Tag Archives: Kansas state government

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

The Kansas economy and agriculture

There’s no need for Kansas state government to exaggerate the value of agriculture to the Kansas economy.

A recent press release from the office of Kansas Governor Sam Brownback quoted the governor thusly: “Agriculture is our largest economic driver, bringing more than $63 billion into the Kansas economy.” (Governor Sam Brownback visits will reinforce the importance of Kansas agriculture, August 17, 2015.)

$63 billion is a lot of output. It’s about 43 percent of the Kansas economy. A document supplied by the Kansas Department of Agriculture provides more detail: “As shown in the above table, agriculture, food, and food processing supports 229,934.1 jobs, or 12% of the entire workforce in the county [sic]. These industries provide a total economic contribution of approximately $62.8 billion, roughly 43% of Gross Region Product (GRP).” (Estimated Economic Impact of Agriculture, Food, and Food Processing Sectors, May 7, 2015.)

The document explains how such a large number is obtained. It includes three components, explained here: “Direct, indirect, and induced effects sum together to estimate the total economic contribution in the state. Direct effects capture the contribution from agricultural and food products. Indirect effects capture the economic benefit from farms and agricultural businesses purchasing inputs from supporting industries within the state. Induced effects capture the benefits created when employees of farms, agricultural businesses, and the supporting industries spend their wages on goods and services within the state.”

This method of reckoning economic impact is from a model called IMPLAN. It is a proprietary system with methodology and assumptions not open to inspection. It often used by those who are asking government for money or tax breaks. IMPLAN comes up with some real whoppers as to how important an industry is to the economy. When shown these figures, government officials are usually swayed to grant incentives.

There’s a problem, however. Agriculture cannot possibly be responsible for 43 percent of Kansas GDP. The U.S. Bureau of Economic Analysis (BEA) has figures for each state showing the contribution to GDP for industry categories. I’ve gathered the data and calculated percentages for each industry. As you can see, the category “Agriculture, forestry, fishing, and hunting” accounts for $8,136 million or 5.5 percent of Kansas GDP. There are seven other industry categories that rank above agriculture.

Gross Domestic Product for Kansas by Industry.
Gross Domestic Product for Kansas by Industry.

5.5 percent is a long way from the governor’s claim of 43 percent. It is true that the title of the paper is “Estimated Economic Impact of Agriculture, Food, and Food Processing Sectors.” So consider these industry subsectors:

Food and beverage and tobacco products manufacturing of $3,463 million (2013 value; 2104 not available)
Food services and drinking places $2,776 million (Also 2013 value)

If we add these to agriculture, we have production worth 9.8 percent of Kansas GDP. This is being overly generous to agriculture. It counts all bars and restaurants as part of the agriculture industry, something that makes no sense.

So how do we take these numbers and pump them up to 43 percent? IMPLAN, that’s how. It’s true that when an industry causes economic activity to occur, it spawns other economic activity. These are the indirect and induced effects that IMPLAN produces. But these numbers are hugely inflated. And when we take all industries, economic activity is counted more than once.

Recall there are seven industry categories ranking above agriculture. When it suits its needs, each of these uses IMPLAN to boost its importance to the state. Consider manufacturing, which at 13.1 percent of GDP is the third-largest industry in Kansas. When manufacturing companies appeal to state or local government for subsidies, they use IMPLAN or related mechanisms to inflate their importance. Almost everyone does this. It’s standard procedure.

Except: When everyone claims the same indirect and induced economic activity, such analysis becomes meaningless. If we added up the IMPLAN-calculated value of each industry to the Kansas economy, we’d end up with a value several times larger than the actual value.

This is what the Kansas Department of Agriculture and Governor Sam Brownback have done. We expect this behavior from companies or local economic development agencies when they appeal for economic development incentives. They need to inflate their importance to gullible government bureaucrats and elected officials. But Governor Brownback doesn’t need to do this, and neither does the Kansas Department of Agriculture. From them, all we want is the truth, and nothing more.

Kansas school standards found lower than in most states

A second study finds that Kansas uses low standards for evaluating the performance of students in its public schools.

What is the relative strength of weakness of the standards your state uses to evaluate students? A new study provides answers to this question. The report is Why Proficiency Matters. It is a project of the Foundation for Excellence in Education.

This study is important because the most widely-reported source of data about student achievement is a state’s own assessment tests. But there are problems, as explained in the report:

A proficiency cut score is an actual number (score) on an assessment that draws the line determining where a student is proficient. States use different tests and set different proficiency cut scores to determine the proficiency level for knowledge and skill mastery. When proficiency cut scores are set too low, it conveys a false sense of student achievement.

Each state has its own tests, and each state sets the bar for what is considered “proficient,” as well as for other descriptive measures such as “basic.” It’s not surprising that states vary in the rigor of their standards:

The difference between NAEP and individual states’ proficiency expectations are wide and varied. Therefore, state-reported proficiency is not equivalent to proficiency on NAEP. This is referred to as the “proficiency gap”. States with large proficiency gaps are setting the bar too low for the proficiency cut score, leading parents and teachers to believe students are performing better than they actually are.

This study looks at the results students on tests in each state and compares them to a national standard, the National Assessment of Educational Progress (NAEP). By doing so, the study evaluates the strength or rigor of the standards used by each state. This does not judge the actual performance of the student. Rather, it assesses the decisions made by the state’s school administration as to what standards they will hold students.

This is not the only effort to assess state standards. The National Center for Education Statistics (NCES), which is part of the U.S. Department of Education, also performs a similar analysis. See Kansas school standards evaluated.

Results for Kansas

The results of the analysis show that Kansas holds students to low standards of achievement. Kansas says students are “proficient” at a very low level of accomplishment, relative to other states. This is consistent with the separate analysis performed by National Center for Education Statistics.

These are the findings for Kansas:

Grade 4 reading: Kansas standards are ranked 39 out of 50 states.
Grade 8 reading: 45 of 50 states.
Grade 4 math: 36 of 50 states.
Grade 8 math: 36 of 50 states.

WichitaLiberty.TV: Rodger Woods of Americans for Prosperity-Kansas

In this episode of WichitaLiberty.TV: Americans for Prosperity is one of the largest grassroots political action groups. Its motto is “Economic Freedom in Action.” Rodger Woods, deputy state director for AFP-Kansas, joins me to explain AFP’s mission and goals, and some specific issues. View below, or click here to view at YouTube. Episode 92, broadcast August 16, 2015.

AFP’s website is Americans for Prosperity.

Kansas school funding growing faster than inflation

Kansas school funding has been growing much faster inflation and enrollment, but for some, it will never be enough, and they will continue to use taxpayer money to press their monetary demands, writes Dave Trabert of Kansas Policy Institute.

Even by KASB standards, school operating spending is $3.9 billion ahead of inflation

By Dave Trabert

A recent blog post by the Kansas Association of School Boards (KASB) Associate Executive Director Mark Tallman says “Total school district funding is, in fact, at an all-time high, expected to top $6.1 billion this year” but “… the part of school funding available for day-to-day operating costs is not keeping up with inflation and enrollment.” There are several misleading aspects to his statement and the data does not support the intended message, but let’s first give credit for the courage to contradict education officials who say funding has been cut. Bravo!

KASB’s definition of operating costs does not comport with the official definition used by the Kansas Department of Education or the U.S. Department of Education1, but for the sake of argument, let’s say that it’s correct. Let’s also assume that their definition of current operating funding represents the amount needed to efficiently operate schools and achieve the required outcomes, even though the facts refute any such claim.

By increasing the KASB-defined operating spending for inflation (the calculation for 2006 is $6,928 times (191.41 ÷ 185.14) = $7,162), we find that schools received a lot more money each year than if KASB’s 2005 amount had been increased each year for inflation. The margin of difference is getting closer over the next two years (if one doesn’t count all of the funding), but funding will have exceeded inflation by almost $3.9 billion since 2005.

