Tag Archives: Wichita Eagle opinion watch

WichitaLiberty.TV: Sales tax exemptions, criminal justice reform, and charity

In this episode of WichitaLiberty.TV: Does the elimination of sales tax exemptions hold the solution to Kansas budget problems? We have a problem with overcriminalization and the criminal justice system. Then, is there a difference between government and charity? View below, or click here to watch in high definition at YouTube. Episode 96, broadcast September 27, 2015.

Sales tax exemptions in Kansas

Can eliminating sales tax exemptions in Kansas generate a pot of gold?

Advocates of eliminating sales tax exemptions in Kansas point to the great amount of revenue that could be raised if Kansas eliminated these exemptions, estimated at some $5.9 billion per year. Analysis of the nature of the exemptions and the amounts of money involved, however, leads us to realize that the additional tax revenue that could be raised is much less than spending advocates claim, unless Kansas was to adopt a severely uncompetitive, and in some cases, unproductive and harshly regressive tax policy.

A recent advocate for eliminating some sales tax exemptions is Phillip Brownlee of the Wichita Eagle editorial board. In a previous op-ed on this topic he wrote ” And with each added exemption, the state is losing out on more revenue — $5.9 billion this fiscal year, according to the Kansas Department of Revenue. That’s money the state could be using to cover its budget shortfalls, increase funding to public schools or further reduce its income-tax rates.” At least he mentioned reducing other tax rates. Usually advocates of closing sales tax exemptions simply want more tax money to spend.

Kansas sales tax exemptions, simplified. Click for larger version.
Kansas sales tax exemptions, simplified. Click for larger version.
$5.9 billion dollars, by the way, is a lot of money, almost as much as the state’s general fund spending. But we need to look at the nature of these exemptions. I’ve prepared a simplified table based on data from the Kansas Department of Revenue. I simplified because there are many deductions that probably should be eliminated, but they represent very small amounts of money.

Some sales tax exemptions are for categories of business activity that shouldn’t be taxed, at least if we want to constrain the state to a retail sales tax only. An example is exemption 79-3606 (m), described as “Property which becomes an ingredient or component part of property or services produced or manufactured for ultimate sale at retail.” The tax that could be collected, should the state eliminate this exemption, is given as $3,083.24 million ($3,083,240,000).

But this exemption isn’t really an “exemption,” at least if the sales tax is a retail sales tax designed to be levied as the final tax on consumption. That’s because these goods aren’t being sold at retail. They’re sold to manufacturers who use them as inputs to products that, when finished, will be sold at retail. Most states don’t tax this type of sales. If Kansas decided to tax these transactions, it would place our state’s manufacturers at a severe disadvantage compared to almost all other states.

There are two other exemptions that fall in this category of inputs to production processes, totaling an estimated $632 million in lost revenue. Another similar exemption is “Machinery and equipment used directly and primarily in the manufacture, assemblage, processing, finishing, storing, warehousing or distributing of property for resale by the plant or facility.” Its value is nearly $159 million.

Together, these exemptions account for $3,874 million of the $5,900 million in total exemptions.

Another big-dollar exemption is “items already taxed” such as motor fuel. This is an estimated $318.90 million loss in revenue. Other exemptions are purchases made by government, or purchase made by contractors on behalf of government. These account for an estimated $624.90 million in lost revenue. If these two exemptions were eliminated, the government would be taxing itself.

Not taxing prescription drugs means lost revenue estimated at $96.49 million. If the state started taxing residential and agricultural use utilities, it could gain an estimated $169.98 million. These taxes, like the sales tax on food and the motor fuel tax, fall hardest on low-income families. As Kansas is one of the few states to tax food, do we want to make life even more difficult for low-income households?

Adding these exemptions comes to about $5,084 million. There are other exemptions for which we could make similar arguments for their retention. What’s left over — the exemptions that really should not exist — isn’t much at all. The entire category of “Exemptions to Charitable Organizations by Name.” amounts to $3.05 million in exempted sales tax. These represent the organizations where a lawmaker has crafted an exemption like “Property and services purchased by Jazz in the Woods and sales made by or on behalf of such organization.”

So when the Eagle’s Brownlee writes “As is, favored groups are saving billions of dollars a year, worsening the tax burden for everybody else” he must be including broad categories of business like “All Kansas manufacturing companies” as a “favored group.” Or maybe he means prescription drug users are a “favored group.” Or families struggling to pay utility bills.

But there are more problems. Brownlee describes these sales tax exemptions as a “cost in lost revenue of $5.9 billion last fiscal year.” The only way this makes sense is if one thinks that our property (our money) first belongs to the state, and that in order to spend it, we have to give the state its cut. That’s an opinion — ideology, if you will — that you may agree with, or you may oppose. What’s remarkable — shocking, really — is that in his previous career Brownlee was a Certified Public Accountant. He ought to understand the nature of sales taxes meant to be applied to retail sales, not components of manufactured goods.

WichitaLiberty.TV: Congressman Mike Pompeo

In this episode of WichitaLiberty.TV: Congressman Mike Pompeo talks about passing legislation like the Safe and Accurate Food Labeling Act, the Iran nuclear deal and his role in discovering the secret side deals, and other topics. View below, or click here to view at YouTube. Episode 94, broadcast August 30, 2015.

Sedgwick County WATC funding trajectory following manager’s recommendations

Sedgwick County taxpayers have been generous with funding for Wichita Area Technical College, and the former county manager has recommended reducing its funding.

During the July 16, 2014 meeting of the Sedgwick County Commission, county manager Bill Buchanan presented the recommended budget for 2015. It included a cut in funding for Wichita Area Technical College in the amount of $150,000. In response to a question, Buchanan told the commissioners:

“The new president has been assertive and aggressive in trying to deal with their financial issues. They have, he has turned that financial, that institution around financially. They are in pretty healthy shape. They have a fund balance that’s relatively strong, and it’s in my opinion that our subsidy, although it was critical in the beginning, is less critical in their operations now, and perhaps it would be time for us, when we face our own fiscal issues, to reduce their funding so we can address some of ours.”

Under the leadership of Chair Dave Unruh, this reduction in funding was approved.

At the January 7, 2015 meeting of the commission, again under the leadership of Unruh, the commission heard an off-agenda item to restore $50,000 of the funding for 2015, making the cut $100,000. That item passed. Being an off-agenda item, there is little or no public notice. Commissioner Karl Peterjohn noted this in his remarks: “I frankly would feel much more comfortable if we postponed this issue until we could get it published in the paper and have at least whatever public attention that that would generate provided, as opposed to taking another Off Agenda item that’s going to increase county spending.”

