Tag Archives: Kansas Governor

Again, KPERS shows why public pension reform is essential

Proposals in the Kansas budget for fiscal year 2018 are more evidence of why defined-benefit pension plans are incompatible with the public sector.

Kansas Governor Sam Brownback has proposed delays in funding KPERS, the Kansas Public Employees Retirement System. The delays are in both directions. The state intends to break a past promise to pay, and also to skip some future payments.

A memo from KPERS summarizes recent history and the proposed changes: “Last fiscal year, the State delayed its fourth quarter payment for School employer contributions with a promise to pay it in Fiscal Year 2018 with interest. The Governor is recommending the State not pay this contribution and skip one quarterly payment each year through FY19. In addition, the Governor recommends extending the time to pay down KPERS’ existing unfunded actuarial liability by 10 years.”1

Many will criticize the proposed reduction in funding KPERS as stealing from KPERS. That really isn’t true. KPERS has plenty of money to pay current retirees their promised benefits. The above memo also says that those near retirement won’t be affected.

But what about younger employees who may not retire for 20 or 30 years? Will they receive their promised benefits?

The answer is yes, almost certainly. Their retirement benefits are in the form of a contract, and it is very unlikely that the state will break those contracts.

So: Is KPERS being robbed? Stolen from?

No. It’s future Kansas taxpayers who will be mugged. They will have to pay the unfunded liabilities accumulated by not only the current governor and legislature, but by past governors and legislatures too. I explain in more detail in my recent article No one is stealing* from KPERS. (The asterisk notes that there is stealing in a way, but from future taxpayers.)

Further: It is entirely foreseeable that this is happening. In 2015 the state issued $1 billion in bonds to address a portion of the KPERS unfunded liability. This made the unfunded liability ratio look better, and the governor and Republicans continually boast of this. But debt has simply been shifted from one balance sheet to another. The same taxpayers that will eventually pay.

This is one of the reasons why government should not offer defined-benefit pension plans. Because of the long time horizons involved, it’s easy to delay and postpone dealing with problems. Or, legislators are prone to make risky investment decisions as Kansas did in 2015 by $1 billion in bonds and transferring the proceeds to KPERS. This was — is — a risky maneuver, and it has led to undesirable behavior that was entirely predictable.

The plan was that the state would borrow $1 billion, and invest it. If the state earned more in investment returns than the interest cost on the bonds, the state wins. Barry Poulson, Ph.D., Emeritus Professor at the University of Colorado — Boulder has written on the danger of borrowing to shore up state pension funds, as Kansas has done. He explained there is the “lack of nexus between the investment of the bond proceeds and payments for unfunded liabilities in the plan.” This means that the borrowed funds may be used for current spending rather than for correcting the KPERS unfunded liability.2

Paulson explains: “If legislators see that additional funds are available to pay off unfunded liabilities in the pension plan they may choose to allocate less general fund money to meet these pension obligations.” What Poulson warned of happened in Kansas in 2016. Now, the governor proposes even more: Pushing off KPERS contributions to the future so that more money is available for spending on other stuff now.

In a way, it’s surprising that groups who advocate for public employees are upset with this. (See, for example, here from KNEA.) Instead, they should be grateful. KPERS benefits are unlikely to be cut for any retirees. But underfunding KPERS today means there is more money available for public employees and the agencies that employ them. In reality, these groups simply want higher taxes now.


Notes

  1. Kansas Public Employees Retirement System. Governor’s Budget Proposal & KPERS Shortfall. https://www.kpers.org/pdf/govbudgetproposalmember_statement.pdf.
  2. Weeks, Bob. This is why we must eliminate defined-benefit public pensions. https://wichitaliberty.org/kansas-government/we-must-eliminate-defined-benefit-public-pensions/.

Holding politicians to their boasts and promises

There are useful lessons we can learn from the criticism of Kansas Governor Sam Brownback, including how easy it is to ignore inconvenient lessons of history.

Tax cuts in Kansas were promised by Governor Brownback to be a “shot in the arm” for the Kansas economy. Opponents of the governor and tax cuts take great delight in reporting the generally anemic growth of the Kansas economy since then. Month after month, the tax cuts are condemned by Kansas newspaper editorial writers and the governor’s detractors.

I don’t think it’s a particularly strong form of argument to defend someone by showing how someone else is equally as bad — or worse. Similarly, criticizing someone for their fixation on A while they ignore the equally bad B: We need to know why they ignore B. Have they forgotten B? Do they not have time to write about B? Or do they ignore B because the fact of B is inconvenient to their ideology or their criticism of A? But I see that not everyone shares these ideals, and even so, perhaps we can learn something.

Many people remember that President Barack Obama warned that the unemployment rate would rise to a high level without a stimulus program. I can’t find that he mentioned a specific number that the unemployment rate would rise above. But in January 2009 two Obama administration officials, including Christina Romer (who would become chair of the Council of Economic Advisers) wrote a paper estimating what the national unemployment rate would be with, and without, the American Recovery and Reinvestment Plan, commonly known as the stimulus.1 That plan passed.

The Romer paper included a graph of projected unemployment rates. The nearby chart from e21 took the Romer chart and added
actual unemployment rates. (The accompanying article is Revisiting unemployment projections. That chart and article were created in 2011. I’ve updated the chart to show the actual unemployment rate since then, as black dots. The data shows that the actual unemployment rate was above the Obama administration projections — with or without the stimulus plan — for the entire period of projections.

The purpose of this is not to defend Brownback by showing how Obama is even worse. (Disclosure: Although I am a Republican, I didn’t vote for Brownback for governor.) Instead, we ought to take away two lessons: First, let’s learn to place an appropriately low value on the promises and boasts made by politicians.

Then, let’s recognize the weak power government has to manage the economy for positive effect. Indeed, the lesson of the Obama stimulus is that it made the unemployment rate worse than if there had been no stimulus — at least according to the administration projections.

And, there is one more lesson to learn about our state’s newspaper reporters and editorial writers, but I think you’ve discovered that already.

Unemployment with and without stimulus through 2014-01


Notes

  1. Romer, Christine, and Bernstein, Jared. The Job Impact of the American Recovery and Reinvestment plan. https://www.economy.com/mark-zandi/documents/The_Job_Impact_of_the_American_Recovery_and_Reinvestment_Plan.pdf.

No one is stealing* from KPERS

No one is stealing from KPERS, the Kansas Public Employees Retirement System. But there are related problems.

You don’t have to look for long on Facebook before you’ll find comments like these regarding KPERS, the Kansas Public Employees Retirement System:

“This is BS. Stupid Brownback robbed our pension plan; we have no real confidence that it will ever be paid back. Why don’t we have some kind of safety measure in place to prevent governors like him from stealing from us?”

“If the governor would keep his greedy hands off of the KPERS money that is there, we might not be having this problem. It was not set up as a lending bank when the Governor’s policies proved to be unworkable. Leave my money alone!!!!!”

These comments — and many similar posted all over Facebook — accuse Kansas state government, specifically the current governor, of stealing from KPERS. But that is not happening, according to Alan Conroy, KPERS Executive Director. By email, he answered this question posed by Kansas Policy Institute: “Can you please confirm that the Legislature or the Governor cannot and have not borrowed money from funds deposited with KPERS?

Conroy’s response, in part, was “Once funds are placed in the KPERS Trust Fund they cannot be withdrawn or ‘loaned-out’ to another entity or group. The only way funds come out of the Trust Fund is to pay the promised benefits to the members.”

That ought to settle the question of whether money is being “robbed” or “stolen” from KPERS.

But you’ll notice that the title of this article contains an asterisk. That’s because KPERS does have many problems. The most important is its underfunded status, which is a chronic problem. This is because the state has not made the actuarially required contributions. This is “stealing,” in a roundabout way. Who is suffering the loss? Not future KPERS retirees, as it is almost certain they will receive their promised benefits. Instead, it is future Kansas taxpayers who will have to make extra contributions to KPERS to make up for the current and past legislatures not making sufficient contributions.

This is one of the reasons why government should not offer defined-benefit pension plans. Because of the long time horizons involved, it’s easy to delay and postpone a solution to the future. Or, legislators are prone to make risky investment decisions as Kansas did in 2015. The state’s action simply replaced KPERS debt with debt the general fund is responsible for. This, of course, is the state selling $1 billion in bonds and transferring the proceeds to KPERS. It makes the KPERS unfunded ratio look better, as the governor and Republican legislative leaders continually boast. But it’s a risky maneuver, and it has led to undesirable behavior that was entirely predictable.

