Voice For Liberty

Search results for: “Bill Warren”

  • Articles of Interest

    Kansas liberal Republicans, student rights, greenwashing, historic preservation, Sotamayor.

    Can we please send Steve Rose to a political science class?

    The northeast Kansas blog Kaw & Border has a few words of criticism for Johnson County Sun publisher Steve Rose. Specifically:

    In this case, the “adjusted fact” was his view that tax cuts have put Kansas in a financial crisis, the few good observations were some long overdue spending cuts, his strawman was the Kansas Chamber and “conservatives”, and his nonsensical point that drastic spending cuts in Calfiornia will be so terrible that Kansans won’t want it and, as he puts it “citizens will rebel, even if it means increased taxes.” He seems to imply that a high tax, high spending state, even one in a budget crisis, is preferable to one where our government spends within our means, people have money in their pockets, and government size is in line with what people really need.

    If it weren’t for the fact this man influenced the opinion of thousands of Johnson Countians who rely on his weekly column for information and insight into what is going on with Kansas politics, we wouldn’t waste our time disecting his drivel.

    Rather, we’d take up a fund to send Mr. Rose to a political science class — because his ignorance of the facts and political realities of the present do a great disservice to his readers.

    Do Student Rights Interfere with Teaching and Learning in Public Schools?

    “We have unwittingly transformed K-12 schools from places where educators are expected to shape character, set boundaries, and foster respect to ones where they are hesitant and unsure of their authority. … The survey firm Public Agenda has reported that 47 percent of superintendents would operate differently if ‘free from the constant threat of litigation’ and that 85 percent of teachers indicate that “most students suffer because of a few persistent troublemakers. … Fully 77 percent of teachers report that ‘if it weren’t for discipline problems, I could be teaching a lot more effectively.’”

    The American Enterprise Institute articles reports more on this topic.

    Claims of ‘Greenwashing’ on the Rise

    “The so-called green movement has sprouted a fresh crop of lawsuits: greenwashing claims, in which companies are getting sued for making bogus eco-friendly statements about their products. Lawyers, environmentalists and marketing groups say that, during the past year, they’ve seen an uptick in greenwashing suits, which are questioning everything from household cleaners to automobiles for their greenworthiness. No surprise, they note, given the thousands of purported green products flooding the market.”

    Consumers and environmental groups challenge eco-friendly statements on products reports on the details of this trend.

    Historic Preservation Tax Credits Under Review in Jefferson City

    More recently, Washington, D.C.-based economist and historic preservation proponent Donovan Rypkema has estimated that during the last decade, state historic tax credits led to more than $2 billion in rehabilitation of old buildings, brought Missourians $1.3 billion in additional income, and helped create 40,000 jobs.

    But critics of tax credits, such as University of Missouri–Columbia economics professor Joseph Haslag, zero in on the total money returned to the state. He figures that the state receives just 3 to 4 cents for every dollar of goods and services produced in Missouri. So, for every dollar of a tax credit, the state would have to produce $25 to $22 of final goods and services for the state to get its money back.

    “I think the only justification for historic preservation tax credits is the existence of an externality — we like to look at old, well-maintained buildings,” said Haslag, who is also executive vice president of the Show-Me Institute. “There is no economic development justification for the preservation tax credit.”

    Read more at Policy Pulse, a publication of the Show-Me Institute.

    Sotomayor’s bias against private property

    From The Washington Times:

    If you thought Judge Sonia Sotomayor’s controversial stances on racial issues were problematic, you should get a gander at the Supreme Court nominee’s apparent hostility to property rights.

    Judge Sotomayor served as the senior judge on one 2006 case, Didden v. Village of Port Chester, which respected University of Chicago law professor Richard Epstein described as “about as naked an abuse of government power as could be imagined.” Her judicial panel’s ruling might be the worst violation of property rights ever approved by a federal appeals court. It is part of a pattern of Judge Sotomayor’s pro-government rulings that run roughshod over the most basic of private property rights. …

    These cases are extremely worrisome. Judge Sotomayor’s apparent bias against private property does not recommend her nomination for the nation’s highest court.

    The Sotomayor Rules: Some were made to be broken.

    From Kimberly A. Strassel in the Wall Street Journal.

    Rather, it is Judge Sotomayor’s biography that uniquely qualifies her to sit on the nation’s highest bench — that gives her the “empathy” to rule wisely. Judge Sotomayor agrees: “I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion [as a judge] than a white male who hasn’t lived that life,” she said in 2001.

    If so, perhaps we can expect her to join in opinions with the wise and richly experienced Clarence Thomas. That would be the same Justice Thomas who lost his father, and was raised by his mother in a rural Georgia town, in a shack without running water, until he was sent to his grandfather. The same Justice Thomas who had to work every day after school, though he was not allowed to study at the Savannah Public Library because he was black. The same Justice Thomas who became the first in his family to go to college and receive a law degree from Yale.

    By the president’s measure, the nation couldn’t find a more empathetic referee than Justice Thomas. And yet here’s what Mr. Obama had to say last year when Pastor Rick Warren asked him about the Supreme Court: “I would not have nominated Clarence Thomas. I don’t think that he was a strong enough jurist or legal thinker at the time for that elevation.”

  • TIF and other subsidies harm Wichita

    Everyone who cares about Wichita — the entire city, not just special interests — ought to be opposed to the continued use of tax increment financing (TIF) districts and other forms of subsidy that direct benefits to a small group at the expense of everyone else.

    Proponents of these programs such as Wichita Eagle editorial writer Rhonda Holman, most elected officials, and nearly all bureaucrats, need to justify these incentives. They make their case, of course, but the case is shallow. We need to look at research that studies these programs. We need to consider the effect of these programs on the city as a whole, and on the civic attitudes of Wichitans. When we do, we find that these programs just don’t deliver what they promise, unless you focus only on the special interest groups that feed off these programs. We also see that these programs contribute to the cynicism that is destructive to a civil society where people exist and trade harmoniously.