KASB uses a different methodology in their inflation analysis. They show prior years’ spending in 2014 inflation-adjusted (constant) dollars; i.e., $X spending in 2014 has the same buying power as $Y in prior years. That methodology is common for restating buying power but it is irrelevant to the question of whether schools are or have been adequately funded.

The Kansas Constitution says the legislature must make suitable provision for the finance of public education; it does not say that schools must be given whatever they want to spend or that efficient use of taxpayer money cannot be taken into account. The honest truth is that no one knows what schools need to achieve the necessary outcomes while making efficient use of taxpayer money, because no such analysis has ever been undertaken in Kansas. We do know, however, that every Legislative Post Audit has found schools to be operating inefficiently and school superintendents openly acknowledge that they choose to spend more than is necessary in many circumstances. We also know that school districts haven’t even spent all of the money they’ve received over the last ten years, as about $400 million has been used to increase operating cash reserves.

There may be ways to demonstrate that today’s funding has less buying power than a particular point in time but that doesn’t mean that each year’s funding didn’t keep up with inflation and enrollment — as shown above, per-pupil funding as defined by KASB was $3.9 billion more than an inflationary increase.

The gap is even greater for total funding, which would have been $6 billion less over the last ten years if per-pupil funding for the 2005 school year had been increased each year for inflation. School districts received large funding increases beginning in 2006 from a Supreme Court Montoy ruling based on a cost study that has since been abandoned by the Supreme Court in Gannon.

The Shawnee County District Court may believe that schools are not adequately funded, but they ignored the Kansas Supreme Court in arriving at what amounts to little more than a political perspective. School funding has been growing much faster inflation and enrollment, but for some, it will never be enough … and they will continue to use taxpayer money to fund KASB justifications (and attorneys) for their monetary demands.

 

1KSDE and the U.S. Department of Education say operating expenditures “…do not include equipment (700 object codes), Capital Outlay or Bond & Interest. [700 object codes include expenditures for acquiring fixed assets, including land or existing buildings; improvements of grounds; initial equipment; additional equipment; and replacement of equipment.]”  The KASB definition also excludes Food Service and employee retirement costs but they don’t disclose that their definition is not the official definition and it also does not comport with the Kansas Supreme Court, which says all funding sources, including retirement costs, should be considered as part of adequate funding.

Federal rules serve as ‘worms’ buried in promises of ‘free money’

An often unappreciated mechanism throughout the Kansas budget severely limits the ability of legislators and governors to adapt to changing state priorities. A new paper from Kansas Policy Institute explains.

Federal Rules Serve as “Worms” Buried in Promises of “Free Money”

Mandates remove state control of budgets, exemplify increasing federal overreach

July 30, 2015 — Wichita — An often unappreciated mechanism throughout the Kansas budget severely limits the ability of legislators and governors to adapt to changing state priorities. These Maintenance of Effort (MOE) requirements are highlighted in a new paper by Kansas Policy Institute and is authored by former state budget director Steve Anderson. MOE stipulations force state and local governments to maintain a constant level of funding for several federal grant programs, most notably Medicaid and the Elementary and Secondary Education Act, two major components of Lyndon Johnson’s “Great Society;” in FY 2014 these two programs accounted for over two-thirds of Kansas general fund expenditures.

Maintenance of Effort cover Kansas Policy InstituteDave Trabert, president of Kansas Policy Institute, offered the following in conjunction with the release of the paper, “Maintenance of Effort requirements are an end-run on the U.S. Constitution, which prohibits the federal government from dictating how states operate.  The feds use MOE to create contractual obligations that effectively control large chunks of states’ budgets and limit legislators’ ability to make appropriate decisions for their constituents.”

Unfortunately, policy makers are bound by MOEs regardless of the state’s budget situation, changing priorities, or new-found efficiencies. A previous legislature can effectively tie the hands of future elected officials. Sometimes it is even agency bureaucrats who sign up for “free federal dollars” apart from the normal appropriations process with little legislative input.

Steve Anderson, author of the “Maintenance of Effort: The Federal Takeover of State Budgets” and current Senior Fiscal Policy Fellow with KPI, said, “The constitutional right of a state to control the appropriation of their citizens’ tax dollars is too often being abrogated by the federal government’s MOE requirements. This takeover of the state budgets is like an addictive drug from which withdrawal is painful. Unlike a drug, this addiction can be created by prior legislatures, governors or even bureaucrats.  The pervasiveness of MOE goes to almost every function of state government.”

The report outlines several strategies that can be utilized by state governments to mitigate the negative effects of MOEs. One proposal may prove difficult with existing programs but brings some common sense to policy making moving forward — avoid federal funds as much as possible. Conversely, a similar recommendation would be that all new grant programs be approved by the state legislature.

In conclusion KPI President Trabert said, “MOE requirements are not about improving outcomes, but dictating how states operate. Until Congress puts a stop to this practice state legislators must say no to the promise of ‘free money’ from the feds and avoid the problems brought by MOEs.”

Westar: First, control blatant waste

As our electric utility asks for a rate increase, let’s first ask that it stop blatant waste.

Westar, our state-regulated electric utility, is asking for a rate increase. As part of any increase, we ought to insist that the utility do a better job of controlling blatant waste.

Downtown Wichita, July 17, 2015, 11:18 am.
Downtown Wichita, July 17, 2015, 11:18 am.
Streetlights burning unnecessarily in the middle day in downtown Wichita is an ongoing problem. See In Wichita, wasting electricity a chronic problem and Waste in Wichita, the seen and probably unseen for examples.

The problem may not be solved soon. No one has much motivation to solve the problem. The city pays Westar a fixed fee for each streetlight. The use of electricity is not metered, at least as far as the city’s bill is concerned. So if the city notices the lights wasting electricity during the middle of the day, well, it’s of no cost to the city. The city is concerned that working with Westar to turn off street lights during the day may not be cost-effective, according to Ken Evans, the city’s director of strategic communications. That’s the attitude he expressed in a recent City of Wichita Facebook dialog with citizens. But the city has run a campaign asking people to turn off appliances like microwave ovens and alarm clocks when not in use. This saves a vanishingly small amount of electricity, and at a large cost in convenience.

Downtown Wichita, July 17, 2015, 11:18 am. At least five burning street lights can be seen.
Downtown Wichita, July 17, 2015, 11:18 am. At least five burning street lights can be seen.
Westar, on the other hand, is a highly-regulated utility that operates much like a governmental agency. How strong is the profit motive to Westar? Not strong, it seems. Most individuals or private business firms would seek to reduce the waste that Westar seems unconcerned about.

But before granting Westar a rate increase, its regulators ought to insist that the utility work to control blatant waste. This may be the only way to get attention to this problem.

WichitaLiberty.TV: Bad news from Topeka on taxes and schools, and also in Wichita. Also, a series of videos that reveal the nature of government.

In this episode of WichitaLiberty.TV: The sales tax increase is harmful and not necessary. Kansas school standards are again found to be weak. The ASR water project is not meeting expectations. Then, the Independent Institute has produced a series of videos that illustrate the nature of government. View below, or click here to view at YouTube. Episode 88, broadcast July 19, 2015.

The “Love Gov” series of videos from the Independent Institute can be found here: Love Gov: From first date to mandate.

Kansas school standards evaluated

A new edition of an ongoing study shows that Kansas school standards are weak, compared to other states. This is a continuation of a trend.

Last week the National Center for Education Statistics (NCES) published a new version of its ongoing study Mapping State Proficiency Standards Onto NAEP Scales: Results From the 2013 NAEP Reading and Mathematics Assessments. As was also found in past years, the standards that the state of Kansas uses to evaluate students are low.

This study is important because states set their own standards for evaluating students, as the report explains: “Because each state set its own standards, there was no assurance that students who met the standards of one state would be able to meet the standards of another state, and one could not compare the effectiveness of schools across states in terms of the percentages of students reported to meet the standards.”