In support of Peterjohn’s motion to delay the decision for a week, Commissioner Richard Ranzau expressed concern over the lack of financial information made available to commissioners. He also repeated the manager’s recommendation that WATC needs less county funding: “Well, I’d like to have more financial information. It’s my understanding that since the state has increased funding for Vocational Ed, they’re doing very well, their reserves increased significantly, and that’s why, I mean, I was told the reason we could reduce it $150,000 was because they were doing so well. I support what they’re doing out there, but if they’ve had an influx of money from the state, a result of Vocational Ed legislation then I think it’s appropriate to adjust our spending, and I’m not prepared to increase it by $50,000 without more financial information, and that’s why I support Commissioner Peterjohn’s motion to postpone this a week so we can get more information and make a more educated decision on this. There is really no reason for hurry through this in my estimation.”

In summary, the Sedgwick County manager recommended that commissioners reduce funding to WATC, as its need for county funding has declined. Under commission chair Unruh, the commission did so, in the net amount of $100,000. The same amount is proposed for cuts this year. In light of this, the criticism of WATC beneficiaries like Spirit Aerosystems is unfounded.

By the way, the commission has been criticized for considering off-agenda items since Ranzau became chair in January, with the Wichita Eagle editorial board describing one off-agenda vote as “abrupt.” In another op-ed, Rhonda Holman complained that “The move came in an off-agenda item, with little opportunity for GWEDC and the business community to argue against it.”

Whether off-agenda items are good or bad public policy seems to depend on the whim of the Eagle editorial board.

Wichita Eagle editorial board on county budget

When someone invokes “ideology” in their criticism of you, you know that they’ve either run short of actual arguments based on fact, or they don’t know what ideological means.

In its op-ed this Sunday, the Wichita Eagle editorial board blasts the Sedgwick County Commission for cuts to various programs, mentioning “Sedgwick County Zoo, Exploration Place, the Arts Council and Greater Wichita Economic Development Coalition” specifically.

I might invite the Eagle editorialists to revisit the county’s recommended budget for 2013, prepared under the leadership of then-chairman Tim Norton, the body’s sole Democrat, both then and now. According to county documents, Norton’s recommended budget made these cuts:

Zoo: $255,889
Exploration Place: $112,405
Arts Council: $0
GWEDC: $0

So this is not the first time the zoo and Exploration Place have been cut.

Additionally, Norton’s recommended budget cut 113.80 employees from the county payroll. Of these, 60.75 were from the closure of the Judge Riddel Boys Ranch Juvenile Detention Program, leaving 53.05 in cuts from other county programs. The 2016 recommended budget calls for cuts of 10.00 employees.

I wonder: Did the Eagle editorial writers rail against commissioners Norton, Unruh, and Skelton for the cuts in the 2013 recommended budget? Yes, there was criticism of budget cuts then, but no ideological bashing.

This year the Eagle editorial board also criticizes the commission majority for its plan to eliminate routing borrowing for county roads and bridges. Last year the Eagle recommended Wichitans vote in favor of a sales tax. One of its components, viewed favorably by the city and the Eagle, was the avoidance of borrowing for a large public works project.

But now that conservatives on the county commission propose avoiding debt — some debt, not all debt — the Eagle is opposed.

The shifting sands underlying the Eagle editorial board’s criticism is evidence of an ideology, and a rather shallow one. Cuts made by conservatives? Bad. There will be damage, says the headline.

Much larger cuts made by progressives? The editorial board acknowledges “the county needs to tighten its belt and prioritize its services.”

That’s quite a contrast.

Here are excerpts from the 2013 and 2016 Sedgwick County recommended budgets showing recommended cuts.

A big-picture look at the EDA

While praising the U.S. Economic Development Administration for a small grant to a local institution, the Wichita Eagle editorial board overlooks the big picture.

While praising a grant to Wichita State University from the U.S. Economic Development Administration, the Wichita Eagle editorial board doesn’t waste an opportunity remind us of its big-government, anti-taxpayer ideology. (Pompeo would eliminate source of WSU grants, July 11, 2015)

The op-ed also criticizes U.S. Representative Mike Pompeo, who has sponsored legislation and offered amendments to end the EDA.

While the Eagle op-ed is designed to make us feel happy for Wichita State University (and bad about Rep. Pompeo, especially given the photo the newspaper used to illustrate the story online), the short-sighted and naive reasoning behind it is harmful. The op-ed promotes the impression that federal money is free, a gift from a magical fairy godmother that falls out of the sky in abundance. Anyone who opposes this free stuff must be evil.

But in exchange for the grant to WSU, we have to tolerate grants like these made by the EDA:

    Harry Reid Research Park
  • In 2008, the EDA provided $2,000,000 to begin construction of the UNLV Harry Reid Research & Technology Park in Las Vegas, NV. For many years the UNLV Harry Reid Research & Technology Park featured a paved road and a website claiming the first anticipated tenant would move in in 2010. But there are signs of life now in 2015, according to the article Signs of life emerge at UNLV’s long-dormant technology park.)
  • In 2010, $25,000,000 was spent by the EDA for a Global Climate Mitigation Incentive Fund and $2,000,000 for a “culinary amphitheater,” wine tasting room and gift shop in Washington State.
  • In 2011, the EDA gave a New Mexico town $1,500,000 to renovate a theater.
  • In 2013, the EDA also gave Massachusetts $1.4 million to promote new video games.
  • Back in the 1980s, the EDA used taxpayer dollars to build replicas of the Great Wall of China and the Egyptian Pyramids in the middle of Indiana. They were never completed — it is now a dumping ground for tires.

So in exchange for WSU receiving a million dollars this year and $1.9 million last year, we have to put up with the above. We have to wonder if Harry Reid being the number one Senate Democrat had anything to do with a grant for a facility named in his honor. We have yet another government agency staffed with a fleet of bureaucrats, including a chief who will travel to Wichita to promote and defend his agency. We have another government agency that believes it can better decide how to invest capital than the owners of the capital. We have another example of shipping tax dollars to Washington, seeing a large fraction skimmed off the top, then cities and states begging for scraps from the leftovers.

Often when the Eagle editorial board criticizes conservatives, it does so by using terms like “driven by ideology” or “blind adherence to right-wing ideology.”

But anyone parachuting down from Mars and observing this system for making investment decisions would wonder: Why do they do this? What kind of ideology would result in this nonsense?

You’ll have to ask the Wichita Eagle editorial board.

Rep. Pompeo on the EDA

In January 2012 Pompeo wrote an op-ed which explains the harm of the EDA. Here is an excerpt:

Last week, Secretary Fernandez invited himself to Wichita at taxpayer expense and met with the Wichita Eagle’s editorial board. Afterwards, the paper accurately noted I am advocating eliminating the EDA even though that agency occasionally awards grant money to projects in South Central Kansas. They just don’t get it. Thanks to decades of this flawed “You take yours, I’ll take mine” Washington logic, our nation now faces a crippling $16 trillion national debt.

I first learned about the EDA when Secretary Fernandez testified in front of my subcommittee that the benefits of EDA projects exceed the costs and cited the absurd example of a $1.4 million award for “infrastructure” that allegedly helped a Minnesota town secure a new $1.6 billion steel mill. As a former CEO, I knew there is no way that a taxpayer subsidy equal to less than one-tenth of one percent (0.1%) of the total capital needed made a difference in launching the project. That mill was getting built whether EDA’s grant came through or not. So, I decided to dig further.