    What is the purpose? Development? Jobs?

    Some people want TIF because it promises development that otherwise would not happen. Others want the jobs that they see TIF create.

    The problem is that both promises are false — if you are able to look beyond stage one. There’s no doubt that things happen in TIF districts, usually. Buildings are built or renovated. Businesses open. People go to work.

    This simple analysis appeals to elected officials and newspaper editorial writers. But if we are concerned about the overall prosperity of our city, we need to look beyond the borders of the TIF district. When we do that, we come to a different assessment.

    Regarding the effect of TIF on overall development, economists Richard F. Dye and David F. Merriman have studied tax increment financing extensively. Their article Tax Increment Financing: A Tool for Local Economic Development states in its conclusion:

    TIF districts grow much faster than other areas in their host municipalities. TIF boosters or naive analysts might point to this as evidence of the success of tax increment financing, but they would be wrong. Observing high growth in an area targeted for development is unremarkable.

    So TIFs are good for the favored development that receives the subsidy — not a surprising finding. It’s what self-serving elected officials, bureaucrats, and newspaper editorial writers can see and focus on. But what about the rest of the city? Continuing from the same study:

    If the use of tax increment financing stimulates economic development, there should be a positive relationship between TIF adoption and overall growth in municipalities. This did not occur. If, on the other hand, TIF merely moves capital around within a municipality, there should be no relationship between TIF adoption and growth. What we find, however, is a negative relationship. Municipalities that use TIF do worse.

    We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF. (emphasis added)

    So if we are concerned about overall growth in Wichita, we need to realize that TIF simply shifts development from one place to another. The overall impact, according to uncontroverted research, is negative: less growth, not more.

    What about jobs? Paul F. Byrne of Washburn University authored a recent report titled Does Tax Increment Financing Deliver on Its Promise of Jobs? The Impact of Tax Increment Financing on Municipal Employment Growth. In its abstract we find this conclusion regarding the impact of TIF on jobs:

    Increasingly, municipal leaders justify their use of tax increment financing (TIF) by touting its role in improving municipal employment. However, empirical studies on TIF have primarily examined TIF’s impact on property values, ignoring the claim that serves as the primary justification for its use. This article addresses the claim by examining the impact of TIF adoption on municipal employment growth in Illinois, looking for both general impact and impact specific to the type of development supported. Results find no general impact of TIF use on employment. However, findings suggest that TIF districts supporting industrial development may have a positive effect on municipal employment, whereas TIF districts supporting retail development have a negative effect on municipal employment. These results are consistent with industrial TIF districts capturing employment that would have otherwise occurred outside of the adopting municipality and retail TIF districts shifting employment within the municipality to more labor-efficient retailers within the TIF district. (emphasis added)

    While this research might be used to support a TIF district for industrial development, TIF in Wichita is primarily used for retail development. And, when looking at the entire picture, the effect on employment is negative.

    Verge of corruption

    The ability and willingness of local elected officials to dish out TIF and other forms of subsidy places them, as Randal O’Toole has written, “on the verge of corruption.” In Wichita, David Burk and the principals of Key Construction make extensive use of political campaign contributions, and have benefited handsomely from TIF and other forms of subsidy. A recent analysis of campaign contributions by these parties to Wichita City Council members showed just how prevalent are these contributions.

    In Wichita city elections, individuals may contribute up to $500 to candidates, once during the primary election and again during the general election. As you can see in this table complied from Wichita City Council campaign finance reports, spouses often contribute as well. So it’s not uncommon to see the David and DJ Burk family contribute $2,000 to a candidate for their primary and general election campaigns. That’s a significant sum for a city council district election campaign cycle. Click here for a compilation of campaign contributions made by those associated with the Douglas Place project, a recent collaboration between Burk, Key Construction, and others.

    Council Member Jeff Longwell (district 5, west and northwest Wichita), in his second term as council member and with his heart set on becoming the next mayor, leads the pack in accepting campaign contributions from parties associated with the Douglas Place project. For his most recent election, he received $4,000 from parties associated with Key Construction, and $2,000 from David Burk and his wife. Total from parties associated with the Douglas Place project: $6,000.

    Lavonta Williams, (district 1, northeast Wichita), who is also vice mayor, received $5,000 from parties associated with Douglas Place: $4,000 from parties associated with Key Construction, and $2,000 from David Burk and his wife.

    Mayor Carl Brewer received $4,000 from parties associated with Douglas Place: $3,500 from parties associated with Key Construction, and $500 DJ Burk, David Burk’s wife.

    Council Member Janet Miller (district 6, north central Wichita) received $3,500 during her 2009 election campaign from parties associated with Douglas Place: $1,500 from parties associated with Key Construction, and $2,000 from David Burk and his wife.

    For his 2011 election campaign, newly-elected Council Member Pete Meitzner (district 2, east Wichita) received $2,500 from parties associated with Douglas Place: $1,500 from parties associated with Key Construction, and $1,000 from David Burk and his wife.

    The people who make these contributions and the officeholders who receive them deny that they make any difference. That’s hard to believe. These donors don’t often contribute to candidates for the Kansas Legislature or U.S. Congress. That’s because these bodies don’t have the power to dish out the subsidies that the Wichita City Council does. I’d say these donors are acting rationally, in their self-interest.

    If you’re still not convinced, consider the case of Reverend Kevass Harding, who wanted to redevelop the Ken-Mar shopping center, and Wichita City Council member Lavonta Williams, (district 1, northeast Wichita), who is presently serving as vice mayor.