The plan was that the state would borrow $1 billion, and invest it. If the state earned more in investment returns than in interest cost on the bonds, the state wins. Barry Poulson, Ph.D., Emeritus Professor at the University of Colorado — Boulder has written on the danger of borrowing to shore up state pension funds, as Kansas has done. He explained there is the “lack of nexus between the investment of the bond proceeds and payments for unfunded liabilities in the plan.” This means that the borrowed funds may be used for current spending rather than for correcting the KPERS unfunded liability.1 What Poulson warned of happened in Kansas.

There’s another way that KPERS is stealing from future taxpayers. When performing projections, a key variable is the discount rate, which is to say, the rate that KPERS expects to achieve on its investments, over the long term. Small changes in the discount rate have large impacts. The nearby illustration from the KPERS annual report for 2015 shows that using a discount rate of 8.00 percent, the KPERS unfunded liability is slightly less than $9 billion. Change the discount rate to 7.00 percent, and the unfunded liability rises to almost $12 billion.

Some authorities believe that state pension funds should use a realistic discount rate, maybe four percent or so. That would cause the unfunded liability to explode. To its credit, KPERS recently adopted a discount rate of 7.75 percent, but that adjustment is not nearly enough.

Who will have to pay to make up the deficiencies caused by using an unrealistic discount rate? Future Kansas taxpayers, not KPERS retirees.

There was a time when money was really and truly stolen from KPERS, in a way. Under the leadership of former Kansas Governor John Carlin, it was decided that KPERS would make targeted, or direct, investments in Kansas companies. A scandal erupted, and KPERS lost many millions.2

Another source described the aftermath as this: “In total KPERS faced losses of at least $138 million from its direct investment program. Moreover more than seven hundred Kansas residents lost their jobs as a result of these failures — a striking contradiction to the stimulus purpose of the Kansas investment program. In hindsight the lack of professional oversight by KPERS of its private investments program was blamed for the failure of the direct investment program.”3 The chair of the KPERS Board of Trustees pleaded no contest to one felony count of aiding and abetting securities fraud regarding a KPERS investment.4

This sounds like stealing from KPERS. Despite this happening at the urging of Carlin, he now portrays himself as a leader, a senior statesman to whom we should listen.


Notes

  1. Weeks, Bob. This is why we must eliminate defined-benefit public pensions. https://wichitaliberty.org/kansas-government/we-must-eliminate-defined-benefit-public-pensions/.
  2. “It started as a way to use the state pension fund to boost the Kansas economy, making loans or investing in healthy businesses. But it has mushroomed into the biggest scandal in state history. Although the Kansas Public Employees Retirement System remains financially sound, with a value of about $4.4 billion, known losses exceed $230 million. Experts say total losses could double or triple.” Curran, Tim. Toto, we’re not in Kansas anymore: state pension scandal a nightmare. Associated Press. Oct. 7, 1991. http://www.apnewsarchive.com/1991/Toto-We-re-Not-in-Kansas-Anymore-State-Pension-Scandal-A-Nightmare/id-fe758e81f6b6a821076c829764cb6399.
  3. Cumming, Douglas ed. The Oxford Handbook of Private Equity. Oxford University Press.
  4. Press, A 1992, ‘Former KPERS Chief Sentenced To Probation For Securities Fraud’, Wichita Eagle, The (KS), 25 Jun, p. 4D, (online NewsBank).

Year in Review: 2016

Here are highlights from Voice for Liberty for 2016. Was it a good year for the principles of individual liberty, limited government, economic freedom, and free markets in Wichita and Kansas?

Also be sure to view the programs on WichitaLiberty.TV for guests like journalist, novelist, and blogger Bud Norman; Radio talk show host Joseph Ashby; David Bobb, President of Bill of Rights Institute; Heritage Foundation trade expert Bryan Riley; Radio talk show host Andy Hooser; Keen Umbehr; John Chisholm on entrepreneurship; James Rosebush, author of “True Reagan,” Jonathan Williams of American Legislative Exchange Council (ALEC); Gidget Southway, or Danedri Herbert; Lawrence W. Reed, president of the Foundation for Economic Education; and Congressman Mike Pompeo.

January

Kansas legislative resources. Citizens who want to be informed of the happenings of the Kansas Legislature have these resources available.

School choice in Kansas: The haves and have-nots. Kansas non-profit executives work to deny low-income families the school choice opportunities that executive salaries can afford.

Kansas efficiency study released. An interim version of a report presents possibilities of saving the state $2 billion over five years.

Wichita Eagle Publisher Roy Heatherly. Wichita Eagle Publisher Roy Heatherly spoke to the Wichita Pachyderm Club on January 15, 2016. This is an audio presentation.

Pupil-teacher ratios in the states. Kansas ranks near the top of the states in having a low pupil-teacher ratio.

Kansas highway conditions. Has continually “robbing the bank of KDOT” harmed Kansas highways?

Property rights in Wichita: Your roof. The Wichita City Council will attempt to settle a dispute concerning whether a new roof should be allowed to have a vertical appearance rather than the horizontal appearance of the old.

Must it be public schools? A joint statement released by Kansas Association of School Boards, United School Administrators of Kansas, Kansas School Superintendents’ Association, and Kansas National Education Association exposes the attitudes of the Kansas public school establishment.

Kansas schools and other states. A joint statement released by Kansas Association of School Boards, United School Administrators of Kansas, Kansas School Superintendents’ Association, and Kansas National Education Association makes claims about Kansas public schools that aren’t factual.

After years of low standards, Kansas schools adopt truthful standards. In a refreshing change, Kansas schools have adopted realistic standards for students, but only after many years of evaluating students using low standards.

Brownback and Obama stimulus plans. There are useful lessons we can learn from the criticism of Kansas Governor Sam Brownback, including how easy it is to ignore inconvenient lessons of history.

February

Spending and taxing in Kansas. Difficulty balancing the Kansas budget is different from, and has not caused, widespread spending cuts.

In Sedgwick County, choosing your own benchmarks. The Sedgwick County Commission makes a bid for accountability with an economic development agency, but will likely fall short of anything meaningful.

This is why we must eliminate defined-benefit public pensions. Actions considered by the Kansas Legislature demonstrate — again — that governments are not capable of managing defined-benefit pension plans.

Kansas transportation bonds economics worse than told. The economic details of a semi-secret sale of bonds by the State of Kansas are worse than what’s been reported.

Massage business regulations likely to be ineffective, but will be onerous. The Wichita City Council is likely to create a new regulatory regime for massage businesses in response to a problem that is already addressed by strict laws.

Inspector General evaluates Obamacare website. The HHS Inspector General has released an evaluation of the Obamacare website HealthCare.gov, shedding light on the performance of former Kansas Governor Kathleen Sebelius.

Kansas highway spending. An op-ed by an advocate for more highway spending in Kansas needs context and correction.

Brookings Metro Monitor and Wichita. A research project by The Brookings Institution illustrates the poor performance of the Wichita-area economy.

March

Wichita: A conversation for a positive community and city agenda. Wichita City Manager Robert Layton held a discussion titled “What are Wichita’s Strengths and Weaknesses: A Conversation for a Positive Community and City Agenda” at the February 26, 2016 luncheon of the Wichita Pachyderm Club.

In Kansas, teachers unions should stand for retention. A bill requiring teachers unions to stand for retention elections each year would be good for teachers, students, and taxpayers.

In Kansas, doctors may “learn” just by doing their jobs. A proposed bill in Kansas should make us question the rationale of continuing medical education requirements for physicians.

Power of Kansas cities to take property may be expanded. A bill working its way through the Kansas Legislature will give cities additional means to seize property.

Wichita TIF district disbands; taxpayers on the hook. A real estate development in College Hill was not successful. What does this mean for city taxpayers?

Kansas and Colorado, compared. News that a Wichita-based company is moving to Colorado sparked a round of Kansas-bashing, most not based on facts.

In Wichita, the phased approach to water supply can save a bundle. In 2014 the City of Wichita recommended voters spend $250 million on a new water supply. But since voters rejected the tax to support that spending, the cost of providing adequate water has dropped, and dropped a lot.

Wichita Eagle, where are you? The state’s largest newspaper has no good reason to avoid reporting and editorializing on an important issue. But that’s what the Wichita Eagle has done.

April

Wichita on verge of new regulatory regime. The Wichita City Council is likely to create a new regulatory regime for massage businesses in response to a problem that is already addressed by strict laws.

Wichita economic development and capacity. An expansion fueled by incentives is welcome, but illustrates a larger problem with Wichita-area economic development.

Rich States, Poor States, 2106 edition. In Rich States, Poor States, Kansas continues with middle-of-the-pack performance, and fell sharply in the forward-looking forecast.

In Wichita, revealing discussion of property rights. Reaction to the veto of a bill in Kansas reveals the instincts of many government officials, which is to grab more power whenever possible.