I discovered that the EDA is a federal agency we can do without. Similar to earmarks that gave us the infamous “Bridge to Nowhere” or the Department of Energy loan guarantee scandal that produced Solyndra, the EDA advances local projects that narrowly benefit a particular company or community. To be sure, the EDA occasionally supports a local project here in Kansas. But it takes our tax money every year for projects in 400-plus other congressional districts, many if not most of which are boondoggles. For example: EDA gave $2 million to help construct UNLV’s Harry Reid Research and Technology Park; $2 million for a “culinary amphitheater,” tasting room, and gift shop at a Washington state winery; and $500,000 to construct (never-completed) replicas of the Great Pyramids in rural Indiana.

Several times in recent decades, the Government Accountability Office has questioned the value and efficacy of the EDA. Good-government groups like Citizens Against Government Waste have called for dismantling the agency. In addition, eliminating the EDA was listed among the recommendations of President Obama’s own bipartisan Simpson-Bowles Deficit Reduction Commission.

So why hasn’t it been shut down already? Politics. The EDA spreads taxpayer-funded project money far and wide and attacks congressmen who fail to support EDA grants. Soon after that initial hearing, Secretary Fernandez flew in his regional director — again at taxpayer expense — to show me “all the great things we are doing in your home district” and handed me a list of recent and pending local grants. Hint, hint. You can’t say I wasn’t warned to back off. Indeed, Eagle editors missed the real story here: Secretary Fernandez flew to Wichita because he is a bureaucrat trying to save his high-paying gig. The bureaucracy strikes back when conservatives take on bloated, out-of-control, public spending, so I guess I’m making progress.

Please don’t misunderstand. I am not faulting cities, universities, or companies for having sought “free” federal money from the EDA. The fault lies squarely with a Washington culture that insists every program is sacred and there is no spending left to cut.

A federal agency run at the Assistant Secretary level has not been eliminated in decades. Now is the time. My bill to eliminate the EDA (HR 3090) would take one small step toward restoring fiscal sanity and constitutional government.

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

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

Following, his remarks on the floor.

Brownback derangement syndrome on display

A newspaper op-ed illustrates some of the muddled thinking of Kansas newspaper editorialists, not to mention Brownback derangement syndrome.

Recent discussion about restricting the ability to spend welfare benefits has lead one newspaper editorialist to compare elected politicians with welfare recipients. The writer is Dave Helling of the Kansas City Star, and his target is Kansas Governor Sam Brownback. Attempting to paint the governor as a government-paid freeloader, Helling wrote: “He’s earned his living from taxpayers almost all his life. He’s worked in state government, the U.S. House and U.S. Senate and now as governor, where he earns around $100,000 a year.” (Dave Helling: It’s time to break lawmakers’ ‘cycle of dependency’)

Except: Helling’s own words undermine his point. He wrote that Brownback earned his living. Welfare recipients are not earning their benefits.

Helling also wrote that Brownback worked in government. Welfare recipients aren’t working for their benefits.

Also: “Taxpayers long have provided Brownback money to buy shelter, food, health care, safety and transportation.” I don’t know how this is relevant. If Brownback worked and earned his pay, it’s of concern to no one how he spends it.

Helling also wrote: “Brownback’s long ride on the public dime is supposed to come to an end in 2019, when term limits force him to finally find a private-sector job.” He follows with speculation that Brownback may run again for the U.S. Senate. Of interest is that Sam Brownback is a rare example of a politician who self-imposed term limits on himself and actually kept the promise, leaving the U.S. Senate after two full terms. As far as serving in the Senate again, most advocates of term limits agree that if officeholders sit out a term, they may run again.

This op-ed was mentioned by the Wichita Eagle, where editorialist Rhonda Holman added “Brownback has held a government job since he became state agriculture secretary in 1986, at age 30.” It’s curious that the Eagle editorial board would criticize someone for working for government. Its usual stance is that there should be more government workers doing more things and spending more money.

There is legitimate criticism of governor Brownback. He has not been an advocate for school choice. He has not been interested in setting Kansas on a path to controlling state spending. (These are some of the reasons why I did not vote for Browback.) But these are not the goals of the Star or Eagle editorial boards, or for that of most newspapers. Instead they pick at the governor with nonsensical arguments. That’s derangement syndrome.

Intrust Bank Arena loss for 2014 is $5 million

The depreciation expense of Intrust Bank Arena in downtown Wichita recognizes and accounts for the sacrifices of the people of Sedgwick County and its visitors to pay for the arena. But no one wants to talk about this.

The true state of the finances of the Intrust Bank Arena in downtown Wichita are not often a subject of public discussion. Arena boosters promote a revenue-sharing arrangement between the county and the arena operator, referring to this as profit or loss. But this arrangement is not an accurate and complete accounting, and hides the true economics of the arena. What’s missing is depreciation expense.

In February the Wichita Eagle reported: “The arena’s net income for 2014 came in at $122,853, all of which will go to SMG, the company that operates the facility under contract with the county, Assistant County Manager Ron Holt said Wednesday.” A reading of the minutes for the February 11 meeting of the Sedgwick County Commission finds Holt mentioning depreciation expense not a single time. Strike one.

Last December, in a look at the first five years of the arena, its manager told the Wichita Eagle this: “‘We know from a financial standpoint, the building has been successful. Every year, it’s always been in the black, and there are a lot of buildings that don’t have that, so it’s a great achievement,’ said A.J. Boleski, the arena’s general manager.” Strike two.

I didn’t notice the Eagle opinion page editorializing this year on the release of the arena’s profitability figures. So here’s an example of incomplete editorializing from Rhonda Holman, who opined “Though great news for taxpayers, that oversize check for $255,678 presented to Sedgwick County last week reflected Intrust Bank Arena’s past, specifically the county’s share of 2013 profits.” (Earlier reporting on this topic in the Eagle in 2013 did not mention depreciation expense, either.) Strike three in the search for truthful accounting of the arena’s finances.

The problem with the reporting of Intrust Bank Arena profits

There are at least two ways of looking at the finance of the arena. Most attention is given to the “profit” (or loss) earned by the arena for the county according to an operating and management agreement between the county and SMG, a company that operates the arena.

This agreement specifies a revenue sharing mechanism between the county and SMG. For 2103, the accounting method used in this agreement produced a profit of $705,678, to be split (not equally) between SMG and the county. The county’s share, as Holman touted in her Eagle op-ed, was $255,678. (Presumably that’s after deducting the cost of producing an oversize check for the television cameras.)

For 2014, the arena’s profit was $122,853. All that goes to SMG, based on the revenue-sharing agreement.