    As reported in 2009, Harding and his wife made campaign contributions to Williams. These campaign contributions, made in the maximum amount allowable, were out of character for the Hardings. They had made very few contributions to political candidates, and they appear not to have made many since then.

    But in June 2008, just before the Ken-Mar TIF district was to be considered for approval, the Hardings made contributions in the maximum allowable amount to Williams, who represents Ken-Mar’s district. Harding would not explain why he made the contributions. Williams offered a vague and general explanation that had no substantive meaning.

    The close linkage between these political contributions the awarding of money illustrates the need for pay-to-play laws in Wichita and Kansas. These laws impose various restrictions on the activities of elected officials and the awarding of contracts or other largesse to those who have made political contributions.

    Citizens become cynical when they feel there is a group of insiders — commonly called the “good ol’ boy network” — who get whatever they want from city hall at the expense of taxpayers. It’s surprising that the Wichita Eagle editorial board is either not aware of this, or doesn’t see it as a problem. In the meantime, our newspaper, along with those in the network of city hall insiders, continue to contribute to the destruction of civil society in Wichita.

    Additional Reading:

    • Wichita property taxes are high, leading to other problems: “An ongoing study by the Minnesota Taxpayers Association tells us that Wichita has high business property taxes. This may be a reason why the Wichita City Council feels it is necessary to offer relief from these taxes, but it is not an effective economic development strategy.”
    • Tax increment financing: The right tool for Wichita jobs?: “Tax Increment Financing (TIF) is an economic development tool that uses the expected growth (or increment) in property tax revenues from a designated geographic area of a municipality to finance bonds used to pay for goods and services calculated to spur growth in the TIF district. The analysis performed for this study found TIF does not tend to produce a net increase in economic activity; favors large businesses over small businesses; often excludes local businesses and residents from the planning process; and operates in a manner that contradicts conventional notions of justice and fairness. We recommend seeking alternatives to TIF and reforms to TIF that make the process more democratic and the distribution of benefits more fair to residents of TIF districts.”
    • Giving away the store to get a store: “Largely because it promises something for nothing — an economic stimulus in exchange for tax revenue that otherwise would not materialize — this tool is becoming increasingly popular across the country. Originally used to help revive blighted or depressed areas, TIFs now appear in affluent neighborhoods, subsidizing high-end housing developments, big-box retailers, and shopping malls. And since most cities are using TIFs, businesses such as Cabela’s can play them off against each other to boost the handouts they receive simply to operate profit-making enterprises.”
    • Wichita’s economic development strategy: rent seeking: “It is wealth, after all, that defines prosperity. Our goal ought to be to create an environment where everyone lives in an environment conducive to creating prosperity and wealth. But in a misguided effort, our city leaders, week after week, take actions that produce just the opposite.”
    • Wichita economic development: And then what will happen?: “Critics of the economic development policies in use by the City of Wichita are often portrayed as not being able to see and appreciate the good things these policies are producing, even though they are unfolding right before our very eyes. The difference is that some look beyond the immediate — what is seen — and ask “And then what will happen?” — looking for the unseen.
    • Wichita and its political class: “Discussion at a Wichita City Council meeting provided an opportunity for citizens to discover the difference in the thinking of the political class and those who value limited government and capitalism.”
    • Wichita on corporate welfare, again: “An award of $2.5 million by the City of Wichita to aircraft manufacturer Hawker Beechcraft to ward off a threatened move to Louisiana stands out as an example of corporate welfare given for its own sake, and not in response to any real threat.”
    • Wichitans mislead on Warren IMAX incentives: “With the possibility of another IMAX theater being built not too far from Wichita, we now know that Wichitans were mislead in awarding economic development incentives.”
    • Wichita again to bet on corporate welfare as economic development: “The Wichita City Council may take action that promotes corporate welfare and the city’s economic development policy.”
    • In Wichita and Kansas, economic development is not working: “The effort of Wichita and Kansas to retain Hawker Beechcraft, one of our leading employers and a Wichita institution, provides a lesson in the futility of corporate welfare as an economic development policy: Someone is usually willing to pay more. We would be much better off if we start transforming Kansas to a state where all companies are nurtured, not by bureaucratic and political oversight and handouts, but by a low taxing and spending environment, and a reasonable regulatory regime.”
    • Tax increment financing is not free money: “Cato Institute Senior Fellow Randal O’Toole has written extensively on the subject of urban planning, development, and tax increment financing (TIF) districts. The following article contains many points that the Wichita City Council may wish to consider as it considers expansion of a downtown Wichita TIF district at tomorrow’s council meeting.”

  • Charles Koch profiled in Forbes

    The new issue of Forbes features a cover story on Charles and David Koch. It is very interesting and seems a balanced and fair article, but there are a few things that stand out. (Inside The Koch Empire: How The Brothers Plan To Reshape America.)

    An example: “Both Kochs innately understand that — unlike the populist appeal of their fellow midwestern billionaire Warren Buffett and his tax-the-rich advocacy — their message of pure, raw capitalism is a much tougher sell, even among capitalists.”

    I think the author should have written “even among business executives” rather than capitalists. That’s because Charles Koch has been outspoken about business cronyism, in September writing in The Wall Street Journal: “Far too many businesses have been all too eager to lobby for maintaining and increasing subsidies and mandates paid by taxpayers and consumers. This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture.”

    I would imagine that most of the business leaders seeking government subsidies and mandates consider themselves capitalists. That’s a problem.

    Then: the description of “pure” capitalism as raw. I think we’re starting to realize just how raw politics and government have become. Capitalism, however, is a system based on respect for property and peaceful, beneficial exchange. Tom G. Palmer in the introduction to The Morality of Capitalism explains: “Far from being an amoral arena for the clash of interests, as capitalism is often portrayed by those who seek to undermine or destroy it, capitalist interaction is highly structured by ethical norms and rules. Indeed, capitalism rests on a rejection of the ethics of loot and grab, the means by which most wealth enjoyed by the wealthy has been acquired in other economic and political systems. … It’s only under conditions of capitalism that people commonly become wealthy without being criminals.”

