Voice For Liberty

Tag: Kansas Policy Institute

  • Kansas must improve its budgeting process

    This year Kansas made a leap forward in reducing income tax rates. The next step for Kansas is to reduce its spending, both to match the reduced revenue that is forecast, but also to improve the efficiency of Kansas government and leave more money in the hands of the private sector. Specifically, Kansas needs to improve its budgeting process and streamline state government.

    In Kansas, like in many states, the budgeting process starts with the previous year’s spending. That is then adjusted for factors like inflation, caseloads, and policy changes that necessitate more (or rarely, less) spending. The result is that debates are waged over the increment in spending. Rarely is the base looked at to see if the spending is efficient, effective, or needed.

    There are several approaches Kansas could take to improve on this process. One is zero-based budgeting. In this approach, an agency’s budget set to zero. Then, every spending proposal must have a rational or justification for it to be added to the budget.

    Zero-based budgeting can be successful, but, according to the recent paper Zero-base Budgeting in the States from National Conference of State Legislatures, it requires a large commitment from the parties involved. It also can take a lot of time and resources. Kansas could start the process with just a few agencies, and each agency could go through the process periodically, say once every five or six years. Some states have abandoned the zero-based budgeting process.

    In its State Budget Reform Toolkit, American Legislative Exchange Council advocates a system called priority-based budgeting. This process starts with deciding on the core functions of state government. That, of course, can be a battle, as people have different ideas on what government should be doing.

    ALEC reports that “In 2003, Washington state actually implemented priority based budgeting to close a budget deficit of $2.4 billion without raising taxes.”

    The spending cuts Kansas needs to balance the budget are not large. Kansas Policy Institute has calculated that a one-time cut of 6.5 percent next year would be sufficient to bring the budget to balance.

    The problem that Kansas will face in reducing state spending and streamlining its government is that there are those who are opposed. Streamlining often means eliminating programs that aren’t needed, aren’t performing as expected, or are very costly. These programs, however, all have constituencies that benefit from them — the concept of concentrated benefits and dispersed costs that public choice economics has taught us. These constituencies will be sure to let everyone know how harmful it will be to them if a program is scaled back or ended.

    Streamlining also means that there may be fewer state employees. Some will say that the loss of state employees means a loss for the economy, as the state workers will no longer be receiving a paycheck and spending it. This reasoning, however, ignores the source of state workers’ pay: the taxpayers of Kansas. With fewer state employees, taxpayers will have more money to spend or invest. The problem is that it is easier to focus on the employees that may lose their jobs, as they are highly visible and they have vocal advocacy groups to watch out for them. This is an example of the seen and unseen, as explained by Henry Hazlitt.

  • Palmer, activist for capitalism, to speak in Wichita

    I’d like to call your attention to, and invite you to attend, a lecture next week in Wichita. The speaker is Tom G. Palmer, and he will be speaking on topics from his recent book The Morality of Capitalism.

    I met Tom last year when I spent my summer vacation attending Cato University, which Tom is director of. He is a fascinating speaker. His background includes feats such as smuggling books, photocopiers, and faxes into the Soviet Union. Currently he is Vice President for International Programs at the Atlas Economic Research Foundation, General Director of the Atlas Global Initiative for Free Trade, Peace, and Prosperity, a Senior Fellow at the Cato Institute, and Director of Cato University. He travels across the world speaking on political science, public choice, civil society, and the moral, legal, and historical foundations of individual rights. His appearance in Wichita is presented by the Kansas Policy Institute.

    The Wichita event is on Wednesday May 16th, at the Hyatt Regency Hotel. A reception begins at 5:30 pm, with the presentation at 6:30 pm. He’s also appearing in Overland Park the day before.

    RSVP is requested by e-mailing James Franko at james.franko@kansaspolicy.org or by calling 316-634-0218. Or, click here to RSVP online.

    For more information and to register for these events see The Morality of Capitalism.

  • Despite superintendents’ claim, Kansas schools have low standards

    In the Wichita Eagle a number of school district superintendents made a plea for increased funding in Kansas schools, referring to “multiple funding cuts.” (Reverse funding cuts, May 3, 2012)

    As an aside, I wonder if these superintendents know that Deputy Commissioner of Education Dale Dennis has said that this school year is likely to be a record-setting year for Kansas school spending, when considering all sources of funding.