‘Trump, Trump, Trump’ … oops! An event in Wichita that made national headlines has so far turned out to be not the story news media enthusiastically promoted.

Wichita doesn’t have this. A small Kansas city provides an example of what Wichita should do.

Kansas continues to snub school choice reform that helps the most vulnerable schoolchildren. Charter schools benefit minority and poor children, yet Kansas does not leverage their benefits, despite having a pressing need to boost the prospects of these children.

Wichita property tax rate: Up again. The City of Wichita says it hasn’t raised its property mill levy in many years. But data shows the mill levy has risen, and its use has shifted from debt service to current consumption.

AFP Foundation wins a battle for free speech for everyone. Americans for Prosperity Foundation achieves a victory for free speech and free association.

Kansas Center for Economic Growth. Kansas Center for Economic Growth, often cited as an authority by Kansas news media and politicians, is not the independent and unbiased source it claims to be.

Under Goossen, Left’s favorite expert, Kansas was admonished by Securities and Exchange Commission. The State of Kansas was ordered to take remedial action to correct material omissions in the state’s financial statements prepared under the leadership of Duane Goossen.

May

Spirit Aerosystems tax relief. Wichita’s largest employer asks to avoid paying millions in taxes, which increases the cost of government for everyone else, including young companies struggling to break through.

Wichita mayor’s counterfactual op-ed. Wichita’s mayor pens an op-ed that is counter to facts that he knows, or should know.

Electioneering in Kansas?. An op-ed written under the banner of a non-profit organization appears to violate the ban on electioneering.

Wichita city council campaign finance reform. Some citizen activists and Wichita city council members believe that a single $500 campaign contribution from a corporation has a corrupting influence. But stacking dozens of the same $500 contributions from executives and spouses of the same corporation? Not a problem.

In Wichita, more sales tax hypocrisy. Another Wichita company that paid to persuade you to vote for higher taxes now seeks to avoid paying those taxes.

Wichita student/teacher ratios. Despite years of purported budget cuts, the Wichita public school district has been able to improve its student/teacher ratios.

June

KPERS payments and Kansas schools. There is a claim that a recent change in the handling of KPERS payments falsely inflates school spending. The Kansas State Department of Education says otherwise.

Regulation in Wichita, a ‘labyrinth of city processes’. Wichita offers special regulatory treatment for special circumstances, widening the gulf between the haves and have-nots.

They really are government schools. What’s wrong with the term “government schools?”

July

Kansas City Star as critic, or apologist. An editorial in the Kansas City Star criticizes a Kansas free-market think tank.

State and local government employee and payroll. Considering all state and local government employees in proportion to population, Kansas has many, compared to other states, and especially so in education.

Kansas government ‘hollowed-out’. Considering all state and local government employees in proportion to population, Kansas has many, compared to other states, and especially so in education.

In Wichita, Meitzner, Clendenin sow seeds of distrust. Comments by two Wichita city council members give citizens more reasons to be cynical and distrusting of politicians.

David Dennis, gleeful regulatory revisionist. David Dennis, candidate for Sedgwick County Commission, rewrites his history of service on the Kansas State Board of Education.

Say no to Kansas taxpayer-funded campaigning. Kansas taxpayers should know their tax dollars are helping staff campaigns for political office.

Roger Marshall campaign setting new standards. Attacks on Tim Huelskamp reveal the worst in political campaigning.

Wichita Metro Chamber of Commerce on the campaign trail. We want to believe that The Wichita Metro Chamber of Commerce and its PAC are a force for good. Why does the PAC need to be deceptive and untruthful?

August

Which Kansas Governor made these proposals?. Cutting spending for higher education, holding K through 12 public school spending steady, sweeping highway money to the general fund, reducing aid to local governments, spending down state reserves, and a huge projected budget gap. Who and when is the following newspaper report referencing?

Wichita Business Journal editorial missed the news on the Wichita economy. A Wichita business newspaper’s editorial ignores the history of our local economy. Even the history that it reported in its own pages.

Sedgwick County Health Department: Services provided. Sedgwick County government trimmed spending on health. What has been the result so far?

School staffing and students. Trends for the nation and each state in teachers, administrators, and students, presented in an interactive visualization.

Intrust Bank Arena loss for 2015 is $4.1 million. The depreciation expense of Intrust Bank Arena in downtown Wichita recognizes and accounts for the sacrifices of the people of Sedgwick County and its visitors to pay for the arena.

School spending in the states. School spending in the states, presented in an interactive visualization.

September

Kansas construction employment. Tip to the Wichita Eagle editorial board: When a lobbying group feeds you statistics, try to learn what they really mean.

Wichita has no city sales tax, except for these. There is no Wichita city retail sales tax, but the city collects tax revenue from citizens when they buy utilities, just like a sales tax.

CID and other incentives approved in downtown Wichita. The Wichita City Council approves economic development incentives, but citizens should not be proud of the discussion and deliberation.

Cost per visitor to Wichita cultural attractions. Wichitans might be surprised to learn the cost of cultural attractions.

GetTheFactsKansas launched. From Kansas Policy Institute and the Kansas Chamber of Commerce, a new website with facts about the Kansas budget, economy, and schools.

The nation’s report card and charter schools.
* An interactive table of NAEP scores for the states and races, broken down by charter school and traditional public school.
* Some states have few or no charter schools.
* In many states, minority students perform better on the NAEP test when in charter schools.

School choice and funding. Opponents of school choice programs argue the programs harm traditional public schools, both financially and in their ability to serve their remaining students. Evidence does not support this position.

October

Public school experts. Do only those within the Kansas public schooling community have a say?

Kansas and Arizona schools. Arizona shows that Kansas is missing out on an opportunity to provide better education at lower cost.

Video in the Kansas Senate. A plan to increase visibility of the Kansas Senate is a good start, and needs to go just one or two steps farther.

Kansas, a frugal state?. Is Kansas a frugal state, compared to others?

Topeka Capital-Journal falls for a story. The editorial boards of two large Kansas newspapers have shown how little effort goes into forming the opinions they foist upon our state.

Kansas revenue estimates. Kansas revenue estimates are frequently in the news and have become a political issue. Here’s a look at them over the past decades.

Kansas school fund balances.
* Kansas school fund balances rose significantly this year, in both absolute dollars and dollars per pupil.
* Kansans might wonder why schools did not spend some of these funds to offset cuts they have contended were necessary.
* The interactive visualization holds data for each district since 2008.

In Wichita, developer welfare under a cloud. A downtown Wichita project receives a small benefit from the city, with no mention of the really big money.

Wichita, give back the Hyatt proceeds. Instead of spending the proceeds of the Hyatt hotel sale, the city should honor those who paid for the hotel — the city’s taxpayers.

Kansas Democrats: They don’t add it up — or they don’t tell us. Kansas Democrats (and some Republicans) are campaigning on some very expensive programs, and they’re aren’t adding it up for us.

November

How would higher Kansas taxes help?. Candidates in Kansas who promise more spending ought to explain just how higher taxes will — purportedly — help the Kansas economy.

Decoding the Kansas teachers union. Explaining to Kansans what the teachers union really means in its public communications.

Kansas school spending: Visualization. An interactive visualization of revenue and spending data for Kansas school districts.

Decoding Duane Goossen. The writing of Duane Goossen, a former Kansas budget director, requires decoding and explanation. This time, his vehicle is “Rise Up, Kansas.”

Decoding the Kansas teachers union. Decoding and deconstructing communications from KNEA, the Kansas teachers union, lets us discover the true purpose of the union.

Government schools’ entitlement mentality. If the Kansas personal income grows, should school spending also rise?

December

Wichita bridges, well memorialized. Drivers on East Twenty-First Street in Wichita are happy that the work on a small bridge is complete, but may not be pleased with one aspect of the project.

Gary Sherrer and Kansas Policy Institute. A former Kansas government official criticizes Kansas Policy Institute.

Wichita to grant property and sales tax relief. Several large employers in Wichita ask to avoid paying millions in taxes, which increases the cost of government for everyone else, including young companies struggling to break through.

Economic development incentives at the margin. The evaluation of economic development incentives in Wichita and Kansas requires thinking at the margin, not the entirety.

The Wichita economy, according to Milken Institute. The performance of the Wichita-area economy, compared to other large cities, is on a downward trend.

State pension cronyism. A new report details the way state pension funds harm workers and taxpayers through cronyism.

In Wichita, converting a hotel into street repairs. In Wichita, it turns out we have to sell a hotel in order to fix our streets.

In Wichita, we’ll not know how this tax money is spent. Despite claims to the contrary, the attitude of the City of Wichita towards citizens’ right to know is poor, and its attitude will likely be reaffirmed this week.