    Often corporations are criticized by liberals as being too focused on short-term gains, that corporate raiders buy firms, gut them, chop them up, sell off assets, lay off employees, pile on debt — you know the story as used against Mitt Romney. But look at how Koch Industries operates:

    Charles spent $6 billion upfront to buy Georgia-Pacific, and rather than satisfy quarterly earnings estimates or dividend-hungry investors, he immediately directed the new division’s cash flow toward paying down the $15 billion in liabilities that it inherited. …

    The Koch long-game strategy is absolute: If it makes sense to them, the Kochs stay with the plan, no matter how burdensome or how long it takes. “We buy something not to milk it but to build it, to take its capabilities and add to them, and build new businesses,” [Charles] Koch says.

    That sounds like a business strategy the left should embrace, not vilify.

    Another curious statement by the author: “Given their strict adherence to the principals of transparent free markets, the Kochs’ secrecy seems hypocritical.” This is curious because transparency is an attribute not often associated with advocacy for free markets. Transparency is more associated with government as a desirable goal. Charles and David Koch are private citizens, not agents of government.

    There’s good news near the end of the article:

    The brothers’ new political emphasis in the coming year? Fighting corporate welfare.

    While Obama talks about getting rid of lobbyists, Charles says, the “only way he can achieve that stated objective is to get government out of the business of giving goodies. That’s like flies to honey,” he adds. “The first thing we’ve got to get rid of is business welfare and entitlements.”

    There’s much more in the article, available at Inside The Koch Empire: How The Brothers Plan To Reshape America.

  • Wichita pension plan report

    First, the good news: The condition of Wichita Employees’ Retirement System is nowhere near as dire as Kansas Public Employee Retirement System, or KPERS. But the city is having to make much higher contributions to keep the plan funded. These contribution rates are likely to increase, as the plan relies on unrealistic assumptions.

    Wichita has two employee retirement plans, one for police and fire, and another for other employees. The two plans are nearly equal in size, and both experience the same problems.

    As a result of low investment returns, the city finds itself saddled with higher retirement plan costs. In 2009, the city’s contribution to Wichita Employees’ Retirement System was $3,887,085. For 2011, it is $7,695,317, an increase of 98 percent in two years. In reality this increase, as large as it is, is not nearly enough to fund the plan if realistic assumptions and accounting was used.

    In the words of report authors, the Wichita Employees’ Retirement System plan experienced a “large increase to the unfunded actuarial liability.” In plain language, the plan’s investments did not earn enough in 2011 to meet expected future expenses. This is termed, again by plan authors, an “unfavorable experience.”

    The reality is worse than reported, as Wichita uses a valuation method called “asset smoothing.” This technique smooths out uneven investment returns. It means that the recent years of investment losses are not fully incorporated into the official statistics. Again, from the report authors: “Under the asset smoothing method used in the valuation process, a portion of this investment loss is deferred to future years.” Private sector pension plans can’t do this.

    As of December 31, 2011, the actuarial value of the plan’s assets — determined using the asset smoothing technique — was $513.3 million. The market value was $458.8 million, or 10.6 percent less. Also, a measure called “Portion of Actuarial Liabilities Covered by Reported Assets” has declined from 90.1 percent in 2009 to 73.9 percent in 2011.

    The effect of this unrealized loss on the plan is severe. If these losses were recognized, the city would have to increase its contributions to the plan by a large amount, write the authors: “If the deferred losses were recognized immediately in the actuarial value of assets, the funded percentage would decrease from 93% to 83% and the actuarially determined contribution rate would increase from 12.6% to 17.9%.” (It’s important to remember who pays for these contributions: Wichita taxpayers.)

    A chart in the report shows the expected city contribution rate for future years. It rises rapidly, from about 10 percent now to over 16 percent in 2015. This assumes that the plan earns 7.75 percent investment returns.

    The ongoing problem

    The Wichita retirement plan uses an assumed rate of return of 7.75 percent. Calculations as to how much the city needs to contribute are based on this assumption. The problem is that this rate is simply too high.

    In the private sector, pension plans use much lower assumed rates, such as the rate of return on high quality corporate bonds. This might be somewhere between five percent and six percent. If the Wichita retirement plans were re-evaluated using this assumption, the unfunded liability would explode, and the contributions the city would need to make would be much greater, perhaps by one-third. That’s because of the long time frame of pension fund investments, where small changes in rates of return have a large dollar impact.

    Solution going forward

    The ongoing problem is that city and state pension plans operate under unrealistic assumptions. This means that Wichita is taking on too much risk in the form of future promised benefits that it isn’t presently paying for.

    It’s also easy for cities and states to promise generous retirement benefits without paying for them. The solution is to simply stop this practice and adopt what most of the private sector has: Defined contribution plans like 401k plans.

    The city has done this, partially, as new employees (not police and fire) are initially in a defined contribution plan. But employees can later decide to move to the defined benefit plan — the type that causes so much trouble for state and local governments. As it turns out, almost all eligible Wichita employees choose to enter the defined benefit plan.

    Government employee representation groups are strongly in favor of defined contribution plans. Last year, in its message to its followers, Kansas National Education Association (KNEA, the teachers union) wrote this about defined-contribution plans: “First, they claim that a DC plan gives the employee control over their own retirement. And if you have lots to invest and have the time and knowledge to do so effectively, that might be true. Of course, even if you do, you can end up like the folks who found Enron to be a great investment or trusted Mr. Madoff. The fact is most of us are not prepared to do our own analysis and investment.”

