Voice For Liberty

Search results for: “historic tax credits”

  • Free standing emergency department about to open in Wichita

    Free standing emergency department about to open in Wichita

    A project in Wichita received substantial subsidy from taxpayers. How have public policy issues been reported?

    Free standing emergency rooms are a recent trend in medical care. This is a facility that has equipment, personnel, and capability like a traditional hospital emergency room, but is not connected to a hospital. The first in Wichita is nearly ready to open, on Twenty-first Street east of Webb Road.

    Regarding the Wichita facility, the Wichita Business Journal quoted Malik Idbeis, chief information officer for Kansas Medical Center: “We see a lot of patients from the northeast side of Wichita. We thought it’d be nice to bring our style of care closer to them. There are a lot of neighborhoods and families in that area.” 1

    Here, the spokesman is promoting that facility is located convenient to (affluent) families in northeast Wichita. That wasn’t the argument made to the Wichita City Council last year when the facility applied for tax relief through the Industrial Revenue Bonds program. At that time, the facility was pitched as an attraction that would serve many out-of-town customers. City documents reported: “The current Economic Development Policy requires medical facilities to attract at least 30% of patients from outside the Wichita MSA. Kansas Medical Center reviewed the location of patients utilizing the emergency room in Andover, which revealed that 37% come from outside the Wichita MSA.” 2

    It seems a stretch to assume that the demographic characteristics of a hospital in Andover would also apply to an emergency room in Wichita, but the city council accepted this reasoning.

    Aside from this, the Wichita Business Journal article contains problems in its reporting of public policy issues. The reporter wrote: “Last summer, the Wichita City Council authorized issuing industrial revenue bonds for the project to help finance land and construction costs. With IRBs, the city serves as a pass-through entity for developers to obtain a lower interest rate on projects. IRBs require no taxpayer commitment.” (For background on IRBs in Kansas, see Industrial revenue bonds in Kansas.)

    It’s not likely the facility will save on interest costs with IRBs. It might save if the bonds were non-taxable, but these bonds are taxable, according to the agenda packet for this item. The article is correct in that IRBs require no taxpayer commitment — at least superficially. Here, I believe the reporter is letting readers know that the city makes no guarantee as to the bond repayment. If the city guaranteed repayment, that would help the borrower obtain a lower interest rate. But there is no guarantee.

    Instead, the benefit of the IRB program is lower taxes. The city estimates the first-year property tax savings to be $61,882, allocated this way: City of Wichita: $17,226. State of Kansas: $792. Sedgwick County: $5,520. USD 259 (Wichita public school district): $28,345. Savings like this would be realized for five years, plus another five years if employment commitments are met.

    This property tax forgiveness is, in many ways, a “taxpayer commitment.” If we don’t recognize that, then we must reconsider the foundation of local tax policy.

    In Wichita, as in most cities, the largest consumers of property tax dollars are the city, county, and school district. All justify their tax collections by citing the services they provide: Law enforcement, fire protection, education, etc. It is for providing these services that we pay local taxes.

    But through the Industrial Revenue Bond program, properties don’t pay property tax. (In the case of this facility, the property tax abatement is limited to 88 percent of the full tax burden.)

    Yet, this new facility will undoubtedly demand and consume the services local government provides — law enforcement, fire protection, and education. But it won’t be paying property tax to support these services (except for the 12 percent not abated). Others will have to pay this cost.

    We’re left with an uncomfortable and awkward circumstance. City officials tell us that we must pay property tax so the city can provide services. (In fact, last year the Wichita city manager recommended increasing property taxes to pay for more police officers.)

    At the same time, however, the city creates special classes of people who use services but don’t pay for them.

    Often the justification for economic development incentives is economic necessity, that is, the project could not be built without the incentive. That argument was not made for this project.

    Free standing emergency rooms

    Free standing emergency departments are controversial. The notes to this article hold references to news articles and academic studies looking at the costs and usage of these facilities. 3 4 5 6 7 8 9 10

    Researchers note that the emergency rooms are much more expensive than traditional doctor offices or urgent care facilities, yet many of the diagnoses made at the ERs are the same as made at non-emergency facilities.