There is a national test that is the same in all states, the National Assessment of Educational Progress (NAEP). Again, from the report: “NAEP provided a common scale on which the stringency of the various state criteria for proficiency could be compared.” The purpose of the study is to map each state’s standards to a common standard. By doing this, we can determine whether a state uses a stringent or weak standard to evaluate students. This study does not evaluate the performance — good or bad — of a state’s students. Rather, the study evaluates the state and its standards.

The two-page summary for Kansas is here.

The summary is this:

For reading in grades four and eight, the answer to the question “How do Kansas’ reading standards for proficient performance at grades 4 and 8 in 2013 map onto the NAEP scale?” is “below basic.”

For math in grades four and eight the answer to the same question is “basic.”

This means that the state of Kansas says students are “proficient” when by NAEP standards the students are “basic” or “below basic.”

Especially in reading, Kansas standards are low. For grade four reading, 26 states (including Kansas) are in the “below basic” category. For grade eight reading, only nine other states besides Kansas fall into the “below basic” category.

Following, charts excerpted from the study showing how Kansas measures against the other states. In some cases, there are few states with lower standards than Kansas. In no case is Kansas above the middle. Click charts for larger versions.

NAEP scale equivalents of state grade 4 reading standards for proficient, 2013, Kansas emphasized 2015-07

NAEP scale equivalents of state grade 8 reading standards for proficient, 2013, Kansas emphasized 2015-07

NAEP scale equivalents of state grade 4 math standards for proficient, 2013, Kansas emphasized 2015-07

NAEP scale equivalents of state grade 8 math standards for proficient, 2013, Kansas emphasized 2015-07

Wichita property taxes still high, but comparatively better

An ongoing study reveals that generally, property taxes on commercial and industrial property in Wichita are high. In particular, taxes on commercial property in Wichita are among the highest in the nation, although Wichita has improved comparatively.

50 State Property Tax Comparison Study, Selected Wichita Data. Click for larger version, or see text for pdf version.
50 State Property Tax Comparison Study, Selected Wichita Data. Click for larger version, or see text for pdf version.
The study is produced by Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence. It’s titled “50 State Property Tax Comparison Study, April 2015” and may be read here. It uses a variety of residential, apartment, commercial, and industrial property scenarios to analyze the nature of property taxation across the country. I’ve gathered data from selected tables for Wichita. (A pdf version is available here.)

In Kansas, residential property is assessed at 11.5 percent of its appraised value. (Appraised value is the market value as determined by the assessor. Assessed value is multiplied by the mill levy rates of taxing jurisdictions in order to compute tax.) Commercial property is assessed at 25 percent of appraised value, and public utility property at 33 percent.

This means that commercial property faces 2.18 times the property tax rate as residential property. (The study reports a value of 2.173 for Wichita. The difference is likely due from deriving the value from observations rather than statute.) The U.S. average is 1.710.

Whether higher assessment ratios on commercial property as compared to residential property is desirable public policy is a subject for debate. But because Wichita’s ratio is high, it leads to high property taxes on commercial property.

For residential property taxes, Wichita ranks below the national average. For a property valued at $150,000, the effective property tax rate in Wichita is 1.253 percent, while the national average is 1.490 percent. The results for a $300,000 property were similar.

Commercial property taxes in Wichita compared to nation.
Commercial property taxes in Wichita compared to nation.
Looking at commercial property, the study uses several scenarios with different total values and different values for fixtures. For example, for a $100,000 valued property with $20,000 fixtures (table 25), the study found that the national average for property tax is $2,519 or 2.099 percent of the property value. For Wichita the corresponding values are $3,289 or 2.741 percent, ranking fourteenth from the top. Wichita property taxes for this scenario are 30.6 percent higher than the national average.

In other scenarios, as the proportion of property value that is machinery and equipment increases, Wichita taxes are lower, compared to other states and cities. This is because Kansas no longer taxes this type of property.

Kansas sales tax has disproportionate harmful effects

Kansas legislative and executive leaders must realize that a shift to consumption taxes must be accompanied by relief from its disproportionate harm to low-income households.

While Kansas legislative leaders and the governor praise the shift from income taxes to sales taxes, they ignore the severely regressive effect of sales taxes in Kansas. That is, a sales or consumption tax affects low-income families in greatest proportion relative to their incomes. The primary reason for the harshness of the Kansas sales tax is its application to food purchased in grocery stores. Few states tax food, and many of those that do apply a lower tax rate to food.

During the debate over a proposed sales tax increase in Wichita last year, I gathered data from the U.S. Census Bureau regarding expenditures on various categories for five different levels of household income. My findings were that if the city raised sales tax by one cent per dollar, the lowest income class of families would experience an increase nearly four times the magnitude as would the highest income families, measured as a percentage of after-tax income. Others produced similar results. This is the regressive nature of sales taxes.

At the national level the Fair Tax is a program whereby income taxes are replaced by consumption taxes. Proponents believe it would be a positive factor for economic growth. In recognition of the regressive nature of sales taxes, the Fair Tax plan includes a “prebate” to compensate households for the sales tax paid on necessities like food. In effect, there would be no tax on food and other necessities, up to the poverty level.

During the legislative session this year, Kansas Legislative Research told legislators that increasing the sales tax from 6.15 percent to 6.50 percent would generate $164,200,000 in additional revenue to the state. This implies that a one percent increase in the sales tax rate would generate about $469 million in revenue. (This is based on static analysis, and therefore does not account for the changes in behavior that the higher sales tax would induce, however large or small the effect.)

Effect of sales tax on consumers of different income levels. Click for larger version.
Effect of sales tax on consumers of different income levels. Click for larger version.
It’s thought that the present sales tax on food results in about $390 million in tax collections. While these two values — 469 and 390 — are not equal to each other, the $469 million figure is close to the gap between revenues and expenses. (The tax bill the legislature passed will raise about $400 million, but it is widely believed the governor will have to make an additional $50 million in cuts.)

So what would have happened if the legislature had raised the sales tax by one cent per dollar and eliminated the sales tax on food? The answer is the sales tax in Kansas would be less regressive.

I modified my worksheet to allow for adjustment of the sales tax rate for general purchases, and for food separately. I gathered the results for three scenarios and present the results in a chart. I use the sales tax rates that Sedgwick County residents would experience. This includes a one cent per dollar county-wide tax in addition to the statewide rate. (Most counties and cities add to the statewide rate. The unweighted average sales tax rate for Kansas cities is 7.835 percent, based on Kansas Department of Revenue figures.)

Kansas sales tax effects by income quintile, three scenarios. The vertical distance between the lines is a measure of the degree of regressivity. It is larger for lower income households. Click for larger version.
Kansas sales tax effects by income quintile, three scenarios. The vertical distance between the lines is a measure of the degree of regressivity. It is larger for lower income households. Click for larger version.
The blue line, labeled “Sales tax at 7.15% on all purchases” is the current tax in effect in Sedgwick County. Note that the lowest quintile of households pay nearly seven percent of their after tax income in sales taxes. For the highest quintile the value is less than two percent.

The gold line (“Sales tax at 7.50% on all purchases”) represents the rates that will be in effect after July 1. Note that the vertical distance between the blue and gold lines is larger for low-income households than for high-income households, again illustrating the regressive nature of sales taxes.

The red line (“Sales tax at 8.15%, food at 0%”) illustrates the situation had the legislature raised the sales tax by one cent per dollar and eliminated the sales tax on food. Notice that the vertical distance between the red and gold lines is greatest for lower-income households, and becomes less as income increases. This means that under this policy, the sales tax is less regressive. But the Kansas Legislature did not do this. Instead, it implemented a sales tax changes that increases its regressive nature.

Kansas has a food sales tax refund program. It has been altered several times in recent years. Even if households can — and do — claim it, it doesn’t cover their likely cost of sales tax on food. At a rate of 7.50 percent, the lowest quintile of households pay an estimated $263 in sales tax, which is far above the maximum refund.