The Operations of Intrust Bank ArenaWhile described as “profit” by many, this payment does not represent any sort of “profit” or “earnings” in the usual sense. In fact, the introductory letter that accompanies these calculations warns readers that these are “not intended to be a complete presentation of INTRUST Bank Arena’s financial position and results of operations and are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America.”

That bears repeating: This is not a reckoning of profit and loss in any recognized sense. It is simply an agreement between Sedgwick County and SMG as to how SMG is to be paid, and how the county participates.

A much better reckoning of the economics of the Intrust Bank Arena can be found in the 2014 Comprehensive Annual Financial Report for Sedgwick County. This document holds additional information about the finances of the Intrust Bank Arena. The CAFR, as described by the county, “… is a review of what occurred financially last year. In that respect, it is a report card of our ability to manage our financial resources.”

Regarding the arena, the CAFR states:

The Arena Fund represents the activity of the INTRUST Bank Arena. The facility is operated by a private company; the county incurs expenses only for certain capital improvements or major repairs and depreciation, and receives as revenue only a share of profits earned by the operator, if any, and naming rights fees. The Arena had an operating loss of $5.0 million. The loss can be attributed to $5.2 million in depreciation expense.

Financial statements in the same document show that $5,157,424 was charged for depreciation in 2014, bringing accumulated depreciation to a total of $26,347,705.

Depreciation expense is not something that is paid out in cash. Sedgwick County didn’t write a check for $5,157,424 to pay depreciation expense. Instead, depreciation accounting provides a way to recognize and account for the cost of long-lived assets over their lifespan. It provides a way to recognize opportunity costs, that is, what could be done with our resources if not spent on the arena.

But not many of our public leaders recognize this. In years past, Commissioner Dave Unruh made remarks that show the severe misunderstanding that he and almost everyone labor under regarding the nature of the spending on the arena: “I want to underscore the fact that the citizens of Sedgwick County voted to pay for this facility in advance. And so not having debt service on it is just a huge benefit to our government and to the citizens, so we can go forward without having to having to worry about making those payments and still show positive cash flow. So it’s still a great benefit to our community and I’m still pleased with this report.”

Earlier in this article we saw examples of the Sedgwick County Assistant Manager, the Intrust Bank Arena manager, and several Wichita Eagle writers making the same mistake.

Intrust Bank Arena commemorative monument
Intrust Bank Arena commemorative monument
The contention — witting or not — of all these people is that the capital investment of $183,625,241 (not including an operating and maintenance reserve) in the arena is merely a historical artifact, something that happened in the past, something that has no bearing today. There is no opportunity cost, according to this view. This attitude, however, disrespects the sacrifices of the people of Sedgwick County and its visitors to raise those funds. Since Kansas is one of the few states that adds sales tax to food, low-income households paid extra sales tax on their groceries to pay for the arena — an arena where they may not be able to afford tickets.

Any honest accounting or reckoning of the performance of Intrust Bank Arena must take depreciation into account. While Unruh is correct that depreciation expense is not a cash expense that affects cash flow, it is an economic fact that can’t be ignored — except by politicians, apparently. The Wichita Eagle aids in promoting this deception.

We see our governmental and civic leaders telling us that we must “run government like a business.” Without frank and realistic discussion of numbers like these and the economic facts they represent, we make decisions based on incomplete and false information.

Legislation to end Economic Development Administration introduced

U.S. Rep. Mike Pompeo calls for an end to a wasteful federal economic development agency.

economic-development-administrationIf you think a proper function of the federal government is spending your tax dollars to build replicas of the Great Pyramids in Indiana or a gift shop in a winery, you’re not going to like legislation introduced by U.S. Representative Mike Pompeo, a Republican who represents the Kansas fourth district, including the Wichita metropolitan area.

Others, however, will appreciate H.R. 661: EDA Elimination Act of 2015. In the following article from 2012, Pompeo explains the harm of the Economic Development Administration, which he describes as a “politically motivated federal wealth redistribution agency.” Pompeo had introduced similar legislation in the past, and this bill keeps the effort alive in the new Congress.

In his article Pompeo mentions the trip by Assistant Secretary of Commerce for Economic Development John Fernandez to Wichita. This was in conjunction with EDA’s grant to Bombardier, part of which was to facilitate production of a new airplane, the LearJet 85. Since then, Fernandez has moved on to the private sector, working for a law firm in a role that seems something like lobbying.

Unfortunately, earlier this year Bombardier mothballed the LearJet 85 project, with industry observers doubting it will be revived.

For more background on the EDA, see Economic Development Administration at Downsizing the Federal Government.

End the Economic Development Administration — Now

By U.S. Representative Mike Pompeo, January, 2012

As part of my efforts to reduce the size of government, I have proposed to eliminate the Economic Development Administration (EDA), a politically motivated federal wealth redistribution agency. Unsurprisingly, the current leader of that agency, Assistant Secretary of Commerce for Economic Development John Fernandez, has taken acute personal interest in my bill to shutter his agency.

Last week, Secretary Fernandez invited himself to Wichita at taxpayer expense and met with the Wichita Eagle’s editorial board. Afterwards, the paper accurately noted I am advocating eliminating the EDA even though that agency occasionally awards grant money to projects in South Central Kansas. They just don’t get it. Thanks to decades of this flawed “You take yours, I’ll take mine” Washington logic, our nation now faces a crippling $16 trillion national debt.

I first learned about the EDA when Secretary Fernandez testified in front of my subcommittee that the benefits of EDA projects exceed the costs and cited the absurd example of a $1.4 million award for “infrastructure” that allegedly helped a Minnesota town secure a new $1.6 billion steel mill. As a former CEO, I knew there is no way that a taxpayer subsidy equal to less than one-tenth of one percent (0.1%) of the total capital needed made a difference in launching the project. That mill was getting built whether EDA’s grant came through or not. So, I decided to dig further.

I discovered that the EDA is a federal agency we can do without. Similar to earmarks that gave us the infamous “Bridge to Nowhere” or the Department of Energy loan guarantee scandal that produced Solyndra, the EDA advances local projects that narrowly benefit a particular company or community. To be sure, the EDA occasionally supports a local project here in Kansas. But it takes our tax money every year for projects in 400-plus other congressional districts, many if not most of which are boondoggles. For example: EDA gave $2 million to help construct UNLV’s Harry Reid Research and Technology Park; $2 million for a “culinary amphitheater,” tasting room, and gift shop at a Washington state winery; and $500,000 to construct (never-completed) replicas of the Great Pyramids in rural Indiana.

Several times in recent decades, the Government Accountability Office has questioned the value and efficacy of the EDA. Good-government groups like Citizens Against Government Waste have called for dismantling the agency. In addition, eliminating the EDA was listed among the recommendations of President Obama’s own bipartisan Simpson-Bowles Deficit Reduction Commission.