Decoding Duane Goossen

The writing of Duane Goossen, a former Kansas budget director, requires decoding and explanation. This time, his vehicle is “Rise Up, Kansas.”

Duane Goossen was Kansas budget director from 1998 to 2010.1 He is critical of the administration of Kansas Governor Sam Brownback and recent sessions of the Kansas Legislature. It’s useful to examine his writings so that Kansans may become aware of the ramifications of his recommendations, and how during his years as budget director he was unable to adhere to the principles he now advocates. Following, some language from his recent article Rise Up, Kansas.

Goossen: “This marks the beginning of a hopeful new chapter in the Kansas story. It also presents a desperately needed opening for comprehensive tax reform.”

Comprehensive tax reform. That sounds good, as “reform” has a positive connotation. It means change for the better. But in this case reform means raising taxes, and by a lot. In fact, advocates of tax increases generally won’t say by how much they want to raise taxes.

As an example, in May a coalition of spending groups called for what they termed “Option 4.” It would eliminate all tax cuts enacted since 2012. This action would reinstate the tax on pass-through business income — the so-called “LLC loophole.” But this would also raise income taxes wage income, as those tax rates also were reduced in 2012. For example, income tax rates for a married family earning up to $30,000 would rise to 3.50 percent from the current 2.70 percent. That’s an increase of 30 percent in the income tax rate. For other income levels the increase is greater.2

A spokesperson for the Option 4 coalition argued that rolling back the tax cuts could increase revenue to the state by $1 billion. By the way, the Option 4 coalition did not call for the rollback of the sales tax increase passed in 2015. I should qualify that with apparently, as no handouts explaining Option 4 can be found. In addition, an audio recording of the press conference has been removed.

Members of the Option 4 coalition included Shannon Cotsoradis of Kansas Action for Children, Bob Totten from the Kansas Contractors Association, Rebecca Proctor of the Kansas Organization of State Employees, and Mark Desetti from the Kansas National Education Association.3

With the exception of the pass-through business income tax, failing to be specific about whose taxes will be raised by how much is characteristic of spending groups. In fact, these spending groups generally shy away from using the term tax. Look at these examples of language from Goossen’s article:

  • damage to state finances
  • hemorrhage revenue
  • can’t start healing while still in triage mode
  • fix our structural revenue imbalance
  • broaden the tax base
  • means reviewing our entire tax code
  • modernizing all revenue sources
  • get our fiscal house back in order
  • begin with commonsense basics
  • new priorities
  • recover the opportunities we lost
  • senseless era of crisis
  • begin restoring those opportunities
  • rise above the political fray
  • find courage to make difficult decisions
  • imagine the possibilities

Commonsense basics. Who could be against that? Yet each of these terms is a call for more and higher taxes.

Goossen: “Three credit rating downgrades”

The Kansas credit rating has declined. In making this decision, Moody’s mentioned “revenue reductions (resulting from tax cuts) which have not been fully offset by recurring spending cuts.4 So Kansas has a decision: Offset revenue reductions with higher taxes or spending cuts. Moody’s doesn’t care which is chosen, but Goossen and the spending coalition does.

KPERS funded ratio through 2014Of note, Moody’s mentions another problem: “an underfunded retirement system for which the state is not making actuarially required contributions.” This is an ongoing problem, as the nearby chart illustrates. The funding ratio of the Kansas retirement plan has deteriorated for many years, including the years when Duane Goossen was Kansas budget director. (Recently Kansas has improved the funding ratio of KPERS, but it did that by borrowing funds, which was an unwise decision. Because of the borrowing, Kansas has delayed schedule KPERS contributions, which effectively pays for current spending with long-term debt.5)

Moody’s also mentioned “In recent years the state has appropriated funds from or shifted costs to the State Highway Fund to help balance the general fund budget.” This too, is an ongoing problem.6 “Raiding the Bank of KDOT” has been a problem for many years, including the years when Duane Goossen was Kansas budget director.

Goossen: “It will likely take a generation to fully recover from this horrible experiment.”

Spending in Kansas. Click for larger.
Spending in Kansas. Click for larger.
Goossen is not specific as to the nature of the damage. Generally, a claim of slashed state spending is made. But it’s difficult to see the purported decline. Some programs may have been cut, but overall, spending is level or climbing, as can be seen in the nearby chart.7 Additionally, in comparison to other states Kansas spends a lot, and continues to.8

Goossen: “lifting the burden the Brownback plan forced onto our lowest-earning Kansans.”

Yes, we should sharply reduce or eliminate the sales tax on groceries. It affects low-income households most severly.9

Goossen: “And it means establishing a responsible state savings account.”

Kansas General Funding ending balance. Click for larger.
Kansas General Funding ending balance. Click for larger.
Kansas doesn’t have what some states have, which is a true rainy day fund that is governed by statute as to when contributions must be made and when the fund may be used. Instead, Kansas has a simple requirement for an ending balance of 7.5 percent, which the state has regularly ignored for decades. Low ending balances are a hallmark of Kansas government, including the years when Duane Goossen was Kansas budget director. In fact, in one year his budget had a negative ending balance.10


Notes

  1. Goossen, Duane. Kansas Budget Blog. http://www.kansasbudget.com/.
  2. Kansas Policy Institute. *Option 4: Soak the poor. https://kansaspolicy.org/option-4-soak-poor/.
  3. Hancock, Peter. Session resumes with call for total repeal of Brownback tax cuts. Lawrence Journal-World, April 27, 2016. http://www2.ljworld.com/news/2016/apr/27/session-resumes-call-total-repeal-brownback-tax-cu/.
  4. Moody’s Investors Service, Inc. Moody’s downgrades Kansas issuer rating to Aa2 from Aa1, notched ratings to Aa3 from Aa2 and KDOT highway revenue bonds to Aa2 from Aa1; outlook stable. April 30, 2014. https://www.moodys.com/research/Moodys-downgrades-Kansas-issuer-rating-to-Aa2-from-Aa1-notched–PR_298383.
  5. Weeks, Bob. This is why we must eliminate defined-benefit public pensions. https://wichitaliberty.org/kansas-government/we-must-eliminate-defined-benefit-public-pensions/.
  6. Weeks, Bob. Kansas transportation bonds economics worse than told. https://wichitaliberty.org/kansas-government/kansas-transportation-bonds-economics-worse-than-told/.
  7. Weeks, Bob. Kansas government spending. https://wichitaliberty.org/kansas-government/kansas-government-spending-2/.
  8. Weeks, Bob. Spending in the states, per capita. Interactive visualization. https://wichitaliberty.org/economics/spending-states-per-capita-2/.
  9. Weeks, Bob. Kansas sales tax has disproportionate harmful effects. https://wichitaliberty.org/taxation/kansas-sales-tax-has-disproportionate-harmful-effects/.
  10. Weeks, Bob. Kansas General Fund. https://wichitaliberty.org/kansas-government/kansas-general-fund-2/.

Kansas Governor Sam Brownback on myths and reality

Kansas Governor Sam Brownback addressed a luncheon gathering at the Wichita Pachyderm Club to set the record straight on what he called myths. Recorded on October 14, 2016.

Myths

  • The Kansas tax plan is failing.
  • Kansas schools have been cut.
  • State employee pensions are severely underfunded.
  • Kansas highways are crumbling.
  • Welfare numbers are down because we are kicking people off.
  • Vulnerable Kansans aren’t being served.
  • Kansans are fleeing to Missouri.

View below, or click here to view at YouTube.

Kansas revenue estimates

Kansas revenue estimates are frequently in the news and have become a political issue. Here’s a look at them over the past decades.

A favorite criticism of liberals and progressives across the nation is that in Kansas, actual revenues to the state’s general fund have fallen short of projections, month after month. Reading most newspaper reports and editorials, one might think that these negative variances are a new phenomenon, and one relished by the Left. As many as a dozen articles on this topic have appeared in the New York Times in the past two years.

The revenue estimates in Kansas are produced by a body known as the Consensus Revenue Estimating Group. It consists of one member each from the Division of the Budget, Department of Revenue, Legislative Research Department, and one consulting economist each from the University of Kansas, Kansas State University, and Wichita State University.

As described: “This group meets each spring and fall. Before December 4th, the group makes its initial estimate for the budget year and revises the estimate for the current year. By April 20th, the fall estimate is reviewed, along with any additional data. A revised estimate is published, which the Legislature may use in adjusting expenditures, if necessary.”1

The estimates are important because the legislature and governor are required to use them when formulating budgets and spending plans. If the estimates are high, meaning that revenue is less than expected, it’s possible that the legislature or (more likely) the governor will need to make spending cuts. (The other alternative is that leftover funds from prior years may be used, if available.)