    —
    Notes

    1. Heck, Josh. Medical group sets opening date for free-standing ER. Wichita Business Journal. Available at https://www.bizjournals.com/wichita/news/2018/04/06/medical-group-sets-opening-date-for-free-standing.html. ↩
    2. City of Wichita. Request for Letter of Intent for Industrial Revenue Bonds (E Wichita Properties, LLC/Kansas Medical Center, LLC). City Council agenda packet for June 6, 2017. ↩
    3. NBC News. You Thought It Was An Urgent Care Center, Until You Got the Bill. Available at https://www.nbcnews.com/health/health-care/you-thought-it-was-urgent-care-center-until-you-got-n750906. ↩
    4. Carolyn Y. Johnson. Free-standing ERs offer care without the wait. But patients can still pay $6,800 to treat a cut. Washington Post, May 7, 2017. Available at http://wapo.st/2pUCskD?tid=ss_tw&utm_term=.21bb76a447aa. ↩
    5. Rice, Sabriya.Texans overpaid for some medical services by thousands, study says. Dallas Morning News. Available at https://www.dallasnews.com/business/health-care/2017/03/23/texans-overpaid-medical-services-thousands-study-said. ↩
    6. Blue Cross Blue Shield of Texas. Rice U. Study: Freestanding Emergency Departments In Texas Deliver Costly Care, ‘Sticker Shock’. Available at https://www.bcbstx.com/company-info/news/news?lid=j0s5sm9d. ↩
    7. Alan A. Ayers, MBA, MAcc. Dissecting the Cost of a Freestanding Emergency Department Visit. Available at https://c.ymcdn.com/sites/ucaoa.site-ym.com/resource/resmgr/Alan_Ayers_Blog/UCAOA_Ayers_Blog_FSED_Pricin.pdf. ↩
    8. Michael L. Callaham. Editor in Chief Overview: A Controversy About Freestanding Emergency Departments. Annals of Emergency Medicine, Volume 70, Issue 6, 2017, pp. 843-845. Available at http://www.annemergmed.com/article/S0196-0644(17)31505-6/fulltext. ↩
    9. Ho, Vivian et al. Comparing Utilization and Costs of Care in Freestanding Emergency Departments, Hospital Emergency Departments, and Urgent Care Centers. Annals of Emergency Medicine, Volume 70 , Issue 6 , 846 – 857.e3. Available at http://www.annemergmed.com/article/S0196-0644(16)31522-0/fulltext. ↩
    10. Jeremiah D. Schuur, Donald M. Yealy, Michael L. Callaham. Comparing Freestanding Emergency Departments, Hospital-Based Emergency Departments, and Urgent Care in Texas: Apples, Oranges, or Lemons? Annals of Emergency Medicine, Volume 70, Issue 6, 2017, pp. 858-861. Available at http://www.annemergmed.com/article/S0196-0644(17)30473-0/fulltext. ↩

  • Wichita helps out the Ambassador Hotel campaign

    A page on the City of Wichita’s official, taxpayer-funded website provides information on the February 28th special election regarding a guest tax rebate for the Ambassador Hotel in downtown Wichita. While the page provides useful information, it makes a claim that is not accurate, and one which may persuade Wichita voters to vote Yes.

    Specifically, a page on the city’s website states: “Developers would be allowed to collect the rebate for 15 years for costs associated with redeveloping the hotel.”

    An informational sheet also on the city’s website says much the same, claiming that the purpose of the guest tax rebate is to “reimburse them for costs associated with redeveloping the hotel.”

    Many city programs, such as TIF and CID, have specified, allowable uses for the funds provided by these incentive programs. But this guest tax rebate program does not. When the city makes these claims regarding the use of the guest tax, it makes it sound almost benign. Voters might feel persuaded to vote in favor of the rebate program using a reason that doesn’t exist in fact or in contract.

    The guest tax is mentioned on pages 22, 25, 27, 81, 82, 95, and 98 of the agenda packet for the September 13, 2001 city council meeting. The packet includes the actual agreement between the city and the Ambassador Hotel development team.

    None of the references to the guest tax rebate say anything about how the money may be used.

    I asked the city about this, as to whether the city was adding extra meaning to the guest tax rebate that was not specified in the contract between the city and the hotel developers.

    A response from city attorney Gary Rebenstorf disagreed with my contention. Rebenstorf wrote “The explanation you question is a factual statement and accurately reflects the purpose of the rebated taxes to help with costs associated with redeveloping the hotel. The development agreement, which details the development project, provides for the incentive. The guest tax rebates will provide operating cost relief with added cash flow to increase the developer’s capacity to carry more private debt and/or equity and thus cover costs associated with redevelopment of the hotel.”

    But you be the judge. Is the guest tax rebate necessary, and will it be used for the purposes mentioned in city attorney Rebenstorf’s statement?

    There’s no contract that requires the hotel developers to do so.

    Furthermore, the hotel developers have said the hotel will open even if the guest tax rebate measure does not pass in the February 28th election.

    The guest tax measure is more properly viewed as a ninth potential layer of taxpayer-funded government subsidy provided for this hotel. Eight layers are already in place and will not be affected by the outcome of the election.

    It is only the ninth layer that is in question — a ninth layer that is unnecessary, and that goes directly to the developer’s pockets, despite the claims of the city’s attorney.

    I believe there’s a technical business and legal term for that: gravy.

  • Downtown Wichita tax base is not growing

    Downtown Wichita tax base is not growing

    There’s been much investment in downtown Wichita, we’re told, but the assessed value of property isn’t rising.