So why hasn’t it been shut down already? Politics. The EDA spreads taxpayer-funded project money far and wide and attacks congressmen who fail to support EDA grants. Soon after that initial hearing, Secretary Fernandez flew in his regional director — again at taxpayer expense — to show me “all the great things we are doing in your home district” and handed me a list of recent and pending local grants. Hint, hint. You can’t say I wasn’t warned to back off. Indeed, Eagle editors missed the real story here: Secretary Fernandez flew to Wichita because he is a bureaucrat trying to save his high-paying gig. The bureaucracy strikes back when conservatives take on bloated, out-of-control, public spending, so I guess I’m making progress.

Please don’t misunderstand. I am not faulting cities, universities, or companies for having sought “free” federal money from the EDA. The fault lies squarely with a Washington culture that insists every program is sacred and there is no spending left to cut.

A federal agency run at the Assistant Secretary level has not been eliminated in decades. Now is the time. My bill to eliminate the EDA (HR 3090) would take one small step toward restoring fiscal sanity and constitutional government.

WichitaLiberty.TV: Wichita Eagle, Kansas Democrats, Kris Kobach on voting, and the minimum wage

In this episode of WichitaLiberty.TV: Wichita Eagle labels hold a clue to the newspaper’s attitude, Kansas Democratic Party income tax reckoning, straight-ticket voting could leave some issues unvoted, and how a minimum wage hike would harm the most vulnerable workers. View below, or click here to view at YouTube. Episode 72, broadcast January 25, 2015.

Wichita Eagle labels hold a clue

How Wichita Eagle news stories label outside organizations is a window into the ideology of the paper’s newsroom.

A Wichita Eagle op-ed references a report released by two think tanks, Institute on Taxation and Economic Policy and Kansas Center for Economic Growth. (Kansas tax system among the most regressive, January 18, 2015.)

Here’s what readers can learn about the mindset of the Wichita Eagle. These organizations were named. Named and referenced without labels, adjectives, or qualifications that give readers clues about the ideology of the organizations.

That wouldn’t be remarkable except for noticing the contrast in how the Eagle labels conservative and libertarian organizations, most notably Kansas Policy Institute. A quick use of Google finds these mentions of KPI in recent Eagle pieces:

  • “Dave Trabert, president of the Kansas Policy Institute and an outspoken advocate for conservative education reforms”
  • “The Kansas Policy Institute, a free-market think tank linked to Koch Industries”
  • “The Kansas Policy Institute, a conservative think tank”
  • “Dave Trabert, president of the Kansas Policy Institute, a conservative think tank in Wichita”
  • “The Kansas Policy Institute, a conservative think tank based in Wichita”
  • “The Kansas Policy Institute, a conservative Wichita nonprofit organization”
  • “parallel recommendations from the Kansas Policy Institute, a conservative small-government think tank”

Always, a reference to Kansas Policy Institute includes a description of the organization’s politics. This is not inaccurate, as KPI is conservative and free-market.

Contrast with these recent excerpts from Eagle stories:

  • “Duane Goossen is a senior fellow at the Kansas Center for Economic Growth”
  • “said Annie McKay, director of the Kansas Center for Economic Growth”
  • “The Kansas Center for Economic Growth recently surveyed districts and analyzed data from the Kansas State Department of Education”
  • “A study by the Institute on Taxation and Economic Policy that Laffer disputes”
  • “said Matt Gardner, executive director of the liberal-leaning Institute on Taxation and Economic Policy”
  • “according to an analysis by the Institute on Taxation and Economic Policy, which is based in Washington, D.C.”
  • “Wednesday’s report by the Institute on Taxation and Economic Policy says”

You can see that one time the Eagle slipped and labeled ITEP as “liberal-leaning.” That’s actually a gentle characterization of ITEP, which in reality lies quite far on the left end of the political spectrum, as does Kansas Center for Economic Growth. But the use of a label shows that someone, at one time, was aware of ITEP’s politics.

So why does the Eagle routinely label Kansas Policy Institute, but never or rarely label Institute on Taxation and Economic Policy and Kansas Center for Economic Growth?

We know the editorial page of the Eagle is liberal, favoring progressive policies of more taxes and larger government over economic freedom almost without exception. We see too that the newsroom shares the same view, as shown by the sampling of references above. Labeling a source as conservative, free-market, and linked to Koch Industries is not meant by the Eagle to be a compliment.

A note: The two outfits the op-ed relied upon produce much content that is demonstrably wrong. The Tax Foundation has found many serious problems with the report that is the subject of the Eagle op-ed. See Comments on Who Pays? A Distributional Analysis of the Tax Systems in All 50 States (Second Edition). For KCEG, see Kansas school teacher cuts, student ratios.

WichitaLiberty.TV: The Wichita Eagle fails the city and its readers

In this excerpt from WichitaLiberty.TV: In its coverage of the recent election, the Wichita Eagle has failed to inform its readers of city and state issues. View below, or click here to view at YouTube.

For more on this topic, see In election coverage, The Wichita Eagle has fallen short and For Wichita Eagle, no immediate Kansas budget solution.

WichitaLiberty.TV: Election results, Kansas school employment and spending, and government planning of the economy

In this episode of WichitaLiberty.TV: In Sedgwick County, an unlikely hero emerges after the November election. Then, what is the trend in Kansas school employment and spending, and what do voters think has happened? Finally, do you know how to make a simple lead pencil? View below, or click here to view at YouTube. Episode 66, broadcast November 23, 2014.

WichitaLiberty.TV: Results of and reflection on the Wichita sales tax election and campaign

In this episode of WichitaLiberty.TV: We’ll look at the results of the Wichita sales tax election and what might happen next. Then, we’ll evaluate the Wichita Eagle’s coverage during the campaign. Also, this election raised issues of the privacy of voter data. View below, or click here to view at YouTube. Episode 65, broadcast November 16, 2014.

For Wichita Eagle, no immediate Kansas budget solution

The Wichita Eagle shows how its adherence to ideology misinforms Kansans and limits their exposure to practical solutions for governance.

In an op-ed posted the day before election day, the editorial board of the Wichita Eagle wrote of the problems it believes the next Kansas governor will face:

The candidates vying to be Kansas governor have lofty-sounding goals and campaign promises. But here’s the grim reality: Whoever wins Tuesday will spend the next several years trying to fill a budget hole.

And that hole keeps growing deeper. (“Budget hole awaits winner,” November 3, 2014)

The state has to make changes. We’ve cut taxes, but we’ve not yet met the challenge of cutting spending to match. The problem with this op-ed is the assertion that will take several years to fix. Here’s what I left in reply:

I have to disagree. Kansas Policy Institute has examined the Kansas budget and found ways to make several structural changes that would immediately (within one year) balance the Kansas budget. This would preserve existing services and fully fund the increases in K-12 school spending and social service caseloads that Kansas Legislative Research has projected. The policy brief that KPI has prepared on this matter is only ten pages long and not difficult to comprehend.

The changes that KPI recommends are specific adjustments to the way Kansas spends money. They are not the vague calls to eliminate waste that we see politicians campaign on. This is something that Kansas could do if both Democrats and Republicans have the will.