    (While KNEA is writing about KPERS, the state employee retirement plan, the principles apply to the Wichita plan.) There’s quite a bit of misinformation here. But before that, a huge irony is that this information is aimed at Kansas schoolteachers, and their union assumes they are not intelligent enough to plan for their own retirement.

    In fact, planning for retirement is quite easy and simple. All one needs to do is select low-cost index stock and bond mutual funds, of which there are many. These funds, over the long time horizon appropriate for retirement investing, beat the performance of all managed funds, meaning funds managed by professionals who attempt to analyze markets and earn greater than average returns through an active trading strategy. This is not disputed by anyone except by those who sell actively-managed mutual funds.

    “The evidence is clear. Low-cost index funds regularly outperform two-thirds of actively managed funds, and the one-third of actively managed funds that outperform changes from period to period. Even the very few professional investors who have beaten the market over long periods of time — Berkshire Hathaway’s Warren Buffett and Yale University’s David Swensen, for instance — are quick to advise that investors are likely to be much better off with simple low-cost index funds than with expensive actively managed funds.” (Burton G. Malkiel, ‘Buy and Hold’ Is Still a Winner. Also, see the author’s book The random walk guide to investing: ten rules for financial success.)

    Generally, most investors would select just one or two funds in which to place their contributions. Over time, investors may want to change the balance or characteristics of the funds they invest in. This again is easy to do. In fact, large mutual fund companies like Vanguard have index funds that automatically shift the balance between stocks and bonds as investors move along towards retirement.

    The idea that the teachers union believes that professionals like schoolteachers are not capable of becoming informed and making these decisions is laughable if it weren’t the actual belief of the union. Suggestion: An actually useful and productive role for the teachers union would be to help their members learn to invest for their retirement. Cities like Wichita could do the same.

    The problem cited about Enron and Madoff is that some people placed all or nearly all their investments with these two firms. That’s a bad strategy for anyone to follow with their retirement investments. Using index funds will not expose investors to the risk of losing all their money.

    The claim by the KNEA that “lots to invest” is required is false. The companies that manage defined-contribution retirement plans accept new employees into the plan no matter how little they have to invest, and they accept their periodic contributions each pay period no matter how small. Scale — the amount available to invest — is not an issue, contrary to the assertions of the teachers union.

    One claim made by KNEA is true: defined contribution plans give workers control over their retirement savings. This is a benefit. If a worker has a low tolerance for risk, they can keep their contributions in cash (actually treasury bonds would be the choice for these people). Others who wish to take an active role in the retirement investing can do so, as most plans offer funds that have targeted goals such as real estate, growth stocks, short-term bonds, long-term bonds, etc.

    But in KPERS — and the Wichita plan — all members are invested in the mix of investments that the plan trustees decide on. These investments are largely in stocks and bonds, a fact possibly lost upon Jane Carter of Kansas Organization of State Employees. She asked her members “Do you really want to take your retirement security and gamble it on the stock market?” The reality is that KPERS is invested in the stock market, and those returns are essential to funding KPERS benefits. The investments that the trustees choose may not be suitable for each individual member. But KPERS members have no choice.

    The point is that the individual is in control, and can choose investments that match their goals.

  • Kansas and Wichita quick takes: Monday October 18, 2010

    Last day to register to vote. Today is the last day to register to vote in the November general election in Kansas. Contact your county election office for details.

    Democratic foreign campaign money. “Democratic leaders in the House and Senate criticizing GOP groups for allegedly funneling foreign money into campaign ads have seen their party raise more than $1 million from political action committees affiliated with foreign companies. … Republicans with groups under fire from the White House say the hefty campaign contributions illustrate Democratic hypocrisy.” More at The Hill: Dems have raised more than $1 million this cycle from foreign-affiliated PACs. Related: Axelrod, Gibbs keep up Dems’ offensive on Chamber donations.

    Rasmussen polls from last week. 55% Favor Repeal of Health Care Law: “The majority of U.S. voters continue to favor repeal of the new national health care law but are slightly less emphatic about the impact the law will have on the country. Confidence in home ownership falls: “Now more than ever, homeowners expect to see the value of their home go down over the next year. A new Rasmussen Reports survey finds that 32% expect the value of their home to decrease over the next year, the highest finding since Rasmussen Reports began asking the question regularly in December 2008.” Generic Congressional ballot: “With just three weeks to go until Election Day, Republicans hold an eight-point lead on the Generic Congressional Ballot. Polling for the week ending Sunday, October 10, shows that 47% of Likely Voters would vote for their district’s Republican congressional candidate, while 39% prefer the Democrat.”

    Waiting for Superman to open in Wichita. Opens October 22 at the Warren Theater on East 13th in Wichita. Check the website for show times. Of the film, the Wall Street Journal wrote: ” The new film “Waiting for ‘Superman’” is getting good reviews for its portrayal of children seeking alternatives to dreadful public schools, and to judge by the film’s opponents it is having an impact. Witness the scene on a recent Friday night in front of a Loews multiplex in New York City, where some 50 protestors blasted the film as propaganda for charter schools.” In Kansas, the Wichita Eagle printed an op-ed penned by the education bureaucracy status quo — Sharon Hartin Iorio, dean of the Wichita State University College of Education in this case — to inoculate Wichitans against the effects of what I am told is a powerful film. Let’s hope this film gets Kansans to thinking about public schools in our state, as Kansas is way behind the curve on innovation, compared to other states.

    Democratic political activists wanted. Craigslist ad: “The Kansas Coordinated Campaign (Democrat) seeks passionate and hard-working persons to do paid door-to-door voter contact in Sedgwick. This is not a fundraising position, and is exclusively focused on ensuring that Democratic voices are heard this November.” Pay is $9/hour. An earlier ad from September: “Looking for several energetic people to work with a small campaign and make sure that Kansas voices are heard in the government! Looks great on resumes, etc. Must be able to work 8-12 hours a week (weekends and/or evenings). Registered Democrats only, no felony convictions.” That job advertised pay of $10/hour.