    Wichita city leaders have promoted public investment in downtown Wichita as wise because it will increase the tax base. Over the past ten years, we’re told that there has been one billion dollars in investment in downtown Wichita, including projects in progress.1

    To evaluate the success of the city’s efforts, we might look at the change in assessed property valuation in downtown Wichita over past years. A way to do that is to look at the valuations for property in the Wichita downtown self-supporting municipal improvement district (SSMID). This is a region of the city that pays an additional property tax to fund the activities of the Wichita Downtown Development Corporation. Its boundaries are roughly the Arkansas River east to Washington, and Kellogg north to Central.

    Assessed valuation is the basis for levying property tax. The process starts with an appraised value, which is targeted to be fair market value for the property, or for commercial property sometimes an income-based method is used. Then, that is multiplied by 25 percent for commercial property, or by 11.5 percent for residential property. This produces the assessed value. Multiply that by the sum of the several mill levy rates that apply to the property, and you have the total property tax for that property.

    Click for larger.
    With all the new projects coming online in downtown Wichita, we should expect that the assessed valuation is rising. As someone converts an old, dilapidated property into something more valuable, appraised and assessed values should rise. As new buildings are built, new appraised and assessed value is created where before there was none (or very little).

    So what has happened to the assessed valuation of property in downtown Wichita, using the SSMID as a surrogate?

    The answer is that after a period of increasing values, the assessed value of property in downtown has been declining. The peak was in 2008. The nearby table holds the figures.

    This is the opposite of what we’ve been promised. We’ve been told that public investment in downtown Wichita builds up the tax base.

    Some might excuse this performance by noting there’s been a recession. That’s true. But according to presentations, there has been much activity in downtown Wichita. Hundreds of millions of dollars over the last ten years, we are told.

    Click for larger.
    A few years ago the city said that the decline was due to the legislature exempting business equipment and machinery from the property tax rolls. Undoubtedly this was true when the law took effect, which was in 2006. It could also explain the some of the drop for a few years after that.

    But for the last several years this factor is gone. At any rate, I believe its effect was small compared to the value of real property.

    Also: How how does the assessed valuation in the SSMID compare to the city as a whole? Nearby is a chart of the percent change in assessed valuation for each year, comparing the SSMID with the city as a whole less the SSMID. In other words, Wichita minus downtown. The SSMID is underperforming the city.

    So why isn’t the assessed valuation rising? Why is it falling during the time of huge successes?

    I don’t have enough data to answer this question. But we need to know.

    —
    Notes

    1. Fluhr, Jeff. Downtown Wichita being transformed. Wichita Eagle, September 4, 2016. http://www.kansas.com/opinion/opn-columns-blogs/article99291922.html. ↩
  • Wichitans willing to fund basics

    Wichitans willing to fund basics

    Wichita City Hall SignIn Wichita, voters are willing to pay a higher sales tax for fundamentals like infrastructure and water supply, and less willing for business incentives, downtown development, and convention centers.

    In April Kansas Policy Institute commissioned SurveyUSA to conduct a scientific poll concerning current topics in Wichita. The press release from KPI, along with a link to the complete survey results, is available at Poll: Wichitans don’t want sales tax increase.

    In a series of questions asking if Wichita voters would be willing to pay a higher sales tax to provide certain services, a pattern appeared: Voters are willing to pay for things that are fundamental in nature, and less willing to pay for others.

    As can be seen in the nearby chart, voters are willing to pay for infrastructure, and more willing to pay for maintenance of existing infrastructure than for new infrastructure. Voters are most willing to pay for securing a long-term water source.

    kansas-policy-institute-2014-04-willing-to-fund

    For business incentives, downtown development, and convention centers, Wichita voters express less willingness to pay higher sales tax to fund these items.

    For the first three items, the average was 68 percent of voters willing to pay a higher sales tax. For the last three, the average is 30 percent.

    Following is the complete text of the questions:

    Would you personally be willing to pay a higher sales tax in the city of Wichita to fund incentives to businesses expanding in Wichita or moving here from other states?

    Would you personally be willing to pay a higher sales tax in the city of Wichita to fund maintenance work on existing infrastructure, such as sewers and roads?

    Would you personally be willing to pay a higher sales tax in the city of Wichita to fund new infrastructure, such as new highways and passenger rail connections?

    Would you personally be willing to pay a higher sales tax in the city of Wichita to continue developing downtown Wichita with apartments, businesses, and entertainment destinations?

    Would you personally be willing to pay a higher sales tax in the city of Wichita to expand or renovate convention spaces, such as the Hyatt Hotel and Century II?

    Would you personally be willing to pay a higher sales tax in the city of Wichita to secure a long-term water source?