Dave Trabert, president of Kansas Policy Institute, added this:

Bob is right. And the Eagle is well aware of our budget plan but declines to let readers know that the budget can be balanced without service reductions or tax increases. It won’t take “several years” to fix the budget; our plan could be implemented by passing a few pieces of legislation.

The policy brief I referenced may be downloaded from KPI at A Five-Year Budget Plan for the State of Kansas: How to balance the budget and have healthy ending balances without tax increases or service reductions or alternatively from Scribd here (may work better on mobile devices). A press release from KPI announcing the policy brief is at 5 Year Budget Plan Outlines Path To Protect Essential Services and Tax Reform.

In election coverage, The Wichita Eagle has fallen short

Citizens want to trust their hometown newspaper as a reliable source of information. The Wichita Eagle has not only fallen short of this goal, it seems to have abandoned it.

The Wichita Eagle last week published a fact-check article titled “Fact check: ‘No’ campaign ad on sales tax misleading.” As of today, the day before the election, I’ve not seen any similar article examining ads from the “Yes Wichita” group that campaigns for the sales tax. Also, there has been little or no material that examined the city’s claims and informational material in a critical manner.

Wichita Eagle Building, detail
Wichita Eagle Building, detail
Someone told me that I should be disappointed that such articles have not appeared. I suppose I am, a little. But that is balanced by the increasing awareness of Wichitans that the Wichita Eagle is simply not doing its job.

It’s one thing for the opinion page to be stocked solely with liberal columnists and cartoonists, considering the content that is locally produced. But newspapers like the Eagle tell us that the newsroom is separate from the opinion page. The opinion page has endorsed passage of the sales tax. As far as the newsroom goes, by printing an article fact-checking one side of an issue and failing to produce similar pieces for the other side — well, readers are free to draw their own conclusions about the reliability of the Wichita Eagle newsroom.

As a privately-owned publication, the Wichita Eagle is free to do whatever it wants. But when readers see obvious neglect of a newspaper’s duty to inform readers, readers are correct to be concerned about the credibility of our state’s largest newspaper.

Citizens want to trust their hometown newspaper as a reliable source of information. The Wichita Eagle has not only fallen short of this goal, it seems to have abandoned it.

Here are some topics and questions the Eagle could have examined in fact-checking articles on the “Yes Wichita” campaign and the City of Wichita’s informational and educational campaign.

The Wichita Eagle could start with itself and explain why it chose a photograph of an arterial street to illustrate a story on a sales tax that is dedicated solely for neighborhood streets. The caption under the photo read “Road construction, such as on East 13th Street between Oliver and I-135, would be part of the projects paid for by a city sales tax.”

Issues regarding “Yes Wichita”

The “Yes Wichita” campaign uses an image of bursting wooden water pipes to persuade voters. Does Wichita have any wooden water pipes? And isn’t the purpose of the sales tax to build one parallel pipeline, not replace old water pipes? See Fact-checking Yes Wichita: Water pipe(s).

The “Yes Wichita” campaign group claims that the sales tax will replace old rusty pipes that are dangerous. Is that true?

The City and “Yes Wichita” give voters two choices regarding a future water supply: Either vote for the sales tax, or the city will use debt to pay for ASR expansion and it will cost an additional $221 million. But the decision to use debt has not been made, has it? Wouldn’t the city council have to vote to issue those bonds? Is there any guarantee that the council will do that?

The “Yes Wichita” group says that one-third of the sales tax will be paid by visitors to Wichita. But the city’s documents cite the Kansas Department of Revenue which gives the number as 13.5 percent. Which is correct? This is a difference of 2.5 times in the estimate of Wichita sales tax paid by visitors. This is a material difference in something used to persuade voters.

The city’s informational material states “The City has not increased the mill levy rate for 21 years.” In 1994 the Wichita mill levy rate was 31.290, and in 2013 it was 32.509. That’s an increase of 1.219 mills, or 3.9 percent. The Wichita City Council did not take explicit action, such as passing an ordinance, to raise this rate. Instead, the rate is set by the county based on the city’s budgeted spending and the assessed value of taxable property subject to taxation by the city. While the city doesn’t have control over the assessed value of property, it does have control over the amount it decides to spend. Whatever the cause, the mill levy has risen. See Fact-checking Yes Wichita: Tax rates.

“Yes Wichita” says there is a plan for the economic development portion of the sales tax. If the plan for economic development is definite, why did the city decide to participate in the development of another economic development plan just last month? What if that plan recommends something different than what the city has been telling voters? And if the plan is unlikely to recommend anything different, why do we need it?

Citizens have asked to know more about the types of spending records the city will provide. Will the city commit to providing checkbook register-level spending data? Or will the city set up separate agencies to hide the spending of taxpayer funds like it has with the Wichita Downtown Development Corporation, Go Wichita Convention and Visitors Bureau, and Greater Wichita Economic Development Corporation?

Issues regarding the City of Wichita

Mayor Carl Brewer said the city spent $47,000 of taxpayer funds to send a letter and brochure to voters because he was concerned about misinformation. In light of some of the claims made by the “Yes Wichita” group, does the city have plans to inform voters of that misinformation?

Hasn’t the city really been campaigning in favor of the sales tax? Has the city manager been speaking to groups to give them reasons to vote against the tax? Does the city’s website provide any information that would give voters any reason to consider voting other than yes?

The “Yes Wichita” group refers voters to the city’s website and information to learn about the sales tax issue. Since the “Yes Wichita” group campaigns for the sales tax, it doesn’t seem likely it would refer voters to information that would be negative, or even neutral, towards the tax. Is this evidence that the city is, in fact, campaigning for the sales tax?

The “Yes Wichita” group says that one-third of the sales tax will be paid by visitors to Wichita. But the city’s documents cite the Kansas Department of Revenue which gives the number as 13.5%. Which is correct? This is a difference of 2.5 times in the estimate of Wichita sales tax paid by visitors. This is a material difference in something used to persuade voters. If “Yes Wichita” is wrong, will the city send a mailer to correct the misinformation?

The city’s informational material states “The City has not increased the mill levy rate for 21 years.” But the city’s comprehensive annual financial reports show that in 1994 the Wichita mill levy rate was 31.290, and in 2013 it was 32.509. That’s an increase of 1.219 mills, or 3.9 percent. The Wichita City Council did not take explicit action, such as passing an ordinance, to raise this rate. Instead, the rate is set by the county based on the city’s budgeted spending and the assessed value of taxable property subject to taxation by the city. While the city doesn’t have control over the assessed value of property, it does have control over the amount it decides to spend. Whatever the cause, the mill levy has risen. Is this misinformation that needs to be corrected?

The city says that the ASR project is a proven solution that will provide for Wichita’s water needs for a long time. Has the city told voters that the present ASR system had its expected production rate cut in half? Has the city presented to voters that the present ASR system is still in its commissioning phase, and that new things are still being learned about how the system operates?