    Energy to be topic at Wichita Pachyderm. This Friday’s meeting of the Wichita Pachyderm club will feature John A. McKinsey speaking on the topic “Cap and Trade: What is the economic and regulatory impact of Congressional legislation?” The public is welcome at Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club.

    Trackers at work. The Kansas City Star explains the role of trackers in political campaigns: “Martin’s job is to follow and film political opponents — and try to catch them in a misstep. Trackers like Martin, who works for the Kansas Democratic Party, have become a fixture of modern political campaigns. They now are so common that many political consultants say campaigns are behind the times if they don’t employ one.” In the Kansas fourth Congressional district campaign, Democrat Raj Goyle employes a tracker to follow Republican Mike Pompeo. At the several events where I’ve seen him, he hasn’t asked a question. Here’s some video, apparently shot by the tracker himself, in which Republican National Chairman Michael Steele has a little good-natured fun at the tracker’s expense at a Pompeo campaign event. When asked by me, the Pompeo campaign would not reveal if they use a tracker.

    Kansas owes — a lot. From Kansas Budget Watch, a project of the Institute for Truth in Accounting: “One of the reasons Kansas is in this precarious position is state officials used antiquated budgeting and accounting rules to determine payroll costs. Truthful accounting would include in the payroll costs the portion of pension benefits employees earn every year they work. Accurate accounting provides that these real and certain expenses be reported on the state’s budget, balance sheet and income statement when earned, not when paid. Because the pension benefits are not immediately payable in cash, Kansas’ politicians have ignored most of these costs when calculating ‘balanced’ budgets. More than $8.5 billion of these and other costs have been pushed into the future, and thus onto your children’s and grandchildren’s backs.” See Financial State of Kansas for more. Whenever the shortfall of funding KPERS, the Kansas Public Employee Retirement System, is mentioned, public sector employees attack the messenger rather than facing the reality of the situation. Their strategy, as it is for a majority of legislators, is to pass along this funding shortfall to a future generation. This is dishonest, and a reason why the public employee pension system needs reform — now.

    Sales tax changes could scuttle grocery store CID. A proposal by Kansas Senator Dick Kelsey to eliminate the sales tax on groceries in Kansas could have an impact on a Wichita grocery store’s plans. The store, a Save-A-Lot proposed to be built in Planeview, would use the state’s Community Improvement District law to allow it to collect an extra two cents per dollar sales tax. Question: If the state stopped taxing groceries, could the store still collect the two cents per dollar CID tax? I’m guessing the answer is no. The store’s developer made the point that many of the stores customers use the food stamp program, so they don’t pay tax anyway. And non-grocery items like household supplies would still be taxed (probably), so there’s some sales tax and CID tax there. Here’s an example of how relying on government and politicians adds extra uncertainty and risk to entrepreneurial activity, as if market risk wasn’t enough already. Although I would say that those like Rob Snyder, the developer of the proposed store, who seek government subsidy to back their ventures can hardly be classified as entrepreneurs — at least not the type we need more of.

    TIF for rich, bit not for poor? A letter writer in yesterday’s Wichita Eagle writes: “Tax-increment financing districts have been used to provide millions of dollars to developers in their attempts to revitalize downtown Wichita. Blocking $400,000 for Planeview implies that buildings downtown are of far greater importance than the concern for human beings living in one of the poorest communities in Sedgwick County.” This is an issue the city has to grapple with, although it was the county commission that rejected the formation of the TIF district. The writer continues with a moral plea: “What has happened to our morality and our concern for and recognition of the needs of those who are less fortunate?” Morality is one of the reasons why I and my friend John Todd have opposed all TIF districts, regardless of location and purpose. That, and the fact that they don’t work — if growth in the entire community is the goal, instead of enriching specific people.

    Organist Massimo Nosetti. Tuesday Italian organist Massimo Nosetti will perform a recital as part of the Rie Bloomfield Organ Series. The recital starts at 7:30 pm in Wiedemann Recital Hall (map), on the campus of Wichita State University. Cost is $10.

    Wichita Eagle Opinion Line. “Am I the only one offended by Russ Meyer’s comment that ‘Anybody who is dumb enough to run against Carl (Brewer) is not qualified to be the mayor of Wichita’? When did Meyer become God?”

  • Wichita Mayor Carl Brewer: State of the City 2011

    This week Wichita Mayor Carl Brewer delivered his annual “State of the City” address. While the Wichita Eagle editorial commenting on the mayor’s speech is titled “Cause to boast, hope,” a look at some of the important topics the mayor addressed will lead some to conclude otherwise.

    The text of the mayor’s address may be read at several places, including here.

    Economic development

    Regarding Wichita’s economic development, the mayor said that the city’s efforts saved 745 jobs and created 435 jobs, for a total impact of 1,180 jobs. To place those numbers in context, we note that American Community Survey data from the U.S. Census Bureau indicates the labor force in Wichita is 191,760 persons. This means that the economic development efforts of the City of Wichita affected a number of jobs equivalent to 0.6 percent of the city workforce.

    This small number of jobs impacted by the city’s economic development initiatives is dwarfed by other economic events. Additionally, these efforts by the city are counterproductive — if our interest is creating a dynamic economy in Wichita. Analysis by the Kauffman Foundation finds that it is new firms — young firms, in other words — that are the primary drivers of job creation. But the economic development policies of cities like Wichita are definitely biased toward older, established firms. The cost of these economic development efforts, which are paid for by everyone including young businesses firms struggling to grow, means that we prop up unproductive companies at the expense of the type of firms we need to really grow the Wichita economy.