  • Examining claims in favor of the proposed Wichita sales tax

    Examining claims in favor of the proposed Wichita sales tax

    In an advertisement in the Wichita Eagle and in a mailer sent to Wichita voters, the “Yes Wichita” group makes a series of statements regarding plans for a new water supply. It’s important that Wichita voters be aware of the complete facts and context of these claims so that they make an informed decision on how to vote.

    The city has proposed a one cent per dollar sales tax. The largest portion — 63 percent or $250 million — is earmarked for a new water supply. Voters will see this question on the ballots for the November 4, 2014 election.

    Advertisement from "Yes Wichita."
    Advertisement from “Yes Wichita.” Click for larger version.
    Here’s what the “Yes Wichita” group has stated under the heading “The Plan For Affordable Long-term Water Supply” along with what voters also need to know.

    Save taxpayers $221 million over 20 years in costs. This statement is true only if the Wichita city council decides to pay for ASR expansion by using long-term debt. That decision has not been made. Besides that, there are other ways to raise this money. And if using debt for water projects is bad, why did the city borrow over $200 million for the current ASR project, and hundreds of millions for other water projects? See By threatening an unwise alternative, Wichita campaigns for the sales tax.

    Wichita Water Supply Plan Capital Costs
    Wichita Water Supply Plan Capital Costs
    Replace 60 year old aging pipelines so water is transported safely. The sales tax plan for water calls for the augmentation of one pipe, as shown in the city’s plan. Not replacing pipes plural, as this advertisement indicates. Plus, the pipe that is the subject of the city’s water plan is 60 years old, but there is no indication that it needs replacement.

    Tourists, visitors and renters help pay for our water. This is true. It is also true that if funds were raised through higher water bills, these people would also pay. Also, city documents regarding the sales tax state: “The State of Kansas estimates that 13% of sales taxes paid in the Wichita area are paid by non-residents based on a report at www.ksrevenue.org/pullfactor.html.” But at the “Yes Wichita” website, there is a different claim: “If we fund a new water source through a sales tax instead of water bills or property taxes, visitors and tourists will pay the sales tax, reducing the burden of this cost to Wichitans by about one-third.” Which is it? 13 percent, or 33 percent? Will “Yes Wichita” show us their figures or provide a reference for the basis of this claim?

    Prevent future high water rate increases. This is true. If we experience a prolonged drought, water rates would have to rise to cover the fixed costs of the water utility. That is, if we have such a drought. That may not happen, or it may not happen for many years.

    Fund ASR improvements which would provide new wells and a water storage site. This is true. What’s left is to decide whether making these additional investments in the ASR project is wise. We’ve learned that the expectations of ASR have been cut in half. We’ve learned that the ASR project is still in its commissioning phase, and it has not been turned loose for actual production for any significant period. I do not believe we have enough knowledge and experience to judge the success or failure of ASR. See Should Wichita expand a water system that is still in commissioning stage?

  • Kansas economy debated in Wichita

    Last Thursday at a meeting of the City Clerks and Municipal Finance Officers Association of Kansas, the effectiveness of the federal economic stimulus and the Kansas economy were discussed. Americans For Prosperity National Director of State Operations Alan Cobb and Kansas Secretary of Revenue Joan Wagnon were the participants, with Dale Goter, Wichita Governmental Relations Manager, as moderator.

    Wagnon started the debate by reciting the distress that the economy has experienced over the past year. She said that these conditions said to the new president “You need to do something.” She said that about 10,000 jobs were picked up in Kansas by the federal stimulus plan. The stimulus worked, she said.

    Cobb said that to conclude that the stimulus has worked is premature. He said that in Kansas 6,500 jobs were created at a cost of $500 million, a cost of about $75,000 per job created. There’s a fundamental problem in politics, he said, in that politicians look at the short-term, not the long term. In the long term, there is no question that the stimulus spending will result in lower growth, as the borrowed money must be repaid. It’s the “seen” versus “unseen” problem.

    Goter asked: “What if nothing had been done?”

    Cobb replied that the President Obama’s team had said that without the stimulus, unemployment would rise to 7.5%, noting that today the rate is 10.2%. Wagnon relied that without intervention, more Kansas banks would have failed, and that the flow of credit would have shut down more than it has. Kansas would have run out of unemployment compensation funds, too, requiring the state to ask employers to make larger contributions at the same time they were laying off employees, resulting in a downwards spiral. She recited a list of construction projects and counties that received stimulus money.

    Wagnon referred to lessons learned during the Great Depression, that the power of the federal government was used to save the economy. Cobb replied that the lesson to be learned is the opposite. It took ten years to recover. Massive government intervention and higher taxes prolonged the Great Depression, he said.

    Goter asked: “Where do we go from here?”

    Wagnon explained that we spent a lot of our stimulus money on K-12 education. This helped the state get through fiscal years 2009 and 2010. For 2011 — the budget year that the Kansas legislature will begin working on in January — the stimulus money is no longer available. She said that we’re likely to see another round of cuts, not only in budget expenditures, but also in tax expenditures.

