Sam Brownback

Kansas Bioscience Authority hearings, day 2

by Bob Weeks on February 9, 2012

At the second day of testimony (January 26, 2012) regarding a forensic audit of the Kansas Bioscience Authority, a representative of Kansas Governor Sam Brownback was strongly critical of the audit itself, and also of the Board of Directors of KBA. Kansas Secretary of Agriculture Dale A. Rodman, who oversaw the audit process on behalf of the Brownback Administration, also said that legislators who voted to form the KBA should “feel outraged that a golden opportunity that you helped create was taken away from your efforts.”

Rodman urged the committee to step back and look at the situation from a distance, saying that many of the issues are “deep and buried.” To him, he said the important issues are first, is the KBA obtaining the performance expected, and second, is the KBA worthy stewards of Kansans’ money?

Based on his investigation, Rodman listed several measures that troubled him, specifically: “The KBA spent $200,000 per job before Tom Thornton and $700,000 per job after he became the CEO of the KBA.” Thornton is the former CEO who resigned shortly after the audit process started. At yesterday’s hearing, Senator Chris Steineger, a Kansas City Republican, presented figures that estimated a cost of $750,000 per job created, using a slightly different set of data.

A second troubling measure, Rodman said, is that KBA spent “nearly 40 cents of every dollar invested on overhead expenses.” He said the KBA board must be responsible for these results.

In a separate letter sent to KBA Board Chairman Dan Watkins, Rodman listed more detailed concerns, including that only 347 jobs are shown by KBA as having been created since 2007. Another concern, he said, is that there appear to be many instances of double counting of invested funds. He said that certain companies were not reporting as required, and some numbers were being “filled in.”

Rodman said the expenditure of over $18 million for KBA headquarters was excessive, a concern shared by many legislators.

What amazed Rodman, he said, was when acting KBA CEO David Vranicar told Rodman he was not there to create jobs. This, along with the earlier evidence he cited, showed him that KBA was not fulfilling the mission of the Kansas Economic Growth Act, the legislation that created KBA.

In follow-up correspondence from KBA, Watkins cited the larger mission statement of KNA, and also that “the longer-term mission is more robust: to build a bioscience infrastructure that will generate high-paying bioscience jobs today and for future generations of Kansans.” Near-term job creation is not the sole focus, the letter added.

Rodman also spoke about the conflict of interest issues, which were prominent in Wednesday’s hearings. BKD auditors said that KBA board followed policy by disclosing that they had a financial interest in a potential KBA investment or grant, and refraining from voting. But Rodman said that is not enough: “Whether or not it is legal is not the issue. It does not pass the smell test. If it smells bad, it is bad, and you should not do it.”

Rodman cited the governing Kansas statute, which reads “No part of the funds of the authority shall inure to the benefit of, or be distributed to, its employees, officers or members of the board.” The statute has exceptions which do not apply in this case.

Rodman, both in his verbal and written testimony, cited the case of KBA board member Bill Sanford. Quoting from the KBA audit, Rodman said “Bill Sanford is the COB and 14% owner of NanoScale, a bioscience company that received four grants totaling $674,996 from KBA.”

Relating a discussion he had with Sanford, Rodman told the committee: ‘Director Sanford looked at me and said ” If you want to get something done, you have to hire someone like Thornton. If we had hired a laid-back Kansan we would not be where we are at today.’ You know, I have to agree with him, we would not be in this room today. With a good Kansan in charge we would not be having this meeting.”

The issue of Thorton’s unethical behavior is at the center of this affair, with a related issue being whether Thornton’s departure solves all problems with the KBA, or if there is a deeper problem.

Also highlighted by Rodman was the issue of missing intellectual property. This refers to the loss of data, along with backups of that data, on the so-called “J-Drive,” a shared and restricted storage location on KBA’s network. Thornton also erased and digitally scrubbed data from his personal laptop computer. Computer forensics experts were not able to recover any of this missing data.

Rodman told the committee that the KBA board, immediately after learning that Thornton quit to go work for a competing firm (Cleveland Clinic Innovations), should have issued a “cease and desist” order, saying “This will inform the competitor that knowledge the employee has belongs to the former employer, and use of that information will result in legal action.” As he believes the KBA board did not do this, Rodman said he concludes “Kansas has lost intellectual property.”

Summarizing, Rodman said that “Thornton was a mistake,” and that the KBA board should have recognized this. He urged the committee to fix the problem, as Kansas needs growth in the bioscience industry.

Senator Susan Wagle, a Wichita Republican who chaired the meeting, noted the statute that Rodman cited regarding conflicts of interest, saying that it prevents board members or employees from receiving a financial benefit based on their position. The BKD audit, she said, cites many such instances of financial benefits, and in every instance the audit concludes that since board members disclosed their conflict was resolved, and that procedures are in place to prevent conflicts of interest.

Of the BKD audit generally, Rodman said the document is complex, and “probably deliberately so.” Wagle, who has been concerned that the audit is “sanitized” and doesn’t present the full scope of issues and problems, asked “Could that be sanitizing conclusions?” Rodman demurred, answering “There was a lot of work on the report.”