If, on the other hand, the estimates are too low, meaning that revenue is higher than expected, the state has collected too much tax revenue. In this case, the state should refund the excess to taxpayers. Some states do that, notably Colorado, although residents may vote to let the state keep the excess.

Some states have true rainy day funds, and the excess revenue might be used to build that fund’s balance. In a true rainy day fund, the fund’s balances can be spent only under specific sets of circumstances.

But in Kansas, the excess revenue is simply called the “ending balance” and is available to spend at the legislature’s whim. That’s what happened in fiscal years 2014 and 2015, when the state spent $340 million and $308 million, respectively, of the ending balance rather than cut spending.

What has been the history of the revenue estimates compared to actual revenue? First, know that making these estimates is not easy. Some of the inputs to the process include the inflation rate in future years, interest rates in future years, and the prices of oil and natural gas in the future. If someone knew these values with any certainty, they could earn huge profits by trading in futures markets.

The state makes the revenue estimates available.2 I’ve presented the results since 1975 in a chart at the end of this article. For each year, two numbers are presented. One it the difference from the Original Estimate and actual revenue. The other is the difference from the Adjusted Final Estimate and actual revenue.

We can see that in fiscal years 2014 and 2016, the variance of the estimates is negative, meaning that revenue was lower than the estimates. The magnitude of these variances, however, is not out of line with the magnitude of the variances of other years, either positive or negative.

In fact, the negative variances — revenue shortfalls, in other words — in 2002 to 2003 and 2009 to 2010 were generally much larger in magnitude than those of recent years. This is of interest as Duane Goossen, who was budget director during these periods, is a prominent critic of the recent revenue shortfalls. Evidently he has forgotten the difficulty of creating these estimates.

While Goossen along with newspaper reporters and editorialists use the negative revenue estimate variances as a political weapon against the governor and conservatives, it is in the interest of the people of Kansas that revenue estimates be as accurate as possible. In an effort to produce more accurate revenue estimates, Governor Brownback created a commission to study the issue. That group released its report in October.3

Kansas revenue estimate errors. Click for larger.
Kansas revenue estimate errors. Click for larger.


Notes

  1. Consensus Revenue Estimating Group. Available at budget.ks.gov/cre.htm.
  2. Kansas Division of the Budget. State General Fund Receipt Revisions for FY 2016 and FY 2017. May 2, 2016. Available at: budget.ks.gov/files/FY2017/CRE_Long_Memo_April2016.pdf. Also Kansas Legislative Research for 2016 figures.
  3. Governor’s Consensus Revenue Estimating Working Group. Final Recommendations. Available at budget.ks.gov/files/FY2017/cre_workgroup_report.pdf.

From Pachyderm: Radio Host Joseph Ashby

Voice for Liberty radio logo square 02 155x116From the Wichita Pachyderm Club this week: Radio Host Joseph Ashby, host of The Joseph Ashby Show. His talk focused on the administration of Kansas Governor Sam Brownback. Bob Weeks provided the introduction. This is an audio presentation recorded on August 26, 2016.

Shownotes

From Pachyderm: Martin Hawver on Kansas Politics

Voice for Liberty radio logo square 02 155x116From the Wichita Pachyderm Club this week: Martin Hawver briefed members and guests on the state of Kansas politics. Judge Phil Journey provided the introduction. Recorded August 19, 2016.

Hawver is the dean of Kansas Statehouse press corps, having covered the beat longer than any current Statehouse reporter — first for 17 years as a Statehouse reporter for the Topeka Capital-Journal and since 1993 for Hawver’s Capitol Report, for which he is the primary reporter/writer. He also writes a column syndicated to Kansas newspapers, is interviewed about Kansas government and politics on TV and radio shows, and is a speaker for seminars and conventions.

Hawver’s Capitol Report is owned by Martin and his wife Vickie Griffith Hawver, who met and married while both worked at the Topeka Capital-Journal newspaper. Their website is havernews.com.

WichitaLiberty.TV: A variety of topics, with some good news, but a lot of bad news

In this episode of WichitaLiberty.TV: Wichita’s economic development, Sedgwick County spending, editorials ignoring facts, your house numbers, Kansas governors, taxpayer-funded political campaigns, and the nature of economic competition. View below, or click here to view at YouTube. Episode 127, broadcast August 21, 2016.

Which Kansas Governor made these proposals?

Cutting spending for higher education, holding K through 12 public school spending steady, sweeping highway money to the general fund, reducing aid to local governments, spending down state reserves, and a huge projected budget gap. Who and when is the following newspaper report referencing?

Under _____ budget for fiscal _____, public schools would continue to receive $3,863 per student in state aid, and higher education would lose only $5 million in general tax dollars, mostly in the central Board of Regents office.

But _____ would take $165 million from highway projects and eliminate $86 million in aid to local governments — on top of the $95 million _____ withheld from highway projects and $48 million _____ kept from cities and counties.

_____ also made a campaign promise to build all projects promised under the state’s 10-year, $13.5 billion transportation program. _____ proposals didn’t say how the Department of Transportation would deal with the loss of funds.

_____ budget also would allow the Kansas Highway Patrol to hire 70 new troopers, give state employees a 1.5 percent pay raise, and prevent the closings of four minimum-security prison units and two inmate boot camps.

Under _____ proposals, total spending in fiscal _____ would decrease about $31 million, or 0.4 percent.

But that figure didn’t convey the seriousness of the state’s budget problems, which some officials have said are the worst since the Great Depression. The gap between expected general tax revenues and spending commitments during the next 18 months is more than $1 billion.

_____ also proposed to help eliminate the gap by spending some $313 million — all but $500,000 — that otherwise would be set aside as emergency cash reserves.

This is coverage from John Hanna of the State of the State Address from Governor Kathleen Sebelius in 2003, where she revealed plans for the fiscal 2004 budget. (Except the blank in “on top of the $95 million _____ withheld from highway projects” refers to her predecessor Bill Graves.) The original article is here.

WichitaLiberty.TV: The State of Kansas

In this episode of WichitaLiberty.TV: Jonathan Williams helps us understand what’s right — and wrong — with Kansas. Williams is Vice President for the Center for State Fiscal Reform at the American Legislative Exchange Council (ALEC). View below, or click here to view at YouTube.

Shownotes

  • American Legislative Exchange Council (ALEC)
  • Rich States, Poor States, ninth edition. This volume holds the most recent state-by-state rankings.
  • Rich States, Poor States, eighth edition. This volume holds Chapter 4, titled “Lessons from Kansas: A Behind the Scenes Look at America’s Most Discussed Tax Reform Effort.”

HB 2615 is a Bi-Partisan Healthcare Solution that Governor Sam Brownback should Support

By Andrew Brown, Foundation for Government Accountability

This site recently published an extensive critique of HB 2615, a bill that would protect doctors and health care professionals providing free charity care and reward them with a minor licensing incentive, and the author encouraged Gov. Brownback to veto the bill. Mr. Weeks has graciously allowed me, as a supporter who worked on behalf of HB 2615, to issue a response to his article. I truly appreciate the opportunity to present another side.

I agree that we do need to reconsider and reform occupational licensure across the board and we absolutely should expect medical professionals to stay current in their field. And while Continuing Medical Education credits are one way, they aren’t the only way to achieve that goal. In fact, Kansas already allows doctors to receive CME credits for a range of non-educational activities.

What’s more important though is the stifling effects abusive medical malpractice lawsuits which often benefit lawyers more than patients can have on the amount of free care doctors and health care professionals are willing to give. This means doctors and others offer less charity than they otherwise would while our low-income neighbors struggle to get access to the health care services they need. HB 2615 seeks to change this by reducing government barriers and freeing medical professionals to provide high-quality care to those who need it most.

HB 2615 doesn’t increase regulations on medical professionals, but eases the burden of existing continuing education regulations and rewards them for giving their time and talents to voluntarily serve those who can’t afford care. It also extends liability protections provided by the Kansas Tort Claims Act to medical professionals who choose to volunteer serving those in need so that the fear of a frivolous lawsuit doesn’t stand in the way of doing good.

Although Kansas currently requires physicians to participate in 50 hours of continuing medical education annually (which they often pay for out of their own pockets), the law divides continuing education hours into two categories.

Category I hours are the kind we typically think of when it comes to continuing education — the structured, academic lectures or workshops where physicians get up to speed on the latest medical research and techniques. 1 Every Kansas physician is required to earn 20 hours of Category I credit each year. 2 This doesn’t change with HB 2615.