    There’s no appetite for raising taxes, she said. She noted that the 2010 Commission has recommended raising taxes instead of cutting spending.

    Cobb replied that the stimulus money is misnamed, as much of the spending is not stimulative. It simply replaced existing state spending and delayed some tough political decisions. Spending is the real problem, he said, noting that if spending had increased at just the rate of population growth plus inflation over the last six or seven years, Kansas would have perhaps $500 million in the bank now.

    Wagnon referred to the large number of governmental bodies in Kansas, saying that we may not be able to afford small school districts and the large number of county governments.

    Goter asked “Have we gone too far with tax exemptions?”

    Wagnon referred to these as tax expenditures. She said there’s a report on the Kansas Revenue Department website that details the cost of these. We should look at the cost of these expenditures, she said. The effectiveness of economic development tools should be looked at, and we’re giving away more than we need to in order to attract jobs.

    Wagnon said we’ve phased out the estate and franchise tax, and we need these revenues. She also mentioned the giveaways of employee withholding tax that Kansas has granted, where a company gets to use its employee tax contributions to repay economic development incentives. “What’s the value of a job, then, at that point?” People go after tax expenditures because they’re confidential and easier to get than going through the appropriations process, she said.

    Cobb said he agrees with some of the problems with these exemptions, although they’re not really expenditures, as the money belongs to the people to begin with. A better policy is lower tax rates for everyone with fewer exemptions. Corporate welfare does not grow a state’s economy, he added. Government is not equipped to pick winners and losers in the economy. Companies make location decisions based on labor force, tax rates, and markets, with incentives viewed simply as gravy.

    Analysis

    One of the most important lessons to take from this debate is to realize that the attitude commonly held by government officials such as Joan Wagnon is that taxes belong to the government first. Government, according to many officials, has a legitimate claim on the income and property of citizens, and if a reduction is given, it’s considered a cost to government. This is why Wagnon called them “tax expenditures.” This is the attitude of our former governor. The Kansas school spending lobby feels the same way, too.

    To learn more about the “seen and unseen” that Cobb referred to, read this excerpt from Economics in One Lesson, in which Hazlitt explains the fallacy of the broken window.

    Kansas Senator Chris Steineger has introduced legislation to reduce the number of counties in Kansas, as reported in Steineger introduces Kansas county consolidation bill.

    A report by the Kansas Division of Legislative Post Audit on the effectiveness of $1.3 billion spent by Kansas on economic development incentives is at Determining the Amounts the State Has Spent on Economic Development Programs and the Economic Impacts on Kansas Counties. Reporting from the Lawrence Journal-World is at Effect of economic spending in doubt. Readers of this site know that the effectiveness of economic development efforts by government is one of the issues I feel most strongly about. My recent testimony on this matter to the Wichita City Council is at Wichita universal tax exemption could propel growth.

  • In Kansas fourth district, debates reveal differences

    In this article, Wendy Aylworth of Wichita takes a look at candidates for the Republican Party nomination for United States Congress from the fourth district of Kansas and their responses to questions at several candidate forums. In particular, she examines the candidates and their attitudes towards free trade.

    The well-known candidates for this nomination (and their campaign websites) are Wichita businessman Jim Anderson, Wichita businessman Wink Hartman, Wichita businessman Mike Pompeo, and Kansas Senator Jean Schodorf. Election filing records maintained by the Kansas Secretary of State indicate that Paij Rutschman of Latham has filed for the Republican Party nomination, but little is known about this candidate at this time, and no website is available.

    Aylworth supports the campaign of candidate Mike Pompeo.

    Part one: Flip-flops, free markets, and NAFTA

    Are you getting a good chuckle yet when listening to the forums featuring the candidates vying for the Republican nomination for the 4th Congressional District seat? If you haven’t yet, you’ll find a few here for your enjoyment.

    We’ll look at the changes in the candidates over the various forums and appearances.

    The positions of three of the candidates appear similar on the surface, but their explanations and tone of voice often reveal whether the candidate has a real grasp of the topic. Three of the four candidates claim to be in favor of limiting the scope of government and shrinking it down to only the powers granted it in the Constitution, yet the answers given by these same candidates reveal a conflicting ideology.

    Have there been flip-flops by the candidates? Yes.

    (more…)

  • Deconstructing Don Hineman

    Deconstructing Don Hineman

    Another Kansas legislator explains why raising taxes was necessary. So he says.

    Many members of the Kansas Legislature are writing pieces defending their decision to vote for higher taxes. Don Hineman is one. His explanation merits more than average attention, as he is the Majority Leader of the Kansas House of Representatives. This week the Topeka Capital-Journal published his op-ed Rep. Don Hineman: Why tax reform was necessary. It deserves comment.