Senator Ty Masterson, a Republican from Andover, asked Rodman what needed to be changed at the KBA. Rodman said he wasn’t ready to answer that now, despite having thought about it. He did say there had to be some dramatic changes in the system.

Masterson also asked about the costs of the audit: Did Thornton’s action in deleting data increase the cost of the BKD audit? Rodman said we should go after Thornton for possible increased costs of the audit.

A question from Representative Les Osterman, a Wichita Republican, framed the issue this way: Do we need different or better rules and laws, or does the problem lie with the composition of the KBA board? Rodman answered that If the KBA board had done their job, we wouldn’t be here today. He repeated that there is a statute to take care of conflicts of interest, but there is a problem with the governance of the KBA board.

Follow-up by Republican Senator Ray Merrick expressed concern that since Thornton, who he labeled a “bad apple,” is gone, the problem is over. But the same board is in place, the same people are in charge, and that he was not satisfied going forward.

But not all members of the committee shared these concerns. Tom Holland, a Democratic Senator from Baldwin City, pressed Rodman as to whether intellectual property had actually been stolen from KBA due to the loss of data from the J-Drive and Thornton’s computer, or was there only the potential for that? Rodman said yes, intellectual property was taken, although that was not stated in the audit.

Holland repeated his questions from yesterday: Does KBA have appropriate management procedures, policies, and controls in place? And does KBA follow these consistently? Snyder, the BKD auditor, had answered yes to both of these questions, although with one exception. Today, Holland pressed Rodman if he took “ownership” of the BKD audit. Eventually Rodman said he did. Holland then asked if the audit was “an accurate summary of life at the KBA.” Rodman said yes, but with qualifications, and Wagle expressed her concern, also.

There is a factor not brought up in testimony, nor in my reading of the BKD audit report, that complicates the KBA governance and may be a source of problems. The KBA has an independent source of revenue that is not dependent on appropriations from the legislature. This source is the incremental growth in tax withholding from employees of Kansas bioscience companies and research institutions. I asked both Wagle and a spokesperson for Governor Brownback if this was a factor or a problem. Both said this is a question for the KBA.

Tagged as: Chris Steineger, Economic development, Kansas legislature, Kansas state government, Sam Brownback, Susan Wagle, Tom Holland

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For Kansas, spending is the other part of the equation

by Bob Weeks on January 30, 2012

Those who oppose tax reform in Kansas say we can’t compare Kansas to states like Texas and Florida, two states which have no state income tax. They point to special advantages these states purportedly have, such as oil or tourism revenue. Kansas has nothing like this, they say.

But Kansas Policy Institute has released analysis indicating that there’s another reason why these states have zero income tax: they simply spend less.

According to the KPI analysis (a one-page document available at Controlling Spending is the Secret to Low Taxes), “The secret to having a low tax burden is to control spending, and that’s exactly what [no income tax] states do.”

Continuing, the study finds: “According to the National Association of State Budget Officers, the states with no income tax spent an average of $2,444 per resident (total state funds) in 2010; the rest of the country spent $3,572 per resident, or 46% more. Kansas spent $3,216 per resident, or 32% more than the states with no income tax.” In this context, “total state funds” excludes federal funds and expenditures from the sale of bonds.

These findings parallel my research, which examined state spending using a different measure — total state spending, including federal funds. I concluded “… states with low or no income tax generally spend much less than Kansas. Using figures I compiled for 2010, Kansas state spending per person is $4,923, which ranks it 35th among the states. Only 15 states spend more than Kansas, on a per person basis. Texas, with no income tax, spends $3,703 per person. Florida, another state with no income tax, spends $3,300 per person.” (See Kansas spending is the problem.)

Generally states that spend less tax less, and vice versa. Low state spending and taxing means that a state leaves more resources in the hands of the productive private sector, instead of burdening its citizens with an expensive and inefficient state government.

For this year, Kansas Governor Sam Brownback has proposed only a slight reduction in general fund spending. Last year the Kansas Legislature lost three opportunities to reduce the cost of state government. Three bills, each with this goal, were passed by the House of Representatives, but each failed to make through the Senate, or had its contents stripped and replaced with different legislation. See In Kansas Legislature this year, opportunities for saving were lost.

Tagged as: Government spending, Kansas legislature, Kansas Policy Institute, Kansas state government, Sam Brownback, Taxation

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Kansas committee asks if KBA audit did enough to expose problems

by Bob Weeks on January 27, 2012

By Bob Weeks, Special to KansasWatchdog.org

Members of the joint Commerce and Economic Development Committees expressed concern that a forensic audit of the Kansas Bioscience Authority was not broad enough and that deliberate deletion of data from a KBA computer left questions unanswered.

On Wedesday James Snyder, managing partner for BKD’s Forensics and Valuation Services, told the committee that while his firm was hired and paid by KBA, Kansas Governor Sam Brownback’s administration was heavily involved. Secretary of Agriculture Dale Rodman served as the main contact for the Brownback Administration, although Caleb Stegall, the governor’s chief lawyer, and Steve Anderson, the Budget Director, also participated.

Snyder told the committee the audit process was designed to avoid a situation where after the final report was released, people would ask why certain facts were not considered or covered. “This process was specifically designed to avoid that, and it worked pretty well,” he said.