Kansas legislative leaders have said that food sales tax could be an issue to tackle next year. One proposal this year had the tax on food falling to 4.90 percent. That is welcome, and would reduce the harsh regressive nature of Kansas taxation. But Kansas would still have a high tax rate on food. Kansas legislative and executive leaders must realize that a shift to consumption taxes must be accompanied by relief from its disproportionate harm to low-income households.

WichitaLiberty.TV: Radio show host Joseph Ashby

In this episode of WichitaLiberty.TV: Radio talk show host Joseph Ashby joins host Bob Weeks to discuss his interview with Kansas Governor Sam Brownback, the end of the legislative session, and Republican presidential candidates. Episode 87, broadcast June 21, 2015. View below, or click here to view at YouTube.

Examining a Kansas school district election

In its campaign to convince voters to raise taxes, the Auburn-Washburn school district deceives voters. David Dorsey explains.

Eight reasons why the Auburn-Washburn (USD 437) LOB election increase is a ruse

By David Dorsey, Kansas Policy Institute

Auburn-Washburn USD 437 is in the midst of a Local Option Budget (LOB) election, asking district voters to approve an up-to three mill increase in their taxing authority. As part of the effort to convince us to support their request, I received, along with every other USD 437 resident, a propaganda card via USPS last week. The card (of which I have provided both front and back) includes virtually every deceptive tactic used by school districts to cajole voters into supporting a tax increase, including the implication that without this extra money, the futures of little Evan and Clare are in doubt.

I must preface the following remarks by saying that I have largely supported the district’s expansion in the past, having enthusiastically voted in favor of building a new elementary school (Farley) several years ago. I also recognize that as school districts go, USD 437 is well run. Their administrative costs are below the state per-pupil average and are 17th lowest among the 25 largest districts statewide. And undoubtedly the relative quality of USD 437 plays a role in increasing property values in the district. Having said that, it doesn’t detract from the fact that this election is just plain unwarranted. Below is the flip side of the card followed by eight reasons why the election is truly needless.

  1. They already have the money.  As the table shows, USD 437 has a consistent cash reserve balance of about $9 million each July 1. The card says they are going to use cash reserves to cover part of the “Block Grant reductions,” but the $386k in taxes they tell us they need represents less than five percent of the district’s cash reserves. If they pulled the $386k from those reserves (taxes they received in prior years but didn’t spend), they would still have several million more than in 2008 and prior years, and the district didn’t say they lacked sufficient reserves during those years.
  2. They don’t spend the money they budget. In the 2013-14 school year, USD 437 spent nearly $2 million less than budgeted.  Do they really expect the voters to believe they need another $386 thousand (out of a total budget of over $65 million – roughly six-tenths of a percent) to “maintain our excellent schools?”
  3. They use misleading tactics to imply they have, and will continue to suffer budget cuts under the  block grant funding formula. They say (in bold, nonetheless) that the state reduced cash support by over $1.1 million for the current school year. Actually, the truth is under the three-year block grant funding law, USD 437 will get an increase in state aid of $1.4 million from $30.5 million to $31.9 million (4.3%).
  4. They act as if they have no authority over spending. According to the card “expenses are expected to rise next year by $1,252,000.” They speak of costs as if they are analogous to flood waters; that they are simply at their mercy and have no control over them. And this argument gets to the heart of the prevailing mentality that instead of trying to be more efficient with taxpayer money, school districts feel they are justly entitled to more taxpayer money.
  5. It’s simply a last-chance cash grab. Under block grant funding, districts must have LOB elections prior to July 1, 2015 or wait two years.
  6. It’s another false choice, right from the give-us-more-or-we’ll-have-to-cut playbook. The card itemizes six potential ways they “will consider” increasing fees/charges to students and five rather vague ways to reduce expenses. Do they really believe it will take a 1% increase in the LOB (again, that’s six-tenths of one percent of the total budget) to keep from increasing class sizes or from having to “Cut Programs (TBD)?”
  7. Kansas taxpayers are already overburdend and will experience yet another tax increase at the state level. School districts don’t operate in a vacuum. As USD 437 is asking their residents to pony up more money at a local level, the state legislature will be increasing taxes statewide by as much as $470 million. Those of us who will foot this bill can’t simply demand a pay raise to cover our increased food, insurance, transportation, or housing costs. So why should school districts be able to?
  8. It will not improve student outcomes. I saved the most important reason for last. Regardless of the dire implications, the result of this election will have exactly zero effect on the educational outcomes of little Evan and Clare when they enter kindergarten — three years from now!

Taxation in the states

Examining tax collections by the states shows that Kansas collects more tax than many of our neighbors, and should put to rest some common myths.

Tax Collections by the States, Kansas and selected States, total and per capita.
Tax Collections by the States, Kansas and selected States, total and per capita.
Of a selection of nearby states, Kansas collects more taxes than most, on a per-person basis. The nearby table shows total tax collections, and tax collections per person. The chart shows collections grouped by major category, and one special category, which is severance taxes.

Some of the data regarding specific taxes is revealing and should shape the debate over taxes in Kansas. Consider severance taxes, which are taxes levied on extracting materials like oil, gas, and coal. The common narrative in Kansas is that states like Texas are sitting atop a sea of oil, with the severance taxes funding a major portion of state government. The data shows that Texas collected $223 per person in severance taxes in 2014. For Kansas the figure is $43. This difference — $180 — doesn’t account for the difference in total tax collections between the states. Texas collects $2,050 in total taxes per person, while Kansas collects $2,526, a difference of $476.

Tax Collections by the States, Kansas and selected States, 2014. Click for larger version.
Tax Collections by the States, Kansas and selected States, 2014. Click for larger version.
We also commonly hear that Kansas doesn’t have the tourism of states like Florida, and therefore doesn’t have the flood of tourism spending and accompanying sales tax. Again, looking at the data, se see that Florida collected $1,460 in Sales and Gross Receipt Taxes per person for 2014. Kansas collected $1,340. This is a difference of $120, while the difference between total tax collections for Florida ($1,779) and Kansas ($2,526) is $747.

You may use this interactive visualization to customize the table to fit your own needs. Click here to open the visualization. Data is from the U.S. Census Bureau, Survey of State Government Tax Collections and Bureau of Economic Analysis, along with author’s calculations. Visualization developed using Tableau Public. Data is expressed on a per person basis, not adjusted for inflation.

Examining Kansas City school district claims

A critical look at the statements coming from one of the largest school districts in Kansas leads to wonder if the Kansas City school superintendent is uninformed, misinformed, or simply lying. Dave Trabert of Kansas Policy Institute reports.

USD 500 Kansas City misleads on school funding and budget claims

By Dave Trabert, Kansas Policy Institute

At a time when many school districts are issuing misleading statements about school funding to parents, teachers and legislators, recent claims by USD 500 Kansas City set a new transparency low. A story in the Kansas City Star outlined the district’s plans to reduce spending, which Superintendent Cynthia Lane blamed on “…years of low state funding, rising costs and the loss this year of $2 million in state money because of a new block grant funding measure….”

Citizens are also dealing with rising costs, and school districts would like to inflict even higher costs on them — more taxes — to fund districts’ financial desires. “Years of low state funding” is a matter of opinion but data from the Kansas Department of Education and the Kansas Division of the Budget show that state funding and total funding of schools are setting new records this year.

Part of the 2015 increase in state aid ($522 million according to block grant files prepared by KSDE) is money that had been inappropriately recorded as Local aid in prior years (20 mills mandated by the Legislature for all districts) but state aid is still at an all-time high with that adjustment. Total taxpayer support of public education will also set a new record this year.

Contrary to Supt. Lane’s implication, however, USD 500 is not getting $2 million less in state aid with the block grant, it is gaining $12.8 million in state aid this year without counting any increases for KPERS, Bond & Interest or Special Education. What she is really saying — but doesn’t want you to know — is that she wanted an even larger increase and says the district is being “cut” because it didn’t get as much of an increase as it desired.