    In particular, the mayor’s proudest achievement — he nearly burst with pride when speaking of it — pours a large amount of state, county, and city funds into Hawker Beechcraft, an old-line company that is shrinking its employment in Kansas. This deal with Hawker Beechcraft should not be viewed as a proud moment for Wichita and Kansas. Instead, we should view this as succumbing to economic blackmail by Hawker, based on a threat that may not have been genuine. We responded by making in investment in an old-line, shrinking company, apparently the first time that the state has invested public funds in a downsizing company.

    Furthermore, the investment in Hawker comes on the heels of an analysis that says Hawker should divest itself of all its lines of business except for one. The analysis paints a grim future for Hawker: “In addition, backlogs are dwindling, R&D budgets are miniscule, employee pensions are underfunded by $296 million and the prospects of paying down its long-term debt are remote. At this point, it would be a monumental task just to roll-over the debt, let alone pay it off entirely. At the root of the problem is the state of Hawker Beechcraft’s business jet product lines. … At the heart of HBC’s current strategy is the assumption that a market recovery will fix what’s ailing the company, and that is just not true. The company’s business aviation products are seriously underperforming with new products relegated to minor upgrades due to a token R&D budgets based on an across-the-board derivative strategy.”

    The mayor also touted an agreement with Bombardier Learjet for the company to produce a new jet in Wichita. This deal required that the state issue bonds to raise money to give to Bombardier. The bonds will be paid off by the company’s employee withholding taxes. That’s money that would normally go to the state’s general fund. Instead, this deal raises the cost of government for everyone else.

    The mayor said of these deals: “As I suggested at the time of the Hawker deal, this was a declaration that Kansas and Wichita will fight to keep its aircraft industry. As I said then, ‘You’re not going to take what’s most important to us, and that’s our aviation industry.’ Simply put, we will not lose these jobs. Period.”

    Unfortunately, the mayor’s declaration is an invitation to Kansas companies of all types to seek public funds just as these two companies did, and as others have across Kansas. The result is increased costs of government and a state and city less inviting to the dynamic and innovative young companies that we now know are the engine of prosperity and job growth.

    The mayor also lauded the use of “revenue bonds” used for the construction of a IMAX movie theater in west Wichita. Focusing on the bonds allowed the mayor to gloss over the large measure of property tax forgiveness — corporate welfare — granted to the Warren Theater. The theater’s owners have received corporate welfare before from the city.

    Plans for downtown

    On the master plan for the revitalization of downtown Wichita, the mayor said the plan will “lead us to a point where ultimately the private investment exceeds public investment by a 15 to 1 ratio.” At the time agitation for a downtown plan started two years ago, research indicated that the ratio of private to public investment in downtown was approximately one to one. It’s quite a stretch for the mayor to promise an eventual 15 to one ratio, especially since the Goody Clancy plan recently adopted by the city council calls for — over the next 20 years — $500 million in private investment supported by $100 million of public investment. That’s a five to one ratio, not the 15 to one mentioned by the mayor. Even then, it will be surprising if anything near a five to one ratio is achieved.

    The mayor also promoted the decision by Cargill to build a new facility downtown as a sign of success. This facility, however, required over $2.5 million in various subsidy from state and local governments. It hardly seems a measure of proud success when companies are able to extract this level of corporate welfare in exchange for locating facilities in Wichita.

    Accountability and transparency

    In his address, Mayor Brewer promoted the city’s efforts in accountability and transparency, telling the audience: “We must continue to be responsive to you. Building on our belief that government at all levels belongs to the people. We must continue our efforts that expand citizen engagement. … And we must provide transparency in all that we do.”

    This an instance in which the actions of the city do not match with Brewer’s rhetoric. A small example is from last fall when the city had a stakeholder meeting to discuss the city’s community improvement district policy. While the term “stakeholder” is vague and means different things to different people, you might think that such a gathering might include representatives from the community at large. Instead, the meeting was stacked almost exclusively with those who have an interest in extracting as much economic subsidy as possible from the city. Often we find that meetings of this type are designed so that no dissenting voices are present.

    More importantly, the City of Wichita has failed to follow a fundamental law that provides accountability and transparency: the Kansas Open Records Act.

    I have made requests for records from three quasi-governmental agencies, two of which are under the city’s direct influence: Wichita Downtown Development Corporation, Go Wichita Convention and Visitors Bureau, and Greater Wichita Economic Development Coalition. Each of these organizations denied that they are public agencies as defined in the KORA, and therefore refused to fulfill my requests.

    Two times last year I appeared before the city council when the city was considering renewal of its contract with Wichita Downtown Development Corporation and Go Wichita Convention and Visitors Bureau. I asked the mayor that as a condition of renewing the contracts, the city ask that the agencies follow the law. But the mayor and the city rely on an incorrect interpretation of the KORA from city attorney Gary Rebenstorf and refused to act on my request. It should be noted that Rebenstorf has been wrong several times before when issuing guidance to the council regarding the Kansas Open Meetings Act, which is similar to the Open Records Act. He’s taken the blame and apologized for these violations.

    The Kansas Open Records Act in KSA 45-216 (a) states: “It is declared to be the public policy of the state that public records shall be open for inspection by any person unless otherwise provided by this act, and this act shall be liberally construed and applied to promote such policy.” Governments in Kansas should be looking at ways to increase availability of information. Instead, the City of Wichita uses a narrow — not liberal — interpretation of the records law restrict citizen access to records. At some time I believe the city’s legal position will be shown to be wrong.

    At any time the mayor could ask — and it could have been written into their contracts — that these agencies comply with the Kansas Open Records Act. The mayor’s refusal to do so indicates an attitude of accountability and transparency on the city’s terms, not on citizens’ terms and the law.

    Citizen response

    At many levels of government, when the chief executive makes an annual address like this, time is provided for someone to make a response, usually someone with a different point of view. This is the practice at the federal level, and also in Kansas when the governor delivers the state of the state address.