The Kansas Legislature created the KBA in 2004 and gave it $581 million to bring bioscience research and jobs to Kansas. KBA has been under fire for expenses and salaries paid to top executives and for giving grants to fund projects out of state.

Any disputes about the report’s contents were ironed out by January, but on Sunday, the day before the report was to be released, Rodman raised a difference of opinion over a possible conflict of interest involving former KBA board member Angela Kreps. Snyder characterized this as the only difference of opinion, and that it was a narrow and minor one.

Committee chair, Sen. Susan Wagle, a Wichita Republican, recognized that BKD’s position was “difficult,” as the firm was hired and paid by KBA, but it was also in frequent communication with the Brownback Administration. Snyder said the administration was involved in an oversight role, and also in defining the scope of the audit.

Senator Ty Masterson, an Andover Republican, expressed concern over possible deletion of computer files and that BKD could only “dive into that which you had, that you were provided.” BKD’s timeline of the audit showed that KBA leadership was apprised of an audit on March 10th, 2011. The next day CEO Tom Thornton accessed a computer hard drive on KBA’s network. The drive was accessible to only four people and held personnel records and confidential company information.

BKD was hired on April 11th, a fact Masterson said he found “fascinating” because KBA used a 30-day rolling backup scheme that would not have retained files deleted on or before March 10. The time lag from March 11th to April 11th means that if information was deleted from the J-Drive, it was not available to the BKD audit team.

The timing of this is “highly suspect,” Masterson said.

Snyder said the audit team had access to much information and that BKD received everything they asked for, but Masterson pointed out that we don’t know what might have been missing. Thornton’s personal laptop computer was erased or “wiped” days after the audit was called for in a way that made it impossible for the computer forensic team to recover the deleted data.

Snyder said that the committee should have high confidence in the audit’s findings and that the number of people and computers the team had access to was in many cases “extraordinary.” He also said that core KBA business records had integrity and there was no reason to suspect these systems had been compromised.

Masterson quoted from page 133 of the audit report: “Our analysis found 301 payments without a contract, including 102 payments that violated KBA’s Contract Policy. The total contract cost involved totaled $1,219,271.81 in payments without a contract, including $571,828.20 in payments which violated Contract Policy.”

Masterson noted that there’s no indication anything was technically illegal, but that the purview of the committee went beyond that. “Why do we put policies in place? It’s so that we can show best practice, best stewardship. You have shown over 300 violations of policy … I don’t know how we can paint this in the light that this is instilling confidence, and that it is clearing the air.”

Masterson also said that the best case seems to be that there was unethical management combined with inadequate oversight. He said there is the possibility of a coordinated cover up of behavior that could potentially be illegal.

Snyder answered that over time they observed “increasing sophistication” of board participation and compliance with procedures and that there had also been changes initiated by the board that offered protection.

Wagle said she received faxes from KBA employees expressing concern that the Senate Commerce Committee received altered documents. “It became very apparent that we could not rely on the information we were receiving,” she said. She asked Snyder if it was possible that documents were altered or erased so BKD did not see them.

Snyder said that although one expense report was altered, there was no indication of a “systematic issue” of alterations or erasures.

Wagle and Snyder disagreed over the extent of BKD’s contact with Wagle contending that it did not constitute an “interview” as claimed in the audit report.

Democratic Senator Tom Holland asked Snyder two questions relating to whether KBA has business policies and procedures in place to effectively run the organization, and has KBA consistently followed these? Snyder answered yes, with very few exceptions. “We found a very high level of compliance.”

Republican Senator Chris Steineger of Kansas City asked a series of questions regarding the mission of the KBA, which is, according to KBA “advancing Kansas’ leadership in bioscience” as well as creating investment and jobs in Kansas. Steineger expressed concern that much of KBA’s funding is spent on overhead, such as lawyers, architects, office buildings, travel, and dining.

Steineger distributed a series of calculations based on KBA data in the audit that he said reveals that KBA made $265 million in commitments resulting in 1,347 jobs for a cost of $196,808 per job created.

Steineger showed that removing the largest company from the mix — Quintiles, which created 1,000 jobs for a KBA contribution of $3.5 million — the remaining jobs cost more than $750,000 each.

Senator Jeff Longbine, an Emporia Republican, mentioned that there had been criticism of the KBA for insider activities among board members, conflicts of interest, cronyism, and fraud and asked Snyder if these accusations were true. Snyder said these generalized accusations were not true, although there was one instance where there was “some technical violation of a conflict of interest rule.” He said that KBA is not “fraught with fraud or self-dealing.”

The audit report also noted that KBA made regular use of executive sessions not open to the public and that, “No notes or recordings are made of Executive Sessions. This is a common business practice. Therefore, information discussed in Executive Session was not available for BKD’s review and could not be considered with regard to the findings of this report.”

In response to another question, Snyder said that no changes were recommended to the Kansas Economic Growth Act, the legislation that created the KBA. There were some recommendations to KBA board policies and procedures.

Wagle also noted that conflict of interest rules don’t really resolve conflicts. Generally, if KBA board members disclose that they have a conflict of interest — such as a company they have financial ties to getting a grant — they can refrain from voting to satisfy the rules. “To me, I don’t know if it’s okay with the people of Kansas,” Wagle said.