That is just the beginning of the district’s conscious efforts to mislead parents, teachers and legislators. “We have cut more than $50 million,” Lane said. “There is no longer any fat left. … I frankly think there is very little left to cut that doesn’t dramatically impact what we do for our kids.”

Budget cut claims don’t hold up

The district has definitely not reduced spending by more than $50 million as implied by Supt. Lane. They may have budgeted for and spent less than they would like (which is what Supt. Lane is really saying) but they most certainly have not cut spending recently (as she wants you to think). This comparison of the district’s budget and actual spending over the last ten years shows that spending less than the amount budgeted is rather common but doesn’t necessarily mean that spending was actually reduced; most often, it means that their plan to spend more was reduced. Districts openly admit that they budget more than they plan to spend to avoid having to re-publish a budget … but conveniently forget to mention that fact when claiming that their budget was cut.

Operating budgets were at record-highs in Kansas City this year and the two previous years; actual spending on current operating costs set records the last two years and likely will do so again this year.

Operating spending increases between 2005 and 2014 in the Kansas City district have been very large across all cost centers; capital spending also jumped but debt service has been stable. Administration spending “only” increased by 23 percent but it was well above average in 2005 and was the second highest spender among large districts last year (profligate USD 501 Topeka wins that prize at $1,568 per-pupil). Shawnee Mission, by comparison, spends $942 per-pupil on administration; spending at that level would save $9.4 million in the Kansas City district, which could be spent on Instruction or returned to taxpayers.

Listening to administrators and media reports, one would think the district is suffering from extreme austerity but district financial reports show otherwise. And these spending comparisons only reflect what has actually been spent. USD 500 also boosted operating cash reserves by $26.7 million over the period, going from $25.1 million in 2005 to $51.8 million in 2014. Operating reserves increase when more money is collected than is spent.

“Very little left to cut” is a farce

Supt. Lane may claim that there is very little left to cut but a July 2013 Legislative Post Audit report on the district says differently; page after page lists recommendations to bring district spending in line with market conditions and reduce costs. One recommendation was “Reduce Custodial and Maintenance Positions and Salaries” since some salaries were found to be more than 20% higher than paid in the private sector and the district had more staff than comparable districts. The district response is listed in the audit: “The community and staff will resist any reduction in staff or salaries. The custodians might unionize if staff positions or salaries are reduced.”

Here is a sampling of maintenance, custodian and bus driver pay taken from an Open Records request of the 2014 school year payroll. This list reflects the highest paid in these positions and reflects total pay (wages, overtime, bonuses, etc.) but do not include any benefits. The position titles are shown as provided by the district.

The simple solution would be to outsource this type of work to private sector companies as is done by some districts. Private sector companies are fully capable of providing these services at the same or better quality and at a better price.

The LPA audit also recommended reducing administrative salaries to market wages through attrition; the district responded by saying “staff would resist any reduction in salaries.” This table shows pay increases given to the highest paid district employees, all of whom are administrators who mostly received double-digit pay increases over the last two years.

Supt. Lane told the Star “I absolutely believe if you have to cut people, you have got to start at the top.” She was referring to the dismissal of Edwin Hudson, chief of Human Relations, and “… 30 assessment managers hired three years ago to keep track of state assessment scores so teachers and principals could concentrate more on school instruction.” Loading up on managers to track state assessment scores that are released once per year (except last year when no scores were released because of technical issues) is symptomatic of district hiring practices.

Over the last ten years, USD 500 increased its management staff by 18.8 percent; management is a KPI-defined label that includes superintendents, assistant superintendents, principals, assistant principals, directors, managers, supervisors and instruction specialists. Maintenance, transportation and food workers jumped by 45.6 percent, teacher aides more than doubled and a variety of employment categories we lumped into All Other shot up by 42.7 percent. Enrollment, meanwhile, increased by just 7.2 percent.

Non-teaching staff jumped by a third and total employment is 24.4 percent higher. The district has one full time equivalent employee for every 5.9 students.

USD 500 has one manager for every 125 students, which is very inefficient compared to other districts. Shawnee Mission, for example, had one manager for every 210 students last year and has since reduced its administrative footprint because Superintendent Jim Hinson felt it was too large. If Kansas City had the same pupil/manager load as Shawnee Mission (before it was reduced), they would have 66 fewer managers … and those costs could be made available for instruction instead of suing citizens for more money.

Here’s another example of misleading information from USD 500. The employee count in the above table comes from official KSDE personnel reports with data provided by each school district. But USD 500 may have many more employees. The LPA efficiency audit shows that the district was significantly under-reporting employment to KSDE. Lest anyone suggest that the KSDE report doesn’t contain categories that capture all of the district’s staff, it should be noted that the Certified Personnel and Non-Certified Personnel reports each have an “Other” category for such purpose. Consciously and consistently underreporting employment by more than 200 employees fits the district’s pattern of providing misleading information.

Misrepresentation by design

The district’s financial position is much different than represented by management, but it should be noted that staff, students and parents are likely experiencing legitimate resource issues. Frankly, that’s part of a pattern across many school districts, which is intended to gain sympathy and support for higher spending at the expense of others. USD 259 in Wichita, for example, is telling staff and media that they are suffering a $4.8 million “cut” with the block grants this year when in reality, they plan to spend $87 million more this year.

The Kansas City district even takes misrepresentation into the courtroom. I was in the courtroom when Supt. Lane testified that lack of funding was the reason that many of the district’s students weren’t adequately prepared for college and career, but she is on record placing the blame elsewhere, months before she made her court appearance.

When the U.S. Department of Education denied a portion of the district’s proposal to raise standards in a requested waiver from the Kansas Approved Accountability Plan from USDOE, Supt. Lane responded by saying, “The Kansas assessment is not rigorous enough to guarantee that our students are on-track with where they need to be. We have asked to raise standards for our students by administering the MAP, which is a more rigorous assessment, and USDOE is telling us ‘No!'”

The district newsletter in which this quote appears makes no mention of funding; the blame for academic issues is placed solely on sub-standard assessment issues. Supt. Lane may say that funding is also an issue but the point here is that the story routinely is crafted to maximize sympathy for the desired outcome.

That’s a disservice to staff, parents, legislators and most important, to students.

WichitaLiberty.TV: Arts funding, property taxes, uninformed officials, tax increment financing, and social security

In this episode of WichitaLiberty.TV: Is Wichita risking a Soviet-style future? A look at Wichita property taxes, uninformed and misinformed elected officials, tax increment financing, and social security. View below, or click here to view on YouTube. Episode 86, broadcast June 7, 2015.

Topeka school figures

The Topeka school district is asking voters for more tax revenue. Here are some figures for this school district. Click charts for larger versions. Data from Kansas State Department of Education.

Spending per pupil in Topeka school district.
Spending per pupil in Topeka school district.
Enrollment and employment in Topeka school district.
Enrollment and employment in Topeka school district.

Kansas City school district figures

The Kansas City, Kansas school district has implemented layoffs and salary cuts. Following are some charts of statistics for this district. Data is from Kansas State Department of Education. Click on charts for larger versions.

Spending in Kansas City school district.
Spending in Kansas City school district.
Enrollment and employment in Kansas City school district.
Enrollment and employment in Kansas City school district.
Fund balances for Kansas City school district.
Fund balances for Kansas City school district.

Kansas public school establishment ought to thank Sam Brownback

Kansas public schools ought to thank the governor and legislature for failing to give parents the power of school choice.

The public school establishment in Kansas is angry with the governor and legislature over school finance. Really, the public schools ought to be grateful for Governor Sam Brownback. In many states with conservative Republican governors, school choice programs have grown. In the summer of 2011 the Wall Street Journal reported on what it called “The Year of School Choice.”