    But what Kansans ought to take notice of is the superintendents’ claim in this sentence: “Historically, our state has had high-performing schools, which make Kansas a great place to live, raise a family and run a business.”

    The truth is that when compared to other states, Kansas has low standards.

    The U.S. Department of Education’s National Center for Education Statistics (NCES) has analyzed state standards, and we can see that Kansas has standards that are below most states. The table of figures is available at Estimated NAEP scale equivalent scores for state proficiency standards, for reading and mathematics in 2009, by grade and state. An analysis of these tables by the Kansas Policy Institute shows that few states have standards below the Kansas standards.

    This table is from KPI’s report earlier this year titled Removing Barriers to Better Public Education: Analyzing the facts about student achievement and school spending.

    The conclusion by NCES is “… most states’ proficiency standards are at or below NAEP’s definition of Basic performance.” KPI, based on simple analysis of the NCES data, concluded: “Kansas is one of those states, with its Reading Proficiency standard set lower than what the U.S. Department of Education considers Basic performance. Math Proficiency levels are above what NAEP considers to be Basic but still well below the U.S. standard for Proficient.”

    The superintendents write: “We recognize that improvement is still possible.” One improvement is for Kansas to upgrade its standards to at least the average of other states. In this way, Kansans will be better informed about the true performance of their schools. Let’s also ask that school district superintendents be truthful about spending and student achievement.

  • Kansans uninformed on school spending

    As the Kansas Legislature debates spending on schools, we have to hope that legislators are more knowledgeable about school spending than the average Kansan. Surveys have found that few Kansans have accurate information regarding school spending. Surprisingly, those with children in the public school system are even more likely to be uninformed regarding accurate figures. But when presented with accurate information about changes in school spending, few Kansans are willing to pay increased taxes to support more school spending.

    These are some of the findings of a 2010 survey commissioned by Kansas Policy Institute.

    Not only did Kansans underestimate school spending levels, they did so for the state portion of school funding, and again for the total of all funding sources — state, federal, and local.

    Many people greatly underestimated school funding. For all sources of funding on a per-student basis, 43% of poll respondents chose a number that is less than half the actual number.

    On a question asking about the change in Kansas school funding over the past five years, 64% thought that funding had declined. Only 6% knew that funding had increased by over 15% during that period. The five year time period is significant, as it was in 2005 that the Kansas Supreme Court ordered additional school spending as a result of the Montoy case.

    When asked about their willingness to pay higher taxes to support mores school funding, 51% said they would, if per-pupil funding was down from five years ago. But when asked whether they would pay more taxes in per-pupil funding had gone up by over 20%, only 11% said yes. According to the Kansas State Department of Education, total funding per pupil increased by 26% over this period.

    The survey was conducted by The Research Partnership, Inc., a Wichita-based market research firm. The complete results may be viewed at the Kansas Reporter website at K-12 Public Opinion Survey, or here.

    Survey participants were asked if they would like to make comments regarding funding of Kansas public schools. There are 17 pages of these comments.

    Analysis

    The results of this Kansas poll are similar to recent nationwide results discovered by EducationNext, a project of the Harvard Kennedy School of Government. That study is summarized at Americans uninformed about school spending, study finds. Another study with similar findings is at Kansas school spending: citizens again are uninformed.

    It’s not surprising that Kansans are misinformed about the level of school spending and its changes. Even members of the Kansas House of Representatives and the Wichita School Board are sometimes uninformed, misinformed. It’s either that or we have to conclude they are lying to us.

    The school spending lobby in Kansas focuses on only one measure of school spending, base state aid per pupil. That number is approximately one-third of total school spending, and it has declined. As this study shows, it is in the best interests of the Kansas school establishment for average Kansans to be uninformed about the true levels of school spending. When presented with accurate information about school spending, Kansans are not willing to pay higher taxes.

    We can understand the motivation of schools to lobby for increased spending. But they should be truthful. It’s even worse when newspaper editorial writers don’