The remaining 30 hours, then, may be earned from Category II, which is considerably more flexible. 3 A physician can earn Category II hours in a number of ways like “participating in journal clubs,” having “patient-centered discussions with other health care practitioners,” and (my personal favorite) “using searchable electronic databases in connection with patient care activities.” 4 The hours that physicians would earn for charitable care provided under HB 2615 fall under Category II, meaning that they will still have to earn the same 20 hours of critical Category I hours in order to maintain licensure. If we allow physicians to earn Category II credits for writing journal articles or Googling a patient’s symptoms, why shouldn’t we reward them with a few Category II hours for voluntarily providing a child with an inhaler to provide relief from his asthma symptoms, or treating a mother’s high blood pressure?

HB 2615 is a proven bi-partisan solution that works to provide care to our friends and neighbors in need by reducing regulatory barriers and unleashing the power of charity to immediately improve access to quality medical care. In 1993, the state of Florida instituted the nation’s first volunteer health services program, which served as the model for HB 2615. Since that time, volunteers in the Sunshine State have provided more than $2.8 BILLION in care to those in need. Each year, nearly 500,000 free patient visits are provided by the state’s top medical professionals valued at more than $300 million. 5 All this happened not through a government program, but because the government recognized that the local community was better equipped to handle a problem, so it got out of the way.

While the data is impressive, HB 2615 is about changing lives. Recently, I had the privilege of speaking with a doctor in Orlando who has dedicated her career to providing volunteer medical services. She told me a powerful story of a truck driver who lost his job because of severe diabetes. Since he was unable to work, he did not have insurance to get the care he needed to get his diabetes under control. Fortunately, he lived in the community where this doctor worked and he was able to get the treatment and care he needed. Eventually, his health improved, which allowed him to go back to work. Thanks to the efforts of this doctor and the volunteer health services program, this man is now working, providing for his family, and has health insurance coverage so that he can stay healthy and working. HB 2615 would bring more stories like this to Kansas.

If Governor Brownback wants to chalk up another win for individual liberty, signing HB 2615 is the best way to do it. This action would send a message that Kansas not only trusts its medical professionals to care for the needs of medically indigent citizens, but that they are better able to provide this care than any government program or insurance company could ever dream.

Andrew Brown is an attorney and Senior Fellow with the Foundation for Government Accountability.


Notes

  1. K.A.R. 100-15- 4(b)
  2. K.A.R. 100-15- 5(a)(1)(A)
  3. Id.
  4. K.A.R. 100-15- 4(c)
  5. Patrick Ishmael and Jonathan Ingram, “Volunteer Care: Affordable Health care without Growing Government,” The Foundation for Government Accountability, Oct. 27, 2015, available at thefga.org/download/Volunteer-Care-Research-Paper.pdf.

Another bill Kansas Governor Sam Brownback should veto

Kansas Governor Sam Brownback has another opportunity to promote and protect individual liberty by blocking expansion of an ever-growing regulatory state.

It took a bit of legislative wrangling, but on Sunday May 1 HB 2615 passed the Kansas Senate by a vote of 40 to zero, and the Kansas House of Representatives by 115 to seven. In its final form, the bill allows physicians and dentists to satisfy a portion of their continuing education requirements by providing charity care to medically indigent persons.1

This bill provides an opportunity to examine and reconsider the purpose of occupational licensure. Most fundamentally: In the case of physicians and dentists, we trust them with our health, our very lives. Can’t we trust them to do whatever they believe is necessary to stay up-to-date in their field without the government requiring a specific number of hours of continuing education? By the way, how does the state of Kansas know how many hours of continuing education are necessary to stay current? Is it the same in all branches of medicine and dentistry? That’s what the Kansas regulations imply.

In Kansas, physicians must participate in 50 hours of continuing medical education annually. This education requirement is satisfied by participating in “activity designed to maintain, develop, or increase the knowledge, skills, and professional performance of persons licensed to practice a branch of the healing arts.”2

But HB 2615 will let physicians satisfy 20 hours of this requirement by providing 40 hours of health care to needy people. Having doctors perform routine medical care — doing their daily job, in other words — doesn’t seem likely to advance the “knowledge, skills, and professional performance” of doctors, which is the stated goal of the regulation.

We have, therefore, a regulation that has a plausibly reasonable purpose — ensuring that physicians and dentists are up-to-date in professional knowledge — instead being used by the state to “encourage” them to provide free labor.

Charity is good. It’s wonderful. It’s why I regularly engage in charitable activity. But it isn’t charity when government is forcing you to do something. I have a feeling that many healthcare professionals already provide much charitable care. But now Kansas wants them to enter into an agreement with the Secretary of Health and Environment to provide gratuitous services if they want credit for performing care as a way to avoid continuing education requirements. Again: If continuing medical education is necessary, why let it be avoided by providing charity care? By allowing the performance of routine medical care to substitute for continuing education, isn’t the state creating a risk to physicians’ regular patients?

Governor Brownback has shown by his veto of SB 338 this year that he has the capacity to appreciate individual rights. In 2012 his veto of SB 353 shows he has an appreciation of the harm of burdensome regulation.

Now, Governor Brownback has another opportunity to promote individual liberty and block the expansion of an ever-growing regulatory state.


Notes

  1. “The bill would allow charitable healthcare providers and dentists to fulfill one hour of continuing education credit for performance of two hours of gratuitous service to medically indigent persons if the provider signs an agreement with the Secretary of Health and Environment (Secretary) to provide gratuitous services. Healthcare providers would be allowed to fulfill a maximum of 20 continuing educational credits through gratuitous service per licensure period, and dentists would be allowed to fulfill a maximum of 6 continuing educational credits through gratuitous service per licensure period.” Kansas Legislature. HB 2615, Fourth conference committee report brief, May 1, 2016. Available at www.kslegislature.org/li/b2015_16/measures/documents/ccrb_hb2615_03_may1.pdf.
  2. Kansas State Board of Healing Arts. K.A.R. 100-15. (2016). Ksbha.org. Available at http://www.ksbha.org/regulations/article15.shtml#kar100154.

In Wichita, revealing discussion of property rights

Reaction to the veto of a bill in Kansas reveals the instincts of many government officials, which is to grab more power whenever possible.

When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that justifies it.
— Frederic Bastiat

Kansas Governor Sam Brownback’s veto of a bill that gives cities additional means to take blighted property has produced reaction from local officials in Wichita. The bill is Senate Bill 338.

As has been noted in numerous sources, cities in Kansas have many tools available to address blight. 1 What is the purported need for additional power?

In remarks from the bench, Wichita City Council Member Pete Meitzner (district 2, east Wichita) said there is no intent to be “aggressive in taking people’s property.” 2 But expanding the power of government — aggression, in other words — is what the bill does. Otherwise, why the need for the bill with its new methods and powers of taking property?

And once government is granted new powers, government nearly always finds ways to expand the power and put it to new uses. Even if we believe Meitzner — and we should not — he will not always be in office. Others will follow him who may not claim to be so wise and restrained in the use of government power.

In particular, government finds new ways to expand its powers through enabling concepts like blight. Did you know the entire suburban town of Andover is blighted? 3 Across the country, when governments find they can take property with novel and creative interpretations of blight, they do so. 4

It’s easy to sense the frustration of government officials like Wichita Mayor Jeff Longwell. In his remarks, he asked opponents of SB 338 “what they would do” when confronted with blight. That is a weak argument, but is often advanced nonetheless. Everyone has the right — the duty — to oppose bad legislation even if they do not have an alternate solution. Just because someone doesn’t have a solution, that doesn’t mean their criticism is not valid. This is especially true in this matter, as cities already have many tools to deal with blight.

Proponents of SB 338 also make unfounded accusations about the motivation of opponents of the law. Because someone opposes this law, it doesn’t mean they are in favor of more blight. Those who fight for freedom and liberty are used to this. Advocating for the right to do something doesn’t necessarily mean that one is in favor of actually doing it.

The nature of rights

Much of the discussion this issue concerns the rights of people who live near blighted property. People do have certain rights, but rights have limits. Regarding property, Roger Pilon writes: “Thus, uses that injure a neighbor through various forms of pollution (e.g., by particulate matter, noises, odors, vibrations, etc.) or through exposure to excessive risk count as classic common-law nuisances because they violate the neighbor’s rights. They can be prohibited, with no compensation owing to those who are thus restricted.” 5

Note that Pilon mentions “excessive risk” as something that injures a neighbor. Some of the activities the city wants to control are things like drug dealing, drug usage, and prostitution that may take place on blighted property. And, I suppose it is a risk to have gangs dealing drugs out of the house across the street, blighted or not. But these activities are illegal everywhere, and there are many laws the city can use to control these problems. There is no need for new laws.