The joint hearing will continue tomorrow with a presentation from Rodman.

This article originally appeared on Kansas Watchdog.

Tagged as: Chris Steineger, Economic development, Government spending, Kansas legislature, Kansas Watchdog, Sam Brownback, Susan Wagle, Tom Holland

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In Kansas, the billion-dollar question

by Guest Author on January 24, 2012

The following argument in favor of the Fair Tax for Kansas is from Larry Halloran, who is Chairman of the Wichita — South Central KS 912 Group. Also included is a presentation by Earl Long of FairTaxKC. I particularly like his characterization of the Kansas statehouse as the “favor factory.”

The Billion-Dollar Question

By Larry Halloran
Why would the State of Kansas ignore the opportunity to generate a $2.1 billion surplus for fiscal year 2013 in the State General Fund (SGF)?

On Friday, January 20, a number of us attended the Senate Standing Assessment and Taxation Committee hearing in Topeka. It was both astonishing and obvious, from the questions that were not ask by the committee members, that they (individually or as a committee) had no real interest in considering any alternative to the Governor Sam Brownback’s tax reform proposal or plans they may have individually devoted time to crafting.

At the turn of the last century, the United States was essentially debt free. Then in 1913, we provided Congress, by constitutional amendment, the authority to tax our income. With the new taxing authority in place, federal lawmakers would no longer need our advice and consent and the march to socialism was on. It would take the better part of the next hundred years to make the million-dollar question obsolete but once government reached the billion dollar spending mark the leap to a trillion dollars occurred in a relative flash. Today, the accumulated annual deficit of the current administration alone exceeds the combined cumulative total deficit of all previous administrations. In less than a decade, we would learn to speak in billions although we really cannot comprehend the quantity.

Today, the million-dollar question equates to little more than pocket change lost in the couch cushions. Perhaps tomorrow, our children will be perplexed at our inability to comprehend such an insignificant amount as a trillion dollars.

Unfortunately, Kansas, like most other states, simply mimics the deficit spending habits and taxation policies of the federal government and now finds themselves in the dubious position of operating its own favor mill, selecting winners and losers each year for receipt of the state’s shrinking revenue — a fact easily witnessed by the parade of interest groups present and providing testimony in order to protect their share of the pie. With federal tentacles burrowed deep in their hide, our governor and state legislators lack the fortitude to make a clean break with the federal schemes of taxation.

Their plan does not mark an end to state sponsored charity but instead simply shifts state funds from one entitlement (the state earned income tax credit (EITC) for instance) to another (Medicaid) for the purpose of attracting more funds from the federal government. Drawn inextricably like a moth to a flame, our governor and legislators fail to appreciate that federal dollars are borrowed dollars that become a liability for future Kansas taxpayers. It is like paying the MasterCard bill with the Visa card. It provides only temporary relief for a chronic if not fatal problem.

The FairTaxKC Triple Zero + 6.3% plan offers the governor and state legislators the opportunity to cut the shackles and make a clean break with the federal government and from the federal schemes of taxation without cutting a single dime from their current projected expenditures.

The FairTaxKC Triple Zero + 6.3% plan would replace all current methods of taxing goods, personal and business income with a single rate consumption tax on services and new products at the Point of Sale only, with zero exceptions or exemptions.

The FairTaxKC Triple Zero + 6.3% plan would provide a prebate (prepayment) monthly to every legal citizen and resident on the registered tax rolls in Kansas for the consumption tax paid up to the poverty level.

The FairTaxKC Triple Zero + 6.3% plan projects a net positive reserve equal to roughly one third of the current SGF total planned expenditures in the first year, or $2.1 Billion, compounding annually. The governor’s tax proposal can only muster on paper about three quarters of the required statutory 7.5% general fund reserve or $350 Million.

In 1972, the total federal budget was approximately $230 billion. Today, the federal government will pay approximately $238 billion in interest payments alone this year. Historically, our state budget reflects the same trend in spending and debt (much of which is largely hidden from the public).

The only common thread in comments of the committee members and those testifying on behalf of their sacred cow was the apparent acknowledgment that significant change in Kansas tax policy was required (even if many hoped it would not affect them).

The only question remaining for us is: Will Kansas take the bold steps required that would allow the state to operate with billions of whole dollars in reserve?

Or will Kansas take a half-measured approach to modifying the federal schemes of taxation and leave the state operating on couch cushion change and a greater dependence on a bankrupt federal government?

Please take the opportunity now to contact the Governor and your legislators asking that they give the FairTaxKC Triple Zero + 6.3% plan fair treatment in their deliberations.