    The City of Wichita ought to do the same.

  • Testimony Opposing Expansion of the Wichita City South Redevelopment Tax Increment Financing District

    From John Todd.

    Mr. Mayor and members of the Wichita City Council, thank you for allowing me this opportunity to speak before you today. My name is John Todd. I stand before you today as a citizen in opposition to the Expansion of the City South Redevelopment District (Tax Increment Financing) (Districts I & VI).

    I testified before you on July 1, 2008 in opposition to the Old Town Warren Theater Loan that you recently approved. The City Council at that time cited the need for taxpayer assistance to prop up an “under-performing” $9.5 million dollar Tax Increment Financing (TIF) subsidy program that a previous city council awarded to Old Town developers in 1998.

    The size of the Old Town TIF project pales in comparison to the $61,772,000 projected in “parking and infrastructure improvements in the Arena Neighborhood Redevelopment Plan area, to be paid for by the TIF” that you are considering today. What vision for a successful TIF in 2008 does this city council have that the 1998 council lacked? What will another “under-performing” TIF cost future taxpayers? Is it the proper role of city government to speculate in real estate ventures using taxpayer money?

    Sedgwick County voters approved the $184.5 (now $205) million dollar downtown arena and have been assured repeatedly by the three county commissioners who originally voted for the arena that adequate parking exists for the arena. I am a little more than suspect when I see the word “parking” in the TIF proposal you are considering today?

    Voters of the arena were told that their approval of the new arena would provide the “economic boost” and the “synergy” needed for effective downtown redevelopment. No mention was made of the need for additional taxpayer subsidy. I believe our new downtown arena project should be given the chance to perform economically as promised before additional taxpayer money is committed to the project.

    If you approve this TIF, please keep in mind that approximately 45% of the $61.8 million dollar proposal or roughly $28 million will be diverted away from The Wichita Public Schools over a 20-year period and another 27% or roughly $16 million from the Sedgwick County taxpayers.

    If you approve this TIF, I believe an excerpt from the July 5, 2008 Wall Street Journal article entitled “Blame Taxes for Baltimore’s Rot” (written by Steve H. Hanke and Stephen J.K. Walters) is on target for Wichita, “True enough, the ability to hand out subsidies gives officials great power. But it also gives them a reason, and incentive, to dismiss the common sense that if tax breaks for the well-connected are a good idea, lower tax rates across the board would lead to broad-based redevelopment.”

    We need to rely on privately funded redevelopment downtown and not on taxpayer-subsidized redevelopment that favors the politically well-connected developers to the exclusion of all other private developers.

    Please vote against the proposed TIF.

  • Wichita Mayor Carl Brewer saves us from covered wagons

    On August 12, 2008, at a meeting of the Wichita City Council, Wichita Mayor Carl Brewer delivered remarks that I found … well, I’m still trying to find the words that fully describe my astonishment. You can read my transcription of his remarks in this post: Wichita Mayor Carl Brewer, August 12, 2008.

    The context of these remarks is that John Todd and I had just testified against the city establishing a tax increment financing (TIF) district that benefits a local developer. Mayor Brewer believes it is the city’s firm duty to guide and subsidize economic development. His remarks on July 1, 2008 (Mayor Brewer Warren Theatre [sic] Statement) leave no doubt about this. So I wasn’t too surprised that the mayor ignored John’s and my advice and supported the formation of this TIF district.

    What surprised me was when the mayor said that without the city’s “role in guiding and identifying how the city was going to grow … we would still be in covered wagons and horses.”

    When I heard him say that, I thought he’s just using a rhetorical flourish to emphasize a point. But later on he said this: “… then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.”

    So I think it’s fair to say that the mayor believes that without the city’s role in economic development, we would soon return to the stone age (okay, there I exaggerate a bit).

    Many people in Wichita, including the mayor and many on the city council and county commission, believe that the public-private partnership is the way to drive innovation and get things done. It’s really a shame that this attitude is taking hold in Wichita, a city which has such a proud tradition of entrepreneurship. The names that Wichitans are rightly proud of — Lloyd Stearman, Walter Beech, Clyde Cessna, W.C. Coleman, Albert Alexander Hyde, Dan and Frank Carney, and Fred C. Koch — these people worked and built businesses without the benefit of public-private partnerships and government subsidy.

    Today this rugged heritage is disappearing in favor of the public-private partnership and programs like Visioneering Wichita. We don’t have long before the entrepreneurial spirit in Wichita is totally extinguished. What can we do to return power to the people instead of surrendering it to government?

  • Contrary to Buffet, government spending is not good

    Recently wealthy investor Warren Buffet has been in the news for his advocacy of higher taxes. But is government — politics, in other words — the best way to allocate resources?

    In a statement on the KochFacts website, Charles Koch disagrees with Buffet:

    As part of the public discourse on government overspending and fiscal irresponsibility, Charles Koch offered the following public response to media queries on the topic: “Much of what the government spends money on does more harm than good; this is particularly true over the past several years with the massive uncontrolled increase in government spending. I believe my business and non-profit investments are much more beneficial to societal well-being than sending more money to Washington.”

    We have to wonder if Buffet is really sincere about the wisdom of sending money to government. As I noted a few years ago, Buffet is giving most of his fortune to charity. In this way, he avoids the estate, or inheritance, tax. If Buffet really thinks inheritance taxes are good, he should keep his wealth and let the government tax it when he dies, like others have to.

    Or, as many have noted, Buffet is free to give as much as he wants — right now — to the federal government.

    But as it turns out, even the super wealthy don’t have much money when compared to the needs of government. Buffet’s fortune, the third largest in the world, would pay for just 12 days of federal government borrowing. Not total spending — just the new debt the U.S. government accumulates in less than two weeks.

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