The City and “Yes Wichita” give voters two choices regarding a future water supply: Either vote for the sales tax, or the city will use debt to pay for ASR expansion and it will cost an additional $221 million. But the decision to use debt has not been made, has it? Wouldn’t the city council have to vote to issue those bonds? Is the any guarantee that the council will do that?

If the plan for economic development is definite, why did the city decide to participate in the development of another economic development plan just last month? What if that plan recommends something different than what the city has been telling voters? And if the plan is unlikely to recommend anything different, why do we need it?

Citizens have asked to know more about the types of spending records the city will provide. Will the city commit to providing checkbook register-level spending data? Or will the city set up separate agencies to hide the spending of taxpayer funds like it has with the Wichita Downtown Development Corporation, Go Wichita Convention and Visitors Bureau, and Greater Wichita Economic Development Corporation?

The “Yes Wichita” campaign uses an image of bursting wooden water pipes to persuade voters. Does Wichita have any wooden water pipes? And isn’t the purpose of the sales tax to build one parallel pipeline, not replace old water pipes? If this advertisement by “Yes Wichita” is misleading, will the city send an educational mailing to correct this?

The Yes Wichita campaign group claims that the sales tax will replace old rusty pipes that are dangerous. Is that true? If not, will the city do anything to correct this misinformation?

Kansas sales tax reform: Revenue booster?

Kansas has a problem with sales tax exemptions, but the potential revenue boost from reform is not as great as commonly mentioned, unless Kansas wants to place its manufacturers at severe disadvantage.

While the Wichita Eagle editorial board is correct to argue for eliminating sales tax exemptions, the amount of potential revenue is far less than presented, if we want to keep Kansas manufacturers competitive. Here’s what the Eagle editorial held:

As a result, the number of sales-tax exemptions keeps growing — from 30 in 1985 to more than 100 today. And with each added exemption, the state is losing out on more revenue — $5.9 billion this fiscal year, according to the Kansas Department of Revenue. That’s money the state could be using to cover its budget shortfalls, increase funding to public schools or further reduce its income-tax rates.” (Reduce state sales tax exemptions, August 27, 2014)

First, it’s good that the editorial board mentioned — as one possibility — the right thing to do if sales tax exemptions are eliminated, which is to reduce other taxes. Second, the state is not “losing out on more revenue” by granting sales tax exemptions. The state is simply letting people conduct certain transactions without being taxed, thereby letting them keep more of their own money. It’s true that the exemptions are granted in a way that is not equitable and does not promote economic growth, but that’s another issue.

The big problem with the editorial is the amount of money mentioned as up for grabs, which is $5.9 billion. That is a lot of money. It’s almost as much as Kansas annual general fund spending. It’s worthwhile to look in detail at the nature of Kansas sales tax exemptions to understand their nature.

In 2010 Kansas Legislative Division of Post Audit looked at the topic of sales tax exemptions and issued a report titled Kansas Tax Revenues, Part II: Reviewing Sales Tax Exemptions. The data in this report is from 2009, so it’s a few years out of date. But the principles and relative amounts remain the same. At the time of this report, advocates of eliminating sales tax exemptions in Kansas pointed, as they do now, to the great amount of revenue that could be raised if Kansas eliminated these exemptions, estimated at some $4.2 billion per year for 2009. Analysis of the nature of the exemptions and the amounts of money involved, however, leads us to realize that the additional tax revenue that could be raised is much less than spending advocates claim, unless Kansas was to adopt a severely uncompetitive, and in some cases, unproductive tax policy.

Tax exemption policy is an important economic policy matter. In its background discussion, the Post Audit report noted “the U.S. Supreme Court’s opinion that tax exemptions and tax deductibility are a form of subsidy that is administered through the tax system. A tax exemption has much the same effect as a cash grant to the organization of the amount of tax it would have to pay on its income.”

Sometimes these sales tax exemptions are issued to specific organizations. Others are issued to organizations that fall within certain categories. In this case, the exemption is like an entitlement, granted to any organization that falls within the scope of definition of the exemption. Some exemptions are for categories of business transactions that shouldn’t be taxed.

It’s this last category that is important to recognize, because of the large amount of economic activity that falls within its scope. An example is exemption 79-3606 (m), described as “Ingredient/Component parts: Of items manufactured or produced for sale at retail.” The audit report estimates that for 2009, this exemption cost the state $2,248.1 million in lost sales tax revenue.

But this exemption isn’t really an “exemption,” at least if the sales tax is a retail sales tax designed to be levied as the final tax on consumption. That’s because these goods aren’t being sold at retail. They’re sold to manufacturers who use them as inputs to products that, when finished, will be sold at retail. Most states don’t tax this type of sales. If Kansas decided to tax these transactions, it would place our state’s manufacturers at a severe disadvantage compared to almost all other states.

There are two other exemptions that fall in this category of inputs to to production processes, totaling an estimated $461 million in lost revenue.

Another big-dollar exemption is “items already taxed” such as motor fuel. This is an estimated $232.5 loss in revenue.

Two other categories of exemptions are purchases made by government, or purchases made by contractors on behalf of government. Together these account for an estimated $449.9 million in lost sales tax revenue. If these two exemptions were eliminated, government would be taxing itself and no net revenue is gained.

All told, these six exemptions account for $3,391.5 million of the total $4,234.2 million in exemptions for 2009. That’s about 80 percent.

So $4.2 billion has shrunk to $842.7 million. That’s still a lot of money, but not near as much as spending advocates would like to have Kansans believe is lying in wait just for the taking.

Intrust Bank Arena: Not accounted for like a business

Proper attention given to the depreciation expense of Intrust Bank Arena in downtown Wichita recognizes and accounts for the sacrifices of the people of Sedgwick County and its visitors to pay for the arena. It’s a business-like way of accounting, but a well-hidden secret.

Sedgwick County Working for YouThe true state of the finances of the Intrust Bank Arena in downtown Wichita are not often a subject of public discussion. Arena boosters promote a revenue-sharing arrangement between the county and the arena operator, referring to this as profit or loss. But this arrangement is not an accurate and complete accounting, and hides the true economics of the arena. What’s missing is depreciation expense.

An example of the incomplete editorializing comes from Rhonda Holman of the Wichita Eagle, who opined “Though great news for taxpayers, that oversize check for $255,678 presented to Sedgwick County last week reflected Intrust Bank Arena’s past, specifically the county’s share of 2013 profits.”

Earlier reporting on this topic in the Eagle did not mention depreciation expense, either.

There are at least two ways of looking at the finance of the arena. Most attention is given to the “profit” (or loss) earned by the arena for the county according to an operating and management agreement between the county and SMG, a company that operates the arena.

This agreement specifies a revenue sharing mechanism between the county and SMG. For 2103, the accounting method used in this agreement produced a profit of $705,678, to be split (not equally) between SMG and the county. The county’s share, as Holman touted, was $255,678. Presumably that’s after deducting the cost of producing an oversize check for the television cameras.