It is important to draw a bright line as to where property rights end. Pilon: “By contrast, uses that ‘injure’ one’s neighbor through economic competition, say, or by blocking ‘his’ view (which runs over your property) or offending his aesthetic sensibilities are not nuisances because they violate no rights the neighbor can claim. Nor will it do to simply declare, through positive law, that such goods are ‘rights.'” 6

In today’s world, however, where new rights are seemingly created from thin air, people want to exercise their purported right to control how their neighbor’s property looks. But we have no such right, writes Pilon: “The principle, in fact, is just this: People may use their property in any way they wish, provided only that in the process they do not take what belongs free and clear to others. My neighbor’s view that runs over my property does not belong free and clear to him.” 7

Opposition in the Legislature

When the Kansas House of Representatives and Senate voted on this bill, several House members submitted explanations of their vote. In the Senate, David Haley filed a protest and message explaining his opposition to the bill. These statements follow.

Explanation of vote in the House of Representatives

MR. SPEAKER: I VOTE NO ON SB 338. KANSAS ALREADY HAS SUFFICIENT TOOLS IN PLACE TO ADDRESS BLIGHT. SB 338 circumvents our current eminent domain statutes by redefining “abandoned property” and by allowing our local governments to expeditiously confiscate, seize or destroy law abiding citizens’ private property without compensation, adequate notice, and a legal property title. This is an egregious overreach that deprives some citizens of their private property rights without sufficient due process and it will cause irreparable harm to our most vulnerable citizens that do not have the resources to protect their property.
— GAIL FINNEY, BRODERICK HENDERSON, RODERICK HOUSTON, BEN SCOTT, VALDENIA WINN, JOHN CARMICHAEL, KASHA KELLEY, BILL SUTTON, JERRY LUNN, CHARLES MACHEERS

Protest of Senator David Haley against Senate Bill 338

February 23, 2016

In Accordance with Article 2, Section 10 of the Constitution of Kansas, I, David Haley, a duly elected Senator representing the Fourth District of Kansas, herein PROTEST the action of this Legislature in the promulgation and passage of Senate Bill 338: An Act pertaining to Cities.

In my 23 years as a Kansas Legislator and as but one of only three attorneys in the Senate, this is the first PROTEST I have ever lodged on any measure of the thousands I have considered.

This Chamber now further denigrates real property rights to which every Kansan should be heir.

SB 338 which purports to grant authority to cities and nonprofit organizations to petition courts to possess vacant property for rehabilitation purposes will, simply, but legalize grand theft.

The Senate Commerce committee as is its charge (and not the Senate Local Government committee where, justifiably, similar language as SB 338 had over many years failed time and time again) recognizes and advances business and financial opportunities for our State.

First, the question of a city, redefining definitions of “abandonment” and “blight” as these terms apply to real property, land and or improvements, is the expertise of deliberations of a committee membership dedicated to the auspices of municipalities not the principles of profit.

The principles of real property ownership should always inure to the rights of the citizen not to a developer’s bottom line or even a desire to enhance appraised valuations for tax purposes.

Diabolical in its spawning, methodical and tenacious in its steady lurch forward, SB 338 adheres to two tiered definitions of “abandoned property;” both ingenuous and neither accurate. One definition of “abandoned property”: vacant for 365 days and having a “blighting influence” on surrounding properties; the other definition vacant for 90 days and 2 years tax delinquent.

There are numerous every day scenarios whereby a real property owner has in no way “abandoned” their property though that same property may be vacant for 90 to 365 days, be tax delinquent for 2 years or may have need of rehabilitation to conform to a local standard, real or perceived. But SB 338 alleges “abandonment” and triggers governmental intrusion, harassment and potentially leads to a taking of real property by the government for the benefit of an organization which profits from the taking and kick back higher taxes to the city.

“Commerce,” yes, but a shameful way to run a citizen responsive “Local Government.”

The specious argument in favor of this legislation portends neighborhood beautification, tax viability and repopulation of or demolition and rebuilding of older houses. By eradicating “blight,” the entire community, even the city, is greatly enhanced.

With that premise, I, David Haley, could not agree more.

Today, with no need for warping and putting into statute time-honored definitions of “blight” and “abandonment” or presupposes new postulates for passages of time periods to correlate to real property owners’ interests or genuine concern with their legally owned land(s), there are tools already available to every municipality to address blight. “Code enforcement” departments can post notice and bring to environmental and district court negligent property owners. Subsequent to insufficient response, steep fines and even jail time can be issued now. Today in current statute, a property with two or more years of delinquent property taxes may be sold by the Sheriff of each Kansas County in a “Delinquent Property Tax Sale” also known as a “Sheriff’s” sale or as property “sold on the Courthouse steps.” Again, these are current tools available to curb or cure blight and to put real property into fiscally responsive ownership.

The property rights of legal property owners should not be infringed upon by this Legislature.

Marginal or fragile property owners (traditionally average income or poor property owners attempting to hold on to inherited property or an entrepreneurial hope structure as often found in inner cities) will be set upon by keen-eyed, out of county based developers sheltered by an industrious “not-for-profit” which uses the city and district court as the leverage to harass and ultimately take the land, all in the name of “civic pride” or “community betterment.” Theft.

The late Kansas City, Missouri civil rights leader Bernard Powell (1947-1979) envisioned and warned of the transfer of inner city property back into the same hands of those who fled the same a half century or more ago to the sanctity of the suburbs. Bernard Powell predicted the day would come when government, and the tools they elect and hire, will work hand-in-hand with “robber barons” to turn those out; those who have despaired in neglected, under represented, often high crime, poorly educated neighborhoods, those who have weathered poverty, hard times, civic and civil harassment but yet held a real property interest, a “piece of the pie” … to force them out. Bernard Powell spoke of prosperity returning to the inner city and nothing being tendered to the people who had paid the price for the most sought after of land.

He called it government assisting the turning of the “ghetto into a goldmine.” How prophetic.

Here I sit, practically alone in my opposition to this expansion of eminent domain targeted at poorer property owners ill equipped to “fight City Hall,” in this Kansas Senate and watch this unfold. Again, SB 338 came out of the Commerce committee as well it should.

Government has redefined terms before to shape shift often dastardly need to justify ill deeds.

I remember efforts to redefine “blight” for economic purposes in another eminent domain taking for use in building the Kansas Speedway and Legends in Wyandotte County. Succinctly, the new definition of “blight” was the ability for exponentially more taxes to be levied against the future use of the land than that which the owner who it was being taken from could be expected to pay in its current use. Remnants of that economically fascist philosophy resonate in SB 338. As more people flee the “golden ghettos” of suburbia, the inner city “ghettos” will be repopulated and turned into “goldmines” at the expense I fear, once again, of the poor and unsuspecting. Ironically, we celebrated and honored some of our Korean and Vietnam War heroes today in the Senate Chamber. Was the freedom to own real property without fear of unwarranted government intrusion something for which they fought?

I protest the passage of Senate Bill 338 as is my Constitutional right as a Kansas State Senator under Article Two, Section 10 of the Kansas Constitution for reasons, beliefs afore-listed as well as others not so and hereby vow to continue to assist unnecessarily embattled real property owners in my home District as we together will face the challenges that this bill, when signed into law, will undoubtedly bring.


Notes

  1. Todd, John. Power of Kansas cities to take property may be expanded. Voice For Liberty in Wichita. Available at wichitaliberty.org/kansas-government/power-kansas-cities-take-property-may-expanded/.
  2. Video. Wichita City Council speaks on blight. Available at wichitaliberty.org/wichita-government/wichita-city-council-speaks-blight/.
  3. Weeks, B. (2012). Andover, a Kansas city overtaken by blight. Voice For Liberty in Wichita. Available at wichitaliberty.org/economics/andover-a-kansas-city-overtaken-by-blight/.
  4. Nicole Gelinas, Eminent Domain as Central Planning. (2015). City Journal. Available at www.city-journal.org/html/eminent-domain-central-planning-13253.html.
  5. Pilon, Roger. Protecting Private Property Rights from Regulatory Takings. (1995). Cato Institute. Available at www.cato.org/publications/congressional-testimony/protecting-private-property-rights-regulatory-takings.
  6. ibid
  7. ibid

Wichita City Council speaks on blight

Wichita City Council members speak in opposition to Kansas Governor Sam Brownback’s veto of Senate Bill 338, which would have given cities additional power to take property. April 12, 2016. View below, or click here to view at YouTube. For more on this issue, see Governor Brownback, please veto this harmful bill.

Governor Brownback steps up for property rights

Today Kansas Governor Sam Brownback vetoed Senate Bill 338. As explained by John Todd, this bill unnecessarily and dangerously increased the power of cities over private property rights. Thank you to the governor for understanding the harm of this bill and acting appropriately. Most of all, thank you to John Todd for recognizing the bill’s danger, for his committee testimony, and for his tireless work in helping inform the governor and his staff about this bill.