In Kansas, Triple Zero + 6.3% Fixes It

Tagged as: Kansas legislature, Kansas state government, Sam Brownback, Taxation

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Kansas and Wichita quick takes: Monday January 16, 2012

by Bob Weeks on January 16, 2012

Tax cuts = extra income? Commenting on Kansas tax reform, Wichita Business Journal editor Bill Roy said “Certainly for business people, it’s the elimination of the income tax on business income. … They’ll appreciate having that extra income that they can use on other things in their business.” I don’t know how much thought Roy gave to these remarks, but his easy likening of lower taxes to extra income is symptomatic of the problem: We have become accustomed to government having a claim on our income. In the rare instances where government gives up part of that claim, we taxpayers are supposed to view it as a gift, as something extra. Roy’s remarks were broadcast on the KPTS television program Impact while discussing Kansas Governor Sam Brownback’s tax reform plan. … Similar lines of thinking are revealed whenever it is said that tax cuts “cost” the government. The proper way of thinking is that government is a cost to the people, and whenever the cost of government is reduced, we experience a benefit. That is, we the people, as contrasted to the political class. If the government cuts taxes, the government gives us nothing. It simply takes less of what is ours in the first place. … I’m also reminded of former Kansas Governor Kathleen Sebelius, who when commenting on a reduction of the Kansas business machinery tax, said “We’re not giving away money for the sake of giving it away.”

Revenue-neutral tax reform. If Kansas tax reform is to be revenue-neutral, that — by definition — means that if one person pays less, someone else has to make up the difference. Peter Hancock of Kansas Education Policy Report has such an example in his post Winners and Losers in Brownback’s Tax Plan. A low-income family would experience a tax increase of $442 (mostly through loss of the Earned Income Tax Credit), while a middle class family with business income would save about $300. These examples were released by Kansas Democrats. … Hancock also reports that the Brownback administration’s projections assume 5.9 percent annual growth, instead of the standard 4 percent used by the Consensus Estimating Group. A common criticism of President Barack Obama’s administration is that its projections are based on an overly-optimistic rate of future economic growth. We shouldn’t do the same in Kansas.

Peterjohn to speak. This Friday (January 20th) the Wichita Pachyderm Club features Sedgwick County Commissioner Karl Peterjohn. He says he will speak on “critical national problems we are facing with a historical perspective.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. Upcoming speakers: On January 27, 2012: The Honorable Jennifer Jones, Administrative Judge, Wichita Municipal Court, speaking on “An overview of the Wichita Municipal Court.”

Southwest to fly to Wichita. Since it gobbled up AirTran, the question has been: Will Southwest Airlines provide service in Wichita? Now we know the answer is yes. While the airline has recently started service in some markets without the large, ongoing subsidies that Wichita and the state provide, that won’t be the case in Wichita, according to news reports. … Last year I reported on Southwest starting service in Charleston, South Carolina, whose metropolitan area population is similar to that of Wichita: “In the Charleston situation, there evidently won’t be the massive state-supplied subsidy as we have in Kansas. But Southwest will still get a leg up: A USA Today story quotes a Charleston airport official saying ‘Southwest didn’t want a state subsidy, but was interested in the airport’s incentives a temporary waiver of landing fees, up to $10,000 to market new flights, and up to $150,000 for other start-up costs.’” That’s a lot less than what Wichita and Kansas offer. .. Will the need for subsidies last? About this time last year, Wichita City Manager Robert Layton said “The Southwest business model doesn’t require subsidies over a long period of time.” Of course, we were told that the subsidy for AirTran would be required for only a short period, but the program grew and grew until it is now considered part of our state’s transportation infrastructure.

Kansas economic development incentives. In an Insight Kansas column, Professor Chapman Rackaway of Fort Hays State University concludes: “No state will abandon the tax-incentive recruitment strategy for fear of being the only business suitor with nothing to offer. But the tax-incentive strategy remains a risky one, and perhaps it is time for Kansas and other governments to re-evaluate the practice.” … Earlier in the article he cites the lack of oversight among the states: “States and localities are regularly in competition with one another for scarce jobs. However, a 2001 article in Economic Development Quarterly reported that, despite the billions distributed annually as incentives, states were doing little evaluation of incentives’ effectiveness or their return on investment.” (Kansas has done a little of this; see here. A quote from the Kansas audit: “Most studies of economic development incentives suggest these incentives don’t have a significant impact on economic growth. The literature we reviewed concluded that, thus far, negative and inconclusive findings are far more numerous than positive findings. Most reviews of economic development assistance find few results are achieved — a theme that audits in Kansas and other states commonly find, as well. Findings of ineffectiveness include promised jobs weren’t created, return on investment is low or negative, and incentives offered weren’t a determining factor.” But also: “The literature also suggests that economic development incentives must be offered to remain competitive with other states.”) … But I think there is a way out. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business wrote this regarding “benchmarking” — the bidding wars for large employers that are the subject of Rackaway’s article: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”

Story is broken. “Prof. Art Carden responds to ‘The Story of Broke,’ a recent video by the creators of ‘The Story of Stuff.’ In ‘The Story of Broke,’ Annie Leonard claims that the government isn’t actually broke. Rather, the government just wastes resources on the wrong things like subsidies to the dinosaur economy and war. She claims that the government should change its ways, and instead, subsidize firms that will bring us the future we really want. Art Carden agrees with Leonard that war and subsidies are wasteful, but is skeptical of notion that there is one unified vision for the future. To Carden, everyone has a different vision for the future. Our path to the future, he argues, is determined by the interactions of billions of unique individuals pursuing their own objectives. … Carden concludes that government spending won’t buy a brighter future. A brighter future will emerge when people are allowed to spend money on things they care about. Put another way, positive change will come from billions of people cooperating freely and voluntarily with one another, not from pushing trillions of dollars through a broken political process.” This video is from LearnLiberty.org, a project of Institute for Humane Studies, and many other informative videos are available.