    Hineman wrote: “This return to common sense tax policy resulted from legislators listening to their constituents and fulfilling the promises they made during 2016 campaigns.”
    There may have been some candidates who campaigned on a platform of higher taxes. But most used more subtle language, such as Hineman’s use of the phrase “common-sense tax policy.” Does anyone know what that means? Does it mean the same thing to everyone? Besides, raising taxes was just one issue for most candidates and campaigns. And, voters must vote for candidates, not specific policies. As Justice Antonin Scalia told us, “Campaign promises are, by long democratic tradition, the least binding form of human commitment.” An example comes from Hineman’s web page, which states one of his four core values is “Respect for private property rights.” He has respect for your property, unless that property happens to be your money. Then he wants more.

    Hineman: “… restore our state to firmer fiscal ground.”
    This could have been done with spending cuts, too.

    Hineman: “… a group of 88 representatives and 27 senators from across the political spectrum voted to override the governor’s veto.”
    Here, Hineman refers to the coalition of Republicans and Democrats that passed the tax bill notwithstanding the governor’s veto. Because members of both major parties voted the same way, it’s described as nonpartisan. It’s meant as a good thing. But most of the Republicans who voted for higher taxes qualify as Democrats in many ways. They dismiss the Republican Party platform and embrace most aspects of the Democratic Party and progressive goals. There is no “spectrum.” Regarding taxation and the size of government, they’re pretty much the same color. Kansas Policy Institute confirms: “The Freedom Index published by Kansas Policy Institute has repeatedly shown the legislative political division to not be about Democrats and Republicans but about legislators’ view of the role of government, and the above June 2 update of 2017 Freedom Index certainly bears that out. With a score of 50 percent being considered neutral, there are 13 Senators at the top of the list with positive scores and 13 Senators at the bottom of the list — and every one of them is a Republican.” 1

    Hineman: “Brownback’s tax plan abandoned the ‘three-legged stool’ approach to funding government, which had served Kansas well for decades by relying on a stable balance of income, sales and property.”
    The three-legged stool is one of the most inappropriate analogies ever coined. If the state of Kansas were to develop an additional source of tax revenue, say by slapping a tariff on Budweiser imported from Missouri or Coors from Colorado, we’d hear spenders like Hineman speaking of the virtue of a stable four-legged chair. Many states thrive without one of our three legs, the income tax. And if we’re looking for stability, as Hineman mentions, income taxes are quite volatile compared to the other legs. 2

    As far as serving Kansas well: There are a variety of ways to look at the progress of Kansas compared to the nation, but here’s a startling fact: For the 73rd Congress (1933 to 1935) Kansas had seven members in the U.S. House of Representatives. (It had eight in the previous session.) Until 1992 Kansas had five. Today Kansas has four members, and may be on the verge of losing one after the next census. This is an indication of the growth of Kansas in comparison to the nation.

    ” … sweep from the highway fund … rejected the governor’s short-term fixes as being neither responsible nor conservative …”
    In this (heavily edited) sentence, Hineman complains about sweeping money from the state’s highway fund. But: Even after raising taxes, the budget just passed by the legislature continues sweeps from the highway fund in the amount of $288,297,663 in fiscal year 2018. For fiscal year 2018, the total of the quarterly sweeps is $293,126,335. 3

    Hineman: “The fiscal strain created by the 2012 tax cuts caused public schools to suffer, increasing class sizes and reducing program offerings.”

    Kansas school spending. See article for notes about 2015. Click for larger.
    The nearby chart shows Kansas school spending, per pupil, adjusted for inflation. It’s easy to see that since 2011, spending has been remarkable level. There was a change in 2015 that shifted the way some school funding was credited, but in total, not much changed.

    Kansas school employment. Click for larger.

    Kansas school employment ratios. Click for larger.
    Some people will dismiss spending figures for a variety of reasons. They may say that inflation affects schools differently from everything else, or that these figures don’t include KPERS, or that they do include the cost of facilities. So let’s look at something else: The number of employees compared to the number of students. When we do this, we find that igures released by the Kansas State Department of Education show the number of certified employees rose slightly for the 2016-2017 school year.

    The number of Pre-K through grade 12 teachers rose to 30,431 from 30,413, an increase of 0.06 percent. Certified employees rose to 41,459 from 41,405, or by 0.13 percent.4 These are not the only employees of school districts.5

    Enrollment fell from 463,504 to 460,491, or 0.61 percent. As a result, the ratios of teachers to students and certified employees to students fell. The pupil-teacher ratio fell from 15.2 pupils per teacher to 15.1. The certified employee-pupil ratio fell from 11.2 to 11.1.

    If we look at these ratios over time, we see they are remarkably consistent since 2012. These figures, at least on a state-wide basis, are contrary to the usual narrative, which is that school employment has been slashed, and class sizes are rising rapidly. The pupil-teacher ratios published by KSDE are not the same statistic as class sizes. But if the data shows that the ratio of pupils to teachers is largely unchanged for the past five years and class sizes are rising at the same time, we’re left to wonder what school districts are doing with teachers. And, why are programs being eliminated?