The Operations of Intrust Bank ArenaWhile described as “profit” by many, this payment does not represent any sort of “profit” or “earnings” in the usual sense. In fact, the introductory letter that accompanies these calculations warns readers that these are “not intended to be a complete presentation of INTRUST Bank Arena’s financial position and results of operations and are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America.”

That bears repeating: This is not a reckoning of profit and loss in any recognized sense. It is simply an agreement between Sedgwick County and SMG as to how SMG is to be paid, and how the county participates.

A much better reckoning of the economics of the Intrust Bank Arena can be found in the 2013 Comprehensive Annual Financial Report for Sedgwick County. This document holds additional information about the finances of the Intrust Bank Arena. The CAFR, as described by the county, “… is a review of what occurred financially at Sedgwick County in 2013. In that respect, it is a report card of our ability to manage our financial resources.”

Regarding the arena, the CAFR states:

The Arena Fund represents the activity of the INTRUST Bank Arena that opened on January 9, 2010. The facility is operated by a private company; the county incurs expenses only for certain capital improvements or major repairs and depreciation, and receives as revenue only a share of profits earned by the operator, if any. The Arena had an operating loss of $4.7 million. The loss can be attributed to $5.3 million in depreciation expense.

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

Depreciation expense is not something that is paid out in cash. Sedgwick County didn’t write a check for $5,295,414 in depreciation expense. Instead, depreciation accounting provides a way to recognize and account for the cost of long-lived assets over their lifespan. It provides a way to recognize opportunity costs, that is, what could be done with our resources if not spent on the arena.

But some don’t recognize this. In years past, Commissioner Dave Unruh made remarks that show the severe misunderstanding that he and almost everyone labor under regarding the nature of the spending on the arena: “I want to underscore the fact that the citizens of Sedgwick County voted to pay for this facility in advance. And so not having debt service on it is just a huge benefit to our government and to the citizens, so we can go forward without having to having to worry about making those payments and still show positive cash flow. So it’s still a great benefit to our community and I’m still pleased with this report.”

Intrust Bank Arena commemorative monument
Intrust Bank Arena commemorative monument
The contention of Unruh and other arena boosters such as the Wichita Eagle editorial board is that the capital investment of $183,625,241 (not including an operating and maintenance reserve) on the arena is merely a historical artifact, something that happened in the past, something that has no bearing today. There is no opportunity cost, according to his view. This attitude, however, disrespects the sacrifices of the people of Sedgwick County and its visitors to raise those funds.

Any honest accounting or reckoning of the performance of Intrust Bank Arena must take depreciation into account. While Unruh is correct in that depreciation expense is not a cash expense that affects cash flow, it is an economic fact that can’t be ignored — except by politicians, apparently.

We see our governmental and civic leaders telling us that we must “run government like a business.” Without frank and realistic discussion of numbers like these and the economic facts they represent, we make decisions based on incomplete and false information.

Shame, says Wichita Eagle editorial board

Shame on Legislature - Rhonda HolmanThe Wichita Eagle editorial board, under the byline of Rhonda Holman, issued a stern rebuke to the Kansas Legislature for its passage of HB 2506 over the weekend. (Eagle editorial: Shame on Legislature, April 8, 2014)

Here are some notes on a few of Holman’s points.

She wrote that the legislature should not “undermine teachers’ rights and meddle in education policymaking.” First: There’s controversy over what the bill actually means to the relationship between teachers and their employers. Courts will probably have to intervene. Second: Should the Legislature have a say in policy, or just pay?

Then, she criticized the bill as “passed with only Republican votes” on a “Sunday night.” This reminded me of the passage of the Patient Protection and Affordable Care Act (Obamacare) in the United States Senate. At the time, The Hill reported: “The Senate approved sweeping healthcare reform legislation by the narrowest of partisan margins early Christmas Eve morning” (Senate passes historic healthcare reform legislation in 60-39 vote) That’s right: Votes from only one party, and on Christmas Eve.

Later in her op-ed Holman complained: “With such handling of the various bills, GOP legislative leaders also failed to reflect Brownback’s State of the State assertion that the ‘wonderfully untidy’ business of appropriations is ‘open for all to see.’ They held a conference committee meeting at 3 a.m. Sunday — after media, most legislators and the teachers had left the Statehouse for the night, and with insufficient public notice.” Reading this, I was again reminded of the passage of Obamacare, when Speaker Nancy Pelosi made her famous explanation as reported by Politico:

“You’ve heard about the controversies, the process about the bill .. but I don’t know if you’ve heard that it is legislation for the future — not just about health care for America, but about a healthier America,” she told the National Association of Counties annual legislative conference, which has drawn about 2,000 local officials to Washington. “But we have to pass the bill so that you can find out what is in it — away from the fog of the controversy.”

On the expansion of innovative districts, Holman wrote: “Nobody even knows whether the new ‘innovative districts’ program will work or is constitutional,” calling it an “accountability-free concept.” Well, we know that an important provision of the Patient Protection and Affordable Care Act (Obamacare) was ruled unconstitutional (the expansion of Medicaid), and Chief Justice John Roberts had to torture logic and the plain meaning of words in order to shoehorn the individual mandate into the Constitution.

I’m not saying that I approve of the way the Kansas Legislature approved this bill. But if it worked for Obamacare, and if Rhonda Holman and the Wichita Eagle editorial board like Obamacare (they do), well, you can draw your own conclusions.

Also, Holman complained of “unproven ideological reforms” contained in the Kansas school legislation. Two things: First, we know that the present system of public education in Kansas is not working for many children. For example, if we critically examine the National Assessment of Educational Progress test scores that Kansans are so proud of, we find that for some groups of students, the national public school average beats or ties Kansas.

Or, if we read the National Center for Education Statistics report Mapping State Proficiency Standards Onto the NAEP Scales, we can learn that Kansas has relatively low standards for its schools, and when Kansas was spending more on schools due to the Montoy decision from the Kansas Supreme Court, the state lowered the standards.

ideology-definitionI’m of the opinion that whenever someone criticizes their opponents as ideological — as the Wichita Eagle editorial board has — they don’t have a very good argument. They’re likely confusing ideology with partisanship. The Wikipedia entry for ideology says: “An ideology is a set of conscious and unconscious ideas that constitute one’s goals, expectations, and actions. An ideology is a comprehensive vision, a way of looking at things. … Ideologies are systems of abstract thought applied to public matters and thus make this concept central to politics. Implicitly every political or economic tendency entails an ideology whether or not it is propounded as an explicit system of thought.”

I wish the Eagle editorial board was more ideological. If it firmly believed in economic freedom, free markets, limited government, and individual liberty — that’s an ideology we could live with, and Kansas schoolchildren could thrive under.

Instead, we’re left with the Wichita Eagle editorial board’s ideology of less educational freedom and less accountability to those who pay the bills and parent the students.