Some governors have been warriors for school choice. Not Kansas Governor Sam Brownback, however. He signed a small school choice bill when it landed on his desk. But he has not vocally advocated for expanded school choice. There are several Kansas legislators who are in favor of school choice, but not enough, certainly not in leadership.

As public schools and their unions despise any form of school choice and the accountability it provides, they should be grateful for our governor and legislature. Kansas public schools operate without much competition, and that’s the way public schools and their unions like it.

School choice in Kansas

How little school choice exists in Kansas? One implementation of school choice that is popular in some states is the charter school. According to National Alliance for Public Charter Schools, Kansas has a poor charter school law. That is, Kansas law makes it difficult to start and maintain a charter school. Of the 43 states that have charter schools, Kansas ranked 42. Kansas public schools are effectively shielded from the diversity and competition that charter schools provide.

Others have also found the Kansas charter school law to be very restrictive. The Center for Education Reform found the Kansas charter school law to be the worst in the nation.

Governor Brownback signed a tax credit scholarship program. The Kansas program is small and restrictive, earning the grade of “D” from Center for Education Reform. Kansas has no school voucher program.

Altogether, Kansas parents have little power to choose schools for their children. The primary power Kansas parents have is to choose where they live. If a family can afford to, it can live in a district where the public schools are not as bad as they are in other districts. Given that these desirable districts almost always cover higher-income areas, poor parents don’t have this possibility.

School choice won’t fix everything, but it goes a long way. Here’s a portion of the 2011 Wall Street Journal article “The Year of School Choice.”

Choice by itself won’t lift U.S. K-12 education to where it needs to be. Eliminating teacher tenure and measuring teachers against student performance are also critical. Standards must be higher than they are.

But choice is essential to driving reform because it erodes the union-dominated monopoly that assigns children to schools based on where they live. Unions defend the monopoly to protect jobs for their members, but education should above all serve students and the larger goal of a society in which everyone has an opportunity to prosper.

This year’s choice gains are a major step forward, and they are due in large part to Republican gains in last fall’s elections combined with growing recognition by many Democrats that the unions are a reactionary force that is denying opportunity to millions. The ultimate goal should be to let the money follow the children to whatever school their parents want them to attend.

Kansas needs low taxes

Two research papers illustrate the need to maintain low taxes in Kansas, finding that high taxes are associated with reduced income and low economic growth.

As Kansas legislators seek to balance the state’s budget, most Kansas opinionmakers are urging higher taxes instead of spending restraint. Many claim that government taxation and spending are the driving forces behind growing the Kansas economy. An example is the motto of the Kansas Economic Progress Council, which is “… because a tax cut never filled a pothole, put out a fire or taught a child to read.”

Two research papers illustrate the need to maintain low taxes in Kansas, finding that high taxes are associated with reduced income and low economic growth. Research such as this rebuts the presumption of government spending advocates that low taxes have killed jobs in Kansas.

One paper is The Robust Relationship between Taxes and U.S. State Income Growth by W. Robert Reed, published in the National Tax Journal in March 2008. The abstract to this paper states:

I estimate the relationship between taxes and income growth using data from 1970 – 1999 and the forty-eight continental U.S. states. I find that taxes used to fund general expenditures are associated with significant, negative effects on income growth. This finding is generally robust across alternative variable specifications, alternative estimation procedures, alternative ways of dividing the data into “five-year” periods, and across different time periods and Bureau of Economic Analysis (BEA) regions, though state-specific estimates vary widely. I also provide an explanation for why previous research has had difficulty identifying this “robust” relationship. (emphasis added)

In his introduction, Reed writes that previous studies had found: “To the extent a consensus exists, it is that taxes used to fund transfer payments have small, negative effects on economic activity.” His paper found a stronger relationship.

Reed issues a caution on the use of his conclusions: “It needs to be emphasized that my claim for robustness should be understood as applying only within the context of U.S. state income growth. It should not be interpreted as being more widely applicable to other contexts, such as employment growth, manufacturing activity, plant locations, etc., or to the relationship between taxes and income growth outside the U.S.”

This illustrates one of the ways we focus on the wrong measure of growth. Politicians focus on jobs. But to business, jobs are a cost. One of the better goals to seek, as Art Hall specifies in his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, is income growth, along with population density and population migration, productivity growth, capital investment, gross business starts and expansions, and customer service and throughput measures of state economic development agencies. Hall writes: “If Kansas performs well in the measures provided, it will also perform well in terms of job count.”

Another example of research finding a negative impact of taxation is State Taxes and Economic Growth by Barry W. Poulson and Jules Gordon Kaplan, published in the Winter 2008 Cato Journal. In the introduction to the paper, the authors write: “The analysis reveals a significant negative impact of higher marginal tax rates on economic growth. The analysis underscores the importance of controlling for regressivity, convergence, and regional influences in isolating the effect of taxes on economic growth in the states.” (emphasis added)

In its conclusion, the paper states:

The analysis reveals that higher marginal tax rates had a negative impact on economic growth in the states. The analysis also shows that greater regressivity had a positive impact on economic growth. States that held the rate of growth in revenue below the rate of growth in income achieved higher rates of economic growth.

The analysis underscores the negative impact of income taxes on economic growth in the states. Most states introduced an income tax and came to rely on the income tax as the primary source of revenue. Jurisdictions that imposed an income tax to generate a given level of revenue experienced lower rates of economic growth relative to jurisdictions that relied on alternative taxes to generate the same revenue. (emphasis added)

Kansas cuts taxes and expands the economy

Ernie Goss is Jack A. MacAllister Chair in Regional Economics and Professor of Economics at Creighton University and an expert on the Midwest economy. Following is his assessment of the Kansas economy in recent years. The full report is here.

Kansas Cuts Taxes and Expands the Economy: Earnings Growth Four Times That of U.S. and Neighbors Since Passage

From the Mainstreet Economy Report, Creighton University, October 2014.

In 2012, Kansas Governor Brownback pushed the Legislature to whack individual tax rates by 25%, to repeal the tax on sole proprietorships, and to increase the standard deduction. In 2013, the Legislature cut taxes again. Since passage in 2012, how has the Kansas economy responded to these dramatic tax cuts? Post Tax-Cut Earnings: Since QIV, 2012, Kansas grew its personal income by 2.92% which was higher than the U.S. gain of 2.85%, and was greater than the growth experienced by each state bordering Kansas, except Colorado. Additionally in terms of average weekly earnings, Kansas experienced an increase of 4.82% which was almost four times that of the U.S., more than four times that of Missouri, approximately seven times that of Nebraska, and nearly four times that of Oklahoma.

Of Kansas’ neighbors, only Colorado with 4.82% average weekly wage growth outperformed Kansas.

Post Tax-Cut Job Performance: Between the last quarter of 2012 and August 2014, the U.S. and each of Kansas’ neighbors, except for Nebraska, experienced higher job growth than Kansas. However, much of Kansas’ lower job growth can be explained by the fact that during this period, Kansas reduced state and local government jobs by 1.4% while all of Kansas’ neighbors and the combined 50 U.S. states increased state and local government employment. In terms of unemployment, Kansas August 2014 joblessness rate was 4.9% compared to rates of 6.1% for the U.S., 5.1% for Colorado, 6.3% for Missouri, 3.6% for Nebraska, and 4.7% for Oklahoma.

Kansas job and income data since the tax cut show that, except for Colorado, the state economy has outperformed, by a wide margin, that of each of its neighbors and the U.S. To remain competitive, expect Kansas’ neighbors to reduce state and local taxes in the years ahead. Ernie Goss.

Kansas legislators: Don’t raise taxes

Letter from ALEC to Kansas lawmakers. Click to read.
Letter from ALEC to Kansas lawmakers. Click to read.
To balance the budget, there are many things Kansas lawmakers could do other than raising taxes.