Tagged as: Economic development, Government spending, Kansas Governor, Kathleen Sebelius, Robert Layton, Sam Brownback, Subsidy, Wichita Pachyderm Club

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Kansas spending is the problem

by Bob Weeks on January 13, 2012

While Kansas Governor Sam Brownback has some good ideas in his State of the State address and tax reform plan, there are two important points that need to be made.

First, the governor has said that tax reform is designed to be revenue neutral. That goal means that if one person pays less, someone else has to pay more. It also means that the state’s thirst for spending is not quenched. It is continued spending that prevents us from dramatically reducing or eliminating income tax rates in Kansas.

Critics of lowering income tax rates point to the advantages that states with no income tax have. Texas is often mentioned, where it is said that the state’s oil wealth and the taxes it generates make it possible for Texas to have no income tax.

There are two rebuttals to this argument. First, Kansas may have much new activity in oil and gas in the very near future. With the severance tax and taxes from other economic activity — as many as 25,000 jobs and $5 billion in investment over five years — new revenue may be flowing to the state. Brownback has called for limiting the growth of state spending to two percent annually, with revenue growth above that dedicated towards reducing income tax rates.

The second rebuttal is that states with low or no income tax generally spend much less than Kansas. Using figures I compiled for 2010, Kansas state spending per person is $4,923, which ranks it 35th among the states. Only 15 states spend more than Kansas, on a per person basis.

Texas, with no income tax, spends $3,703 per person. Florida, another state with no income tax, spends $3,300 per person.

Kansas Democrats have called for restoring school spending, and increasing it in the future. They have other plans for state spending, too. That’s why it is important that Kansas implement something that 47 states have, but Kansas does not. Unfortunately, the governor didn’t mention it in his address. That missing ingredient in the Kansas state financial plan is a rainy day fund.

Rainy day funds operate in different ways in the states that have them, but generally there are strict rules about spending the money in the fund. A rainy day fund would have helped Kansas whether a downturn in revenue without resorting to a tax increase. That’s vitally important, as once tax increases are in place, they are very difficult to remove. We have such an example of this now in Kansas: The increase in the statewide sales tax, promoted to last just three years, is now recommended to be permanent, according to the governor’s plan.

(Shifting sands: Kansas Senator Carolyn McGinn, who voted for the sales tax increase, now wants it ended a year earlier than originally planned. That was a transparent response to her having to face a conservative challenger in her primary election this year. But now she finds herself opposing the governor on this issue.)

Kansas has a requirement for a 7.5 percent ending balance in the general fund. That requirement is often waived by the legislature, as it has been for several years in a row. Rainy day fund legislation is often implemented in states’ constitutions, which can’t easily be waived or ignored by spending-happy legislature. The strict requirements as to how and when the fund balances can be spent is much different from a simple ending balance. Kansas Democrats, for example, are calling for spending the year’s ending balance.

Tagged as: Government spending, Kansas Democrats, Kansas Governor, Kansas state government, Sam Brownback, Taxation

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Kansas and Wichita quick takes: Wednesday January 11, 2012

by Bob Weeks on January 11, 2012

A legislator would do this? In his At The Rail column, Kansas statehouse reporter Martin Hawver speculates that even routine procedural votes, as well as votes in committee, may be material for campaign ads and mailers in this election year. “You’ve seen the mailings in election years, you know, the ones with a photo of a few lines apparently ripped from the official journal of the House or Senate. The scrap is always tilted a bit to make it more visually interesting. And, by gosh, that bit of an official document almost always shows — usually with a swipe of yellow highlighter — that a candidate voted for or against something that the rest of the brochure deems politically or fiscally or culturally important. … So, we’re going to be watching closely, to see whether a vote in a committee on something relatively unimportant becomes the theme of a campaign or two out there, and whether the public will be much moved by a vote even when it is dramatically presented as a fact ‘ripped from the official record’ of some committee or another. Key might be that it’s the final votes, not necessarily some little acting-out behavior in a committee, that is the real indication of just where a legislator is on legislation that you care about.” … I should tell you this: I’m more than a little shocked to learn this goes on in Topeka.

Where to see, listen to State of State Address. Tonight’s 6:30 pm address by Kansas Governor Sam Brownback can see seen on television by tuning in to KTPS (Wichita), KTWU (Topeka), or Smoky Hills Public Television. Radio coverage is on Kansas Information Network, KSAL-Salina 1150 AM, KANU-Lawrence/Topeka/Kansas City FM 91.5, KANH-Emporia FM 89.7, KANV-Olsburg/Junction City FM 91.3 and in Manhattan on FM 99.5, KANZ- Garden City FM 91.1, KZNA-Hill City FM 90.5, KHCC-Hutchinson/Wichita FM 90.1, KHCD-Salina/Manhattan FM 89.5, KHCT-Great Bend/Hays FM 90.9, KMUW-Wichita FM 89.1, KRPS-Pittsburg KS FM 89.9, KCUR-Kansas City Missouri FM 89.3, and online at www.KWCH.com, kslegislature.org, www.khi.org, and www.am580wibw.com.