    (The relative change in enrollment and employment is not the same in every district. To help Kansas learn about employment trends in individual school districts, I’ve gathered the numbers from the Kansas State Department of Education and present them in an interactive visualization. 6 7)

    Hineman: “Though raising taxes is never easy …”
    No. Spenders love to raise taxes. In fact, some legislators warned that the tax hikes are not enough, and that they’ll be back for more. Indeed, projections show spending outpacing revenue in just a few years.

    Hineman: “… it was unfortunately the only responsible option available. State government has been cut to the point where there is no reasonable way to reduce spending enough to balance the budget.”
    No. One example: The efficiency study commissioned by the legislature recommended savings in the method of acquiring health insurance for public school employees. This was not adopted. Therefore, $47,200,000 in general fund spending is added over what the governor recommended. 8 9 This was not cutting services or benefits. It was asking school employees to do something differently in order to save money. But, it didn’t happen.

    Can Kansas cut spending? There are many states that spend less than Kansas on a per capita basis. 10

    Hineman: “Those who parrot the phrase ‘we have a spending problem, not a revenue problem’ have repeatedly failed to offer realistic suggestions for further cuts.”
    Hineman is correct in a small way. To balance the budget this year with cuts alone was probably impossible. The lust for spending other people’s money is just too great. But there have been proposals that should have been followed. First, the legislature should have commissioned the efficiency study in 2012 when taxes were cut. That didn’t happen. Then, the legislature should take the efficiency study seriously. But even simple things — like the recommendation of savings through school employee health insurance acquisition reform — are difficult to accomplish, because the spenders don’t want these reforms.

    And, in the past there have been responsible plans for reforming spending and the budget. But these plans were not wanted, nor were they realized. 11

    Hineman’s criticism shows that it is difficult to cut spending. People become accustomed to other people paying for their stuff. Legislators want to appear to be doing more for their constituents, providing seemingly free stuff while pushing aside the idea of paying for it. And so government grows, at the expense of our liberty and what might have been had the money been left in the productive private sector.

    —
    Notes

    1. Trabert, Dave. “Freedom index: Political division is citizens vs. government, not party lines.* Available at https://kansaspolicy.org/freedom-index-political-division-citizens-vs-government-not-party-lines/. ↩
    2. Federal Reserve Bank of St. Louis, Gary C. Cornia & Ray D. Nelson. State Tax Revenue Growth and Volatility. 6 Regional Economic Development, 23-58 (2010). Available at https://files.stlouisfed.org/files/htdocs/publications/red/2010/01/Cornia.pdf. ↩
    3. Weeks, Bob. In Kansas, sweeps to continue. Available at https://wichitaliberty.org/kansas-government/kansas-sweeps-continue/. ↩
    4. According to KSDE, certified employees include Superintendent, Assoc./Asst. Superintendents, Administrative Assistants, Principals, Assistant Principals, Directors/Supervisors Spec. Ed., Directors/Supervisors of Health, Directors/Supervisors Career/Tech Ed, Instructional Coordinators/Supervisors, All Other Directors/Supervisors, Other Curriculum Specialists, Practical Arts/Career/Tech Ed Teachers, Special Ed. Teachers, Prekindergarten Teachers, Kindergarten Teachers, All Other Teachers, Library Media Specialists, School Counselors, Clinical or School Psychologists, Nurses (RN or NP only), Speech Pathologists, Audiologists, School Social Work Services, and Reading Specialists/Teachers. Teachers include Practical Arts/Vocational Education Teachers, Special Education Teachers, Pre-Kindergarten Teachers, Kindergarten Teachers, Other Teachers, and Reading Specialists/Teachers. See Kansas State Department of Education. Certified Personnel. http://www.ksde.org/Portals/0/School%20Finance/reports_and_publications/Personnel/Certified%20Personnel%20Cover_State%20Totals.pdf. ↩
    5. There are also, according to KSDE, non-certified employees, which are Assistant Superintendents, Business Managers, Business Directors/Coordinators/Supervisors, Other Business Personnel, Maintenance and Operation Directors/Coordinators/Supervisors, Other Maintenance and Operation Personnel, Food Service Directors/Coordinators/Supervisors, Other Food Service Personnel, Transportation Directors/Coordinators/Supervisors, Other Transportation Personnel, Technology Director, Other Technology Personnel, Other Directors/Coordinators/Supervisors, Attendance Services Staff, Library Media Aides, LPN Nurses, Security Officers, Social Services Staff, Regular Education Teacher Aides, Coaching Assistant, Central Administration Clerical Staff, School Administration Clerical Staff, Student Services Clerical Staff, Special Education Paraprofessionals, Parents as Teachers, School Resource Officer, and Others. See Kansas State Department of Education. Non-Certified Personnel Report. http://www.ksde.org/Portals/0/School%20Finance/reports_and_publications/Personnel/NonCertPer%20Cov_St%20Totals.pdf. ↩
    6. Weeks, Bob. Kansas school spending, an interactive visualization. Available at https://wichitaliberty.org/wichita-kansas-schools/kansas-school-spending-interactive-visualization/. ↩
    7. Weeks, Bob. Kansas school employment. Available at https://wichitaliberty.org/politics/kansas-school-employment-2/. ↩
    8. “The FY 2018 budget assumes savings of $47.2 million from implementation of Alvarez & Marsal efficiency recommendations to include K-12 health benefit consolidation and sourcing select benefit categories on a statewide basis.” Budget Report, p. 17 ↩
    9. “Add $47.2 million, all from the State General Fund, for removing savings associated with A&M recommendations for health insurance and procurement for FY 2018.” Bill Explanation For 2017 Senate Sub. For House Bill 2002, p. 10. ↩
    10. Weeks, Bob. Spending in the states, per capita. https://wichitaliberty.org/economics/spending-states-per-capita-2/. ↩
    11. Kansas Policy Institute. 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. Available at https://kansaspolicy.org/kpi-analysis-5-year-kansas-budget-plan/. ↩