In congratulating Kansas lawmakers for passing a pro-growth tax cut, American Legislative Exchange Council (ALEC) reminds everyone that there is more than one way to balance a budget. Spending needs to be addressed:

However, as budget realities need to be addressed, the spending side of the fiscal coin is a good place to start. ALEC has conducted non-partisan research on how states can make government more efficient. In the State Budget Reform Toolkit, case studies and policy options are examined that allow the state to maintain core services of government at a lower cost. One example is to eliminate positions in state agencies that have been vacant for more than six months, or to adopt a sunset review process for state agencies, boards and commissions. These examples and many more can be found on our website for your review.

Some of the ideas in the State Budget Reform Toolkit have been considered and rejected by the Kansas Legislature. Others have not been considered, as far as I know. Most take more than one year to implement. These ideas remind us that when the Kansas Legislature and Governor Brownback cut taxes for everyone, they did not start planning for lower spending.

WichitaLiberty.TV: Kansas legislative failure, newspaper editorials, and classical liberalism

In this episode of WichitaLiberty.TV: The failure of Kansas lawmakers to reform state spending means you will pay. A newspaper editorial excuses bad behavior by government. Then: What do classical liberals and libertarians believe? View below, or click here to view at YouTube. Episode 85, broadcast May 24, 2015.

Kansas Center for Economic Growth: Show us the math

Why won’t Kansas Center for Economic Growth show its calculations and explain its data sources? Dave Trabert of Kansas Policy Institute explains.

KCEG misleads on job growth — again

By Dave Trabert

The latest misleading claim on job growth from the Kansas Center for Economic Growth is loaded with misleading and irrelevant information; they don’t fully disclose their methodology and at this writing they have ignored our request to explain it. Sadly, this is not the first, second or even third time that KCEG has published misleading information and declined to produce documentation.

Here are the questions we posed to Annie McKay, executive director at KCEG:

We received a ‘read’ receipt but no reply, so we attempted to replicate their methodology to arrive at what they call “private sector job growth since tax changes” which they measure between January 2013 and March 2015. Based on tests of Kansas and national data, it appears that KCEG is using seasonally adjusted jobs but we couldn’t find a 6-state region including all of Kansas’ neighbors to match their number.

KCEG has the national average increasing 5.2% and Kansas 3.8%, so we assume they are comparing January 2013 to March 2015. This is not a true measure of post-tax reform activity, however; the base month of a point-to-point comparison should be the last month of the old tax system, which was December 2012. Comparing Kansas to the 5-state region does show that Kansas is slightly behind (4.0% vs. 4.2%) but by not showing the performance of individual states, KCEG hides the fact that Kansas beat three of its four neighbors.   

While Kansas is outperforming three of its neighboring states on this measurement, point-to-point comparisons are problematic; one or both points can be unusual spikes or declines, making the data less reliable.  The Bureau of Labor Statistics also publishes average annual employment, which minimizes the impact of any single data point.

The more stable comparisons of average annual employment show job growth trends for Kansas to be much more competitive since tax reform. Private sector jobs grew just 2.2% between 1998 and 2012, which ranked Kansas at #38, but Kansas moved up to #27 in 2013 and last year moved up again to #21. That’s still not good enough and it will take perhaps another decade to fully understand the impact of tax reform, but the early trend is very encouraging. Kansas still trails Colorado, but has improved its competitive position. The table below shows Kansas trailed Colorado by a factor of five (2.2% vs. 10.6%) between 1998 and 2012 but has since closed the gap to a factor of two.

KCEG noted that Utah and Idaho have higher taxes on “the wealthy” and better job growth than Kansas, but of course they don’t tell the whole story. Kansas does have a lower marginal rate than both states but that is a recent development; Kansas was higher than Utah until 2013 and much closer to Idaho when the marginal was 6.45%. Kansas’ lower rates are helping to reverse trends but it will take much more time to catch up to states that historically grew much faster – like Utah and Idaho.

Here’s the rest of the story that KCEG doesn’t want you to know. According to the Tax Foundation, the corporate income tax rate in Kansas is 40% higher than Utah’s and just slightly below Idaho’s.  State sales tax rates are comparable but Kansas has much higher local sales tax rates. 

Utah and Idaho also have much lower property taxes on commercial and industrial real estate. Kansas has the 10th highest effective tax rate on urban property and the worst in the nation on rural property!   Part of the reason that Kansas has very high effective tax rates is baked into the State Constitution, where Commercial and Industrial property is assessed at 25% of appraised value but Residential is assessed at 11.5%.

The other major factor driving up property taxes is that Kansas has too much government.  Kansas and Utah have about the same population but Kansas has 1,997 cities, counties and townships whereas Utah has only 274.  Idaho has just 244.  Extra government means extra government employees (and higher taxes to pay for all of that government); Kansas is ranked #47 in government employees per 10,000 residents (i.e., the 3rd worst in the nation) but Utah is ranked #15 and Idaho is #9.

These truths about private sector job growth and relevant competitive issues with Utah and Idaho are typical of KCEG efforts to mislead citizens and legislators – and probably explain why they refuse to engage KPI in public debates on tax, spending and education issues.

In Topeka, to raise taxes, scare the voters

The Topeka public school district is using scare tactics to persuade voters to raise taxes. David Dorsey of Kansas Policy Institute explains.

Topeka schools use scare tactics to justify LOB election

By David Dorsey

The USD 501 school board voted unanimously on April 29 to hold an election to increase the district’s local option budget (LOB). They claim the $3 million that could be raised with voter approval is necessary “in the face of state budget cuts.”  The district held three public meetings to discuss how to deal with what they called a $1.6 million cut in state funding this year and $2 million over the next two years. KPI has shown in this blog that Topeka Public Schools will actually get a total increase in state aid of 6.5% over the three years of the new block grant funding law.

But that’s not how a school district sees things. To the educrats, a cut means getting a smaller increase than they had planned.

If I were the suspicious type, I might think the meetings were just a ruse, using the implicit threat of cutting school programs in order to scare the public into supporting an override election to raise more money.

The purpose here is not to revisit the increase vs. decrease debate. The purpose here is to discuss the spending side of the equation and show just how easy it would be for USD 501 to meet their self-defined shortfalls – and without having any impact on students.

First, here’s a little perspective on the realities between what is budgeted and how much is actually  spent. The adjoining table shows the millions that have gone unexpended for the last four years. Given this recent history, it’s hard to imagine that a $1.6 million “cut” from the budgeted $203 million 2014-15 budget is even a concern, let alone cause for an election.

Even if one concedes the point of a revenue shortfall, should the taxpayers of USD 501 (in the name of full disclosure, I do not live in the district, so I don’t have a dog in this hunt) shell out more money to the district? Or could the district find ways to reduce spending and operate more efficiently (a concept foreign to any government organization)? As a former employee of USD 501 I can attest that finding a savings of what amounts to $114 per pupil should be pretty easy to accomplish.

I offer these three opportunities that would reduce spending far in excess of what the district calls a cut and save local taxpayers the burden of providing more financial support to a district that won’t look seriously at reducing spending.

Reduce a bloated administration

As the table shows, Topeka Public Schools has the highest per pupil administrative costs of the 25 largest districts in the state. A glance at their own budget document reveals the costs are trending significantly higher. The 2013-14 costs were a 14% increase from the previous year. The USD 501 2014-15 budget for administration and support of $28,301,407 is a whopping 25% higher than 2013-14! That’s an increase from two years ago of 41.8% when administration costs were just under $20 million.

Some of that increase can be explained by the decision made by the USD 501 school board to drastically increase salaries of the administrative staff by $435,400 in the summer of 2013 in the name of being competitive with other districts. Perhaps if USD 501 was “competitive” in terms of administrative costs per pupil, there would be no issue.

 I’m guessing these facts didn’t come up at the public meetings.