Kansas Policy Institute launches blog. In its newsletter, the Kansas Policy Institute announces the start of a blog: “We believe this will be a venue to have an open discussion on the challenges facing our state and advancing liberty and freedom. Of course, we will continue the work we’ve been doing, but this is an opportunity to provide more real time analysis, share videos and stories from around the web, and allow concerned Kansans can debate the issues of the day.” The blog is located at KPI Blog. … KPI’s primary communications with Kansans have been through policy analysis and reports, and through newspaper op-ed columns. The blog should make KPI a more familiar source of news and information.

Kansas House Speaker criticized. “Continuous abuse of power and nepotism” along with his role in a lawsuit against the State of Kansas are the charges leveled against Speaker of the Kansas House of Representatives Mike O’Neal. The writer of the letter with the charges is Kansas Representative Owen Donohoe of the 39th district, which covers parts of Johnson, Leavenworth, and Wyandotte counties. … In 2010 O’Neal faced an legislative ethics panel investigation into his role as attorney for clients suing the state. The panel decided that O’Neal broke no rules, but that the legislature’s ethics rules should prohibit what O’Neal was doing, citing the “appearance of impropriety” such actions create. … In 2009, O’Neal faced a complaint relating to nepotism, and a panel found there was insufficient evidence to support the charges. … Last year O’Neal made several committee reassignments that were seen as motivated by a desire to silence critics of policies that O’Neal supported. These included Rep. Charlotte O’Hara for her position on health care issues, Rep. Kasha Kelly for her position on state spending, and Donohoe himself. Coverage is at More trouble brewing for House Speaker O’Neal and Kansas Republican legislator blasts House Speaker Mike O’Neal. … The public policy issue is this: Does legislative leadership — Speaker of the House, Senate President, Committee Chairs — have too much power? From my observation of the Kansas Legislature over the past few years, my answer is: Yes.

Kansas presidential caucus. Kansas Republicans will hold their presidential nominating caucus on Saturday, March 10th. Participants must be registered as Republicans to participate, and the last day to register as such is February 17th. Photo ID will be required for admission.

Democrats urged to help Republicans. In an email, Kansas National Education Association (KNEA), the teachers union, urges Kansas Democrats to help Republican select their nominees in the August primary elections. Writes the union to its minions: “Given the registration advantage that Republicans have over Democrats in Kansas, it is not surprising that many elections are decided in the August primaries. In many districts the Republican nominee will likely win. This means that unaffiliated and Democratic voters are very limited in the influence they can have on who will be their Representative or Senator. The reality is that, while it might feel good to register your disgust with both parties by registering as an unaffiliated voter, it dramatically reduces the influence of your vote in the election. … If you want your vote to have a greater influence this year, then we would urge you to consider your registration and participation in the primary election in August. If you live in a district that will likely elect a Republican in the general election, wouldn’t it be nice to have a say in which Republican that will be? If you want that voice, you will need to be a registered Republican by July 16, 2012.”

Kansas health issues. The Kansas Health Institute News Service has identified the issues related to health that are important in this year’s legislative session. Medicaid reform and health care exchanges are the first two mentioned, with Medicaid reform a very large and important issue. The article is Health issues facing the 2012 Legislature.

Separation of art and state. Kansas Governor Sam Brownback may be wavering on his opposition to state funding for the arts in Kansas, according to Lawrence Journal-World reporting. I recently urged legislators — borrowing a term from David Boaz — to respect the separation of art and state. In his book The Politics of Freedom: Taking on The Left, The Right and Threats to Our Liberties, Boaz explained why this is important: “It is precisely because art has power, because it deals with basic human truths, that it must be kept separate from government. Government, as I noted earlier, involves the organization of coercion. In a free society coercion should be reserved only for such essential functions of government as protecting rights and punishing criminals. People should not be forced to contribute money to artistic endeavors that they may not approve, nor should artists be forced to trim their sails to meet government standards. Government funding of anything involves government control.”

Numbers trouble Americans. “Many Americans have strong opinions about policy issues shaping the presidential campaign, from immigration to Social Security. But their grasp of numbers that underlie those issues can be tenuous.” The Wall Street Journal article Americans Stumble on Math of Big Issues covers this topic. “‘It’s pretty apparent that Americans routinely don’t know objective facts about the government,’ says Joshua Clinton, a political scientist at Vanderbilt University. Americans’ numerical misapprehension can be traced to a range of factors, including where they live, the news they consume, the political rhetoric they hear and even the challenges of numbers themselves. And it isn’t even clear how much this matters: Telling people the right numbers often doesn’t change their views.”

Capitalism. “The Occupy Wall Street movement expresses valid frustrations, but do the protesters aim their accusations in the wrong direction? Economics Professor Chris Coyne draws the distinction between crony capitalism and legitimate capitalism. Crony capitalism is government favoritism fueled by handouts and is responsible for the plight of the 99%. Legitimate capitalism, on the other hand, uses competition to align consumer and producer interests and serves to improve everyone’s standard of living. … Coyne says: “What we need is constraints on government … The minute you open the floodgates of government handouts, people are going to start lining up to grab them. And the people that are going to tend to get those handout are those that have money and political connections. So the solution to this is simple. Instead of spreading out losses, we need to do is to allow people to earn profits when they produce things that people value, and suffer losses when the fail to do so. When you have that type of system, the only way to earn wealth is to improve peoples’ standards of living.”… This video is from LearnLiberty.org, a project of Institute for Humane Studies, and many other informative videos are available.