Following, the governor’s veto message:

The right to private property serves as a central pillar of the American constitutional tradition. It has long been considered essential to our basic understanding of civil and political rights. Property rights serve as a foundation to our most basic personal liberties. One of government’s primary purposes is to protect the property rights of individuals.

The purpose of Senate Bill 338, to help create safer communities, is laudable. However, in this noble attempt, the statute as written takes a step too far. The broad definition of blighted or abandoned property would grant a nearly unrestrained power to municipalities to craft zoning laws and codes that could unjustly deprive citizens of their property rights. The process of granting private organizations the ability to petition the courts for temporary and then permanent ownership of the property of another is rife with potential problems.

Throughout the country, we have seen serious abuse where government has broadened the scope of eminent domain, especially when private development is involved. The use of eminent domain for private economic development should be limited in use, not expanded. Senate Bill 338 opens the door for serious abuse in Kansas. Governmental authority to take property from one private citizen and give it to another private citizen should be limited, but this bill would have the effect of expanding such authority without adequate safeguards.

Kansans from across the political spectrum contacted me to discuss their concerns that this bill will disparately impact low income and minority neighborhoods. The potential for abuse of this new statutory process cannot be ignored. Government should protect property rights and ensure that the less advantaged are not denied the liberty to which every citizen is entitled.

There is a need to address the ability of municipalities and local communities to effectively maintain neighborhoods for public safety. However, Senate Bill 338 does much more. Though I am vetoing this bill, I would welcome legislation that empowers local communities to respond to blight and abandoned property that does not open the door to abuse of the fundamental rights of free people.

Kansas Supreme Court judicial selection

Kansas progressives and Democrats oppose a judicial selection system that is used by U.S. Presidents, both Democrats and Republicans.

What is the substantive difference between these two systems?

A) A state’s chief executive appoints a person to be a judge on the state’s highest court. Then the state’s senate confirms or rejects.

B) A nation’s chief executive appoints a person to be a judge on the nation’s highest court. Then the nation’s senate confirms or rejects.

Perhaps there is a difference that I’m not smart enough to see. I’m open to persuasion. Until then, I agree with KU Law Professor Stephen Ware and his 2007 analysis of the way Kansas selects Supreme Court judges as compared to the other states.1 That analysis concludes that “Kansas is the only state in the union that gives the members of its bar majority control over the selection of state supreme court justices.”

Ware has made other powerful arguments in favor of discarding the system Kansas uses: “In supreme court selection, the bar has more power in Kansas than in any other state. This extraordinary bar power gives Kansas the most elitist and least democratic supreme court selection system in the country. While members of the Kansas bar make several arguments in defense of the extraordinary powers they exercise under this system, these arguments rest on a one-sided view of the role of a judge.”2

Judges, Ware says, make law, and that is a political matter: “Non-lawyers who do not know that judges inevitably make law may believe that the role of a judge consists only of its professional/technical side and, therefore, believe that judges should be selected entirely on their professional competence and ethics and that assessments of these factors are best left to lawyers. In short, a lawyer who omits lawmaking from a published statement about the judicial role is furthering a misimpression that helps empower lawyers at the expense of non-lawyers, in violation of basic democratic equality, the principle of one-person, one-vote.”3

Kansas exhibits a pattern of selecting governors from alternate political parties.
Kansas exhibits a pattern of selecting governors from alternate political parties.
For Kansas progressives and Democrats to oppose Kansas adopting the same system that has enabled Barack Obama to appoint two liberal justices to the U.S. Supreme Court, with perhaps more to come — don’t they realize that Kansas will (likely) have a Democratic governor someday? As Clay Barker noted, for the last 50 years, no Kansas governor has been followed by a successor of the same party (except for Mark Parkinson filling the remainder of a term after Kathleen Sebelius resigned). If that pattern holds — and there’s no guarantee that it will — the next Kansas governor will be a Democrat, just three years from now.

Superficially, it doesn’t seem to make sense for Kansas Democrats to oppose the governor making judicial selections while supporting the President of the United States having the same power. It does make sense, however, when we realize that Kansas Democrats are comfortable with the state’s bar selecting the judicial nominees that the governor may consider. (Which gives truly useful and enjoyable bars a bad name.) Lawyers, especially lawyers that take an active role in politics, tend to be Democrats, and progressive Democrats at that. If the Kansas bar was dominated by constitutional conservatives, would Kansas Democrats feel the same?

I’m not claiming that the motives of conservative Kansas Republicans are pure. Will they change their stance on the desirability of the governor appointing Supreme Court judges if there is a Democratic governor? I don’t know, but I have a suspicion.

Defenders of the current Kansas system claim that the system is based on merit, not politics. To which we must note that this year the Kansas Supreme Court was reversed by the United States Supreme Court. It wasn’t even close, with justices voting eight to zero that the Kansas court was wrong in its application of the law. (The other Supreme Court justice said “I do not believe these cases should ever have been reviewed by the Supreme Court.)

  1. Ware, Stephen J., Selection to the Kansas Supreme Court. Fed-soc.org. Available at: http://www.fed-soc.org/publications/detail/selection-to-the-kansas-supreme-court.
  2. Ware, Stephen J., The Bar’s Extraordinarily Powerful Role in Selecting the Kansas Supreme Court (September 25, 2009). Kansas Journal of Law & Pubic Policy, Vol. 18, No. 3, p. 392, 2009. Available at SSRN: http://ssrn.com/abstract=1478660.
  3. Ware, Stephen J., Originalism, Balanced Legal Realism and Judicial Selection: A Case Study (August 3, 2012). Available at SSRN: http://ssrn.com/abstract=2129265.

Steve Rose and Jim Denning on the Kansas economy

Kansas City Star editorialist Steve Rose visits with Kansas State Senator Jim Denning.

It’s helpful for Kansans to have commentary and factual injection accompany a Steve Rose editorial in the Kansas City Star. In this case let’s look at a column based on his interview with Kansas State Senator Jim Denning.

Steve Rose: “The numbers can be sliced and diced to make a positive or negative picture, but it is undeniable that Kansas government itself is virtually bankrupt, and Brownback’s tax policies are responsible.”

A government can balance a budget by taxing more or spending less. We see the clear preference of Rose here: There is not enough taxation. We now have an efficiency study that shows some ways to save money. The question is why didn’t the legislature commission this study in 2012, the year in which it cut taxes?

“[State Sen. Jim Denning of Overland Park] Denning said: ‘The governor rolled the dice on the most aggressive tax cut policy in history, and things just did not turn out the way he expected.'”

It’s a shame to see Republicans — or anyone, for that matter — referring to tax cuts as “rolling the dice.” Cutting taxes simply means that people are allowed to keep more of what is rightfully theirs in the first place — which is a good thing. There is legitimate concern that the 2012 tax cuts were distributed in an unfair or unwise way. The way to fix that is to cut taxes for those who didn’t receive the purportedly unfair cuts.

Unemployment with and without stimulus through 2014-01As far as the results of the tax cuts, the governor should not have bragged as he did. The ability of government to manage the economy is limited, especially at the state level. Consider the Obama stimulus. The nation’s unemployment rate was always above the rate the administration predicted if there were no stimulus. See Brownback and Obama stimulus plans.

Kansas Spending, Per Capita, Adjusted for CPI 2016-01Further, what is the role of taxation in Kansas? Is it taxation or government spending that is purportedly good for the Kansas economy? Is it to support spending? If so, the tax cuts have not have an effect on spending. While some programs have been trimmed, overall state spending continues on a largely upward trend (for all funds spending) or remains mostly flat (for general fund spending). See Spending and taxing in Kansas.

Denning: “If we would have closed the [LLC] loophole, we would have brought in an additional $200 million, and the governor would have been a hero.”

Kansas General Fund spending, showing large deficits of revenue compared to spending in 2014 and 2015.
Kansas General Fund spending, showing large deficits of revenue compared to spending in 2014 and 2015.
The LLC loophole Denning refers to is the zero income tax on pass-through business income. Eliminating it and recapturing the $200 million would not have balanced the Kansas budget. In fiscal years 2014 and 2015 the state spent $340 million and $308 million more than it took in as revenue. Spending restraint is necessary.

Denning: “The Legislature has controlled spending to the lowest levels on record. … Our constituents wanted us to reduce spending, and we did.”

It’s hard to justify Denning’s claim with facts. See again Spending and taxing in Kansas.

WichitaLiberty.TV: Jonathan Williams of American Legislative Exchange Council

In this episode of WichitaLiberty.TV: Jonathan Williams of American Legislative Exchange Council (ALEC) explains the goals of ALEC, changes to Kansas tax policy and the results, and the effects of state taxes on charitable giving. View below, or click here to view in high definition at YouTube. Episode 100, broadcast November 8, 2015.

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