Put literacy and math coaches back in the classroom

Little-known to the public is that in every USD 501 school there are licensed teachers who do NOT teach students. They are known as math coaches and literacy coaches. Each school has at least one coach and most have more than one. What is their job, you ask? They are in the buildings to help classroom teachers do a better job. Furthermore, USD 501 forbids the coaches from directly teaching students, except in special circumstances. They are there to teach the teachers.

There are several reasons the practice of having licensed teachers be coaches should end.

  • “Teaching the teachers” is what professional development is supposed to do.
  • Dealing with ineffective teachers should be the job of the principals, not other teachers.
  • Since coaches have no contractual authority over teachers, teachers do not have to utilize coaches. In practice, that means teachers who are least effective don’t solicit assistance from the coaches, so the coaches end up spending most of their time with the most effective teachers.
  • Many coaches use the position as a stepping-stone toward getting into administration.
  • Most of the coaches are among the best teachers in the district and should be with students, not other teachers.

To be fair to USD 501, math and literacy coaches are an educational trend and most districts now employ them. However, it doesn’t stray from the fact that money spent on coaches doesn’t directly benefit students. In fact, students lose out anytime a quality teacher chooses to become a coach and leaves the classroom.

Putting just one coach per building back in the classroom through attrition would go a long way toward dealing with the budget “cut.”

Cash reserves

The district could easily deal with any short-term budget issue simply by using their current operating cash reserves. The following table shows USD 501’s cash reserves for the past ten years. The table not only shows the district had in excess of $24 million from which to draw at the beginning of this school year, but that is 56.2% more than a decade ago. I doubt they explained that fact to the patrons at the public meetings.

I now present a rather conservative approach to dealing with the “budget cut.” A 5% reduction in administration, returning just one coach in each building to the classroom, and tapping 10% from the operating cash reserves, hardly Draconian measures, would generate nearly twice as much as they could take from the voters.

Savings Category Spending reduction
5% reduction in administration costs $1.41 million
Returning 1 coach to the classroom (through attrition) in each traditional public school building – 26 X $60,000 (salary/benefits)  

$1.56 million

10% from operating cash reserves $2.47 million

Total reduction

 $5.44 million

Board member Patrick Woods was quoted as saying K-12 funding is a “state responsibility.” Maybe it’s time the state starts taking responsibility for how the money gets managed.

WichitaLiberty.TV: Initiative and referendum

In this excerpt from WichitaLiberty.TV: What recourse do citizens have when elected officials are not responsive? Initiative and referendum are two possibilities. View below, or click here to view at YouTube. Originally broadcast May 3, 2015.

For more about this issue, see Wichita has examples of initiative and referendum and Initiative and referendum.

WichitaLiberty.TV: Kansas legislative failure means you pay

In this excerpt from WichitaLiberty.TV: The Kansas Legislature has had several years to come up with plans for reforming government spending. But it didn’t do that. Now, it is most likely you will be asked to pay more taxes to compensate for the legislature’s failure. View below, or click here to view on YouTube. Originally broadcast May 3, 2015.

For more on this issue, see: In Kansas, a lost legislative opportunity and Efficiency has not come to Kansas government.

Kansas state aid to schools is increasing

The top school finance official in Kansas says that says that state aid for schools has risen for the current year. From Kansas Policy Institute.

KSDE confirms that state aid to schools is increasing this year

By Dave Trabert

While some school districts and special interests claim state aid to schools is declining this year, Kansas State Department of Education Deputy Commissioner for Finance Dale Dennis confirms that state aid to schools is increasing.

KSDE published spreadsheets comparing block grant equivalent funding for the 2013-14 school year with block grant funding for this year and the next two school years. SF15-092 shows total funding last year was $3.263 billion including KPERS and $2.951 billion without KPERS. SF15-109 shows total funding this year of $3.408 billion including KPERS and $3.093 billion without.  Even excluding KPERS, state aid to schools under the block grants will increase by $142 million.

In Kansas, a lost legislative opportunity

Kansas legislators are struggling to balance the state’s budget. In 2012 the legislature passed a tax cut, although it was unevenly applied. But in the intervening years, the legislature has not taken serious steps to cut state spending to match. Legislators failed to consider bills to streamline and outsource government functions, although the bills had passed in a previous session. The legislature has also failed to consider budgetary process reform as explained below in an article from May 2012.

Leaders in the Kansas legislature and executive branch tell us the only way to balance the Kansas budget this year is by raising more revenue through taxation. That may be true, as reforming spending and budgeting takes time to accomplish. We had the time. But our legislature and executive branch squandered that opportunity. Now, they ask you for more tax revenue.

This year Kansas made a leap forward in reducing income tax rates. The next step for Kansas is to reduce its spending, both to match the reduced revenue that is forecast, but also to improve the efficiency of Kansas government and leave more money in the hands of the private sector. Specifically, Kansas needs to improve its budgeting process and streamline state government.

In Kansas, like in many states, the budgeting process starts with the previous year’s spending. That is then adjusted for factors like inflation, caseloads, and policy changes that necessitate more (or rarely, less) spending. The result is that debates are waged over the increment in spending. Rarely is the base looked at to see if the spending is efficient, effective, or needed.

There are several approaches Kansas could take to improve on this process. One is zero-based budgeting. In this approach, an agency’s budget set to zero. Then, every spending proposal must have a rationale or justification for it to be added to the budget.

Zero-based budgeting can be successful, but, according to the recent paper Zero-base Budgeting in the States from National Conference of State Legislatures, it requires a large commitment from the parties involved. It also can take a lot of time and resources. Kansas could start the process with just a few agencies, and each agency could go through the process periodically, say once every five or six years. Some states have abandoned the zero-based budgeting process.

In its State Budget Reform Toolkit, American Legislative Exchange Council advocates a system called priority-based budgeting. This process starts with deciding on the core functions of state government. That, of course, can be a battle, as people have different ideas on what government should be doing.

ALEC reports that “In 2003, Washington state actually implemented priority based budgeting to close a budget deficit of $2.4 billion without raising taxes.”

The spending cuts Kansas needs to balance the budget are not large. Kansas Policy Institute has calculated that a one-time cut of 6.5 percent next year would be sufficient to bring the budget to balance.

The problem that Kansas will face in reducing state spending and streamlining its government is that there are those who are opposed. Streamlining often means eliminating programs that aren’t needed, aren’t performing as expected, or are very costly. These programs, however, all have constituencies that benefit from them — the concept of concentrated benefits and dispersed costs that public choice economics has taught us. These constituencies will be sure to let everyone know how harmful it will be to them if a program is scaled back or ended.

Streamlining also means that there may be fewer state employees. Some will say that the loss of state employees means a loss for the economy, as the state workers will no longer be receiving a paycheck and spending it. This reasoning, however, ignores the source of state workers’ pay: the taxpayers of Kansas. With fewer state employees, taxpayers will have more money to spend or invest. The problem is that it is easier to focus on the employees that may lose their jobs, as they are highly visible and they have vocal advocacy groups to watch out for them. This is an example of the seen and unseen, as explained by Henry Hazlitt.

Kansas and U.S. economic dashboard

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

Click here to view the charts.

Wichita economic development, the need for reform

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

More government spending is not a source of prosperity

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Kansas revenue problem in perspective

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

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

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

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

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

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

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

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

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

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

Efficiency has not come to Kansas government

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

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

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

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

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

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

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

A simple path forward

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

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

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

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

The bills that did not pass

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

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

Kansas Streamlining Government Act

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

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

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

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

Privatization and public-private partnerships

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

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

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

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

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

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

Performance measures

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

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

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

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

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

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

Political perspective masquerades as ‘documentary’

From Kansas Policy Institute.

Political perspective masquerades as ‘documentary’

By Dave Trabert

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Kansas school test scores, two interactive visualizations

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Economic indicators for Kansas

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

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

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

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

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

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

Rich States, Poor States, 2105 edition

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

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

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

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

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

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

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

Kansas compared to other states

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

Why Kansas fell

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

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

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

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

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

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

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

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

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

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

How valuable is the ranking?

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

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

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

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