chief of Staff, Kansas City, Kansas Public Schools
David A. Smith, Chief of Staff, Kansas City, Kansas Public Schools

David Smith, chief of staff for Kansas City, Kan., public schools, said the bill was targeted at students specifically in low-income districts, including his district. Now, he is trying to figure out what this portion of the bill will mean for public schools.

“It is beyond my comprehension how encouraging students to go to a private school serves the public good,” Smith said. “It is such a perversion of what it means to serve the public that I don’t get it.” (Legislators offer tax credits for scholarships to private schools, KU Statehouse Wire Service via Hays Daily News)

Consider these circumstances:

(a) Parents feel that their children are not thriving in Smith’s public school, and
(b) parents find a private school that they feel will help their children, and
(c) taxpayer money for these students is diverted from Smith’s public school to private schools that are teaching the children.

Is the result of these activities a “perversion?” Isn’t the public also served when children are educated in private schools? And if the private schools do a better job than the public schools, hasn’t the public been delivered better service?

Smith may not realize that if private schools are not doing a good job, students are not forced to attend them. They can go to other schools, including the public schools. But students who are not doing well in Smith’s school don’t have many alternatives. Perhaps none.

The attitude expressed by Smith is a opportunity to recognize and understand the real issue in the debate over schools in Kansas: Which is more important — public schools (and unions, teachers, principals, administrators, superintendents, service employees, school architects, school construction companies) or Kansas schoolchildren?

David A. Smith knows the answer that best serves his interests.

Economic Outlook Ranking for Kansas and selected states.

Rich States, Poor States for 2014 released

In the 2014 edition of Rich States, Poor States, Utah continues its streak at the top of Economic Outlook Ranking, meaning that the state is poised for growth and prosperity. Kansas continues with middle-of-the-pack performance rankings, and fell in the forward-looking forecast.

Rich States, Poor States is produced by American Legislative Exchange Council. The authors are economist Dr. Arthur B. Laffer, former Wall Street Journal senior economics writer (now Heritage Foundation Chief Economist) Stephen Moore, and Jonathan Williams, director of the ALEC Center for State Fiscal Reform.

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

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

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

In this year’s compilation for economic outlook, Kansas ranks fifteenth. That’s down four spots from last year.

Kansas compared to other states

Economic Outlook Ranking for Kansas and selected states.
Economic Outlook Ranking for Kansas and selected states.
A nearby chart shows the Economic Outlook Ranking for Kansas and some nearby states, shown as a trend over time. The jump of Kansas in 2013 is evident, as is the fall of Missouri.

Why Kansas fell

Kansas fell four spots in the Economic Outlook Ranking from 2013 t0 2014. To investigate why, I gathered data for Kansas from 2013 and present it along with the 2014 values. There are three areas that may account for the difference, One value, “Top Marginal Corporate Income Tax Rate,” did not change from 2013 to 2014, remaining at 7.00%. But the ranking for Kansas fell from 24 to 26, meaning that other states improved in this measure.

Economic Outlook Ranking components for Kansas, 2013 and 2014 compared.
Economic Outlook Ranking components for Kansas, 2013 and 2014 compared.

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

In “Sales Tax Burden” Kansas also fell two spots in rank. The burden is calculated proportional to personal income. The most recent data for these measures is for 2011, so this does not include the sales tax rate change that took place on July 1, 2013.

Kansas improved three rank positions for “Debt Service as a Share of Tax Revenue.” This data is from 2011.

Important conclusions

According to the authors of the report, there are three main conclusions to be drawn from this research:

States with lower taxes and fiscally responsible policies experience far more economic growth, job creation, and domestic in-migration than their high-tax, big government counterparts.

States are looking to become more competitive and embrace the policies that have been proven to lead to economic prosperity. Last year, 17 states substantially cut taxes, with Indiana, North Carolina, and Michigan leading the charge to vastly improve their overall economic outlooks.

California, Illinois, and New York — once economic powerhouses — continue their long slides into deeper economic malaise. While levels of economic output for these states remain high, rates of economic growth are falling behind states like Texas, North Carolina, and Utah.

How valuable is the ranking?

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

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

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