Tagged as: Capitalism, Economics, Free markets, Kansas Democrats, Kansas Governor, Kansas legislature, Kansas National Education Association, Kansas Policy Institute, Kansas Republicans, Kansas state government, KNEA, Politics, Sam Brownback

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Kansas and Wichita quick takes: Monday January 9, 2012

by Bob Weeks on January 9, 2012

Wichita City Council. This week the Wichita City Council will consider the formation of a STAR bond district in northeast Wichita. While this is a complex issue that will take some study to fully understand, the action the council will consider this week is only to set a public hearing for February 14th. A concern is that the developers for the proposed Wichita project are also responsible for the Village West project in Kansas City, Kansas. On November 22, I reported this regarding that project: “The Legends at Village West, a huge shopping development in Kansas City near the Kansas Speedway, has defaulted on its loan. According to reporting in Commercial Real Estate Direct, the property never met its cash flow projections, topping out at $10.3 million per year in 2008. The loan assumed it would generate $11.1 million. Since 2008 cash flow has fallen. The public policy interest is that this facility, along with the nearby racetrack, received millions in sales tax (STAR) bond financing, to be repaid by taxpayers through sales tax collections.”

Kansas House Speaker speaking in Wichita. This Friday (January 13th) the Wichita Pachyderm Club features Speaker of the Kansas House of Representatives Mike O’Neal, speaking on “The untold school finance story.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. Upcoming speakers: On January 20th: Sedgwick County Commissioner Karl Peterjohn. … On January 27, 2012: The Honorable Jennifer Jones, Administrative Judge, Wichita Municipal Court, speaking on “An overview of the Wichita Municipal Court.”

Legislature starts. Today is the first day of the 2012 session of the Kansas Legislature.

State of the State address. Kansas Governor Sam Brownback will deliver the “State of the State” address this Wednesday at 6:30 pm. It appears that public television and radio are the only way to experience this address. A much-anticipated portion of the address is the governor’s plan for tax reform. The plan has been in the works for several months, and requests for information about the process have been refused.

Kansas State Sovereignty Rally. This Friday (January 13th) afternoon is the 4th Annual State Sovereignty Rally, held at the Kansas State Capitol. Topics include constitutional issues, health care reform, and the Kansas budget. A printable flier with details is here. There are transportation opportunities from Wichita; contact Larry Halloran at 316-777-9352 or LarryHalloran@aol.com.

Making Economics Come Alive. Tonight the Americans for Prosperity monthly meeting will feature the topic “Making Economics Come Alive” with a video presentation by John Stossel. Topics include Government Spending, Deficits, and Debt, Are We Heading Toward a Debt Crisis?, Can Government Spending Be Cut?, Growth of Government, Spending, Taxes and the role of Government, International Trade and Trade Barriers, International Trade: Criticisms and Responses, Economics of Trade Deficits, Why Some Nations Prosper and Others Stagnate, Why Do Nations Prosper?, and Economic Freedom and Quality of Life. This meeting is at a different location: Central Branch Wichita Public Library, 223 S. Main (3rd Floor Meeting Room). The meeting starts at 7:00 pm. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

Tagged as: Americans For Prosperity, Kansas Governor, Kansas legislature, Sam Brownback, Wichita city council, Wichita Pachyderm Club

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Good news coming for Wichita, says Brownback top aide

by Bob Weeks on January 6, 2012

Speaking at the Wichita Pachyderm Club luncheon today, David Kensinger, Chief of Staff for Kansas Governor Sam Brownback, said that Brownback will be in Wichita Tuesday “with a very specific announcement as relates to jobs in the aviation industry.”

He said that Wichita, as of a week ago, had the best facilities, workforce, and best supply chain for aviation manufacturing. That is still true today, he said. If Boeing doesn’t want to utilize this asset, there are others in the marketplace who will.

“Kansas will grow, Wichita will grow, Wichita aviation will grow,” he told an appreciative audience.

Later he told the audience that based on Tuesday’s announcements, and subsequent announcements, “you will see Kansas, and Wichita, and Wichita aviation employment grow.”

He also said that two companies are preparing to invest $5 billion in Kansas over the next five years to use hydraulic fracturing to produce natural gas and oil. He cited a study that shows that each $1 million spent on energy production produces 1.2 direct jobs and a total of 4.9 jobs when indirect jobs are included. This, he said would result in 25,000 new high-wage jobs.

Tagged as: Kansas state government, Sam Brownback, Wichita Pachyderm Club

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Kansas and Wichita quick takes: Tuesday January 3, 2012

January 3, 2012

Today: Legislators to hear from citizens; Romney seen as ‘good enough’; Brownback Chief of Staff in Wichita; Arrogance of Trump; Ethanol; 180 miles in an electric car; Kansas Policy Institute research; Capitalism.

Tagged as: Capitalism, Free markets, Kansas Policy Institute, Sam Brownback, Subsidy, Wichita Pachyderm Club

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