  • In Kansas, everyone wins or we all lose

    By Dave Trabert, Kansas Policy Institute.

    One of the biggest obstacles to conflict resolution is the petty notion that one party has to lose in order for the other party to win. Amazingly, people (regrettably, including me) who very clearly understand and explain this common-sense concept when settling squabbles among their children can completely lose sight of it when they are engaged in a conflict. It happens in the boardroom, in personal relationships, in union negotiations and is increasingly becoming the hallmark of politics.

    The budget battle raging in Topeka is a classic example, where the actions of both parties make one wonder whether it’s more important to both that the other party lose than for anyone to win. Party, in this case, refers not to Democrats and Republicans but to those who want a tax increase and those who oppose tax increases. Those pushing for a tax increase primarily do so under the premise that a tax increase is the only way to balance the budget without crippling the state’s ability to provide necessary services. Those opposed to tax increases believe they would be harmful to the economy and that further spending reductions can be made without undermining the ability to provide services. One side says no further cuts are possible, the other says they are.

    But the debate really isn’t about whether spending cuts are feasible; it’s whether state spending should be increased. Those pushing for a tax increase say it’s to prevent unwarranted spending reductions, but they are really calling for a $380 million or 7% spending increase. The facts suggest that the true disagreement is over a great ideological divide over the growth of government.

    Pursuit of absolute “either/or” positions will have a negative impact on citizens regardless of which side prevails. Kansas Policy Institute is among those who believe that tax increases would cost jobs, but we also believe that across-the-board spending cuts could produce undesirable results. Instead of waging ideological war, legislators should be working together to find ways we can do both: avoid harmful tax increases and prevent crippling service cuts.

    By the way, Kansas employers are already absorbing a $163 million (81%) increase in unemployment premiums, so there will be a big tax increase. The budget debate will only decide if it will be even greater.

    The House Appropriations Committee made some recommendations last week that are moving in the right direction of common-sense compromise. The proposal maintains total state aid to schools (but doesn’t replace approximately $172 million in declining federal aid), restores $6.9 million in welfare aid to the developmentally and physically disabled and offsets expected revenue declines by reducing state government payroll 5% through mandatory furloughs and a 1% across-the-board cut to agency operating budgets (except K-12, colleges, corrections, and human service caseloads). The plan doesn’t raise taxes and leaves a $312 million ending balance.

    Perhaps the most contentious aspect of the House plan is that schools would still see a decline because of less federal money. There is ample evidence as provided by various Legislative Post Audit reports that schools could save a lot of money by operating more efficiently, and probably more than enough to offset the loss of federal money. On the other hand, some districts have chosen to make high-profile cuts that directly impact students (and even encouraged to do so by some education officials as a means of rallying support for tax increases), so students could suffer unnecessarily if the federal money isn’t replaced.

    Alternatively, it would be interesting to see how schools would respond to a proposal that would maintain total state aid and replace federal stimulus money, which could be accomplished by selling some state assets (an option that has already been vetted). Schools would be held harmless, the State would be increasing its portion of aid and taxpayers wouldn’t have to suffer a tax increase. Total per-pupil aid is currently $12,225 and 26% higher than five years ago; most taxpayers would probably find that to be a pretty good outcome in today’s economy.

    It may not be everything schools want and it may be more than some legislators feel is necessary, but as Mick Jagger once said, “You can’t always get what you want, but if you try sometimes you just might find you get what you need.”

    Come to think of it, that’s a pretty good budget theme. Maybe it should be the legislature’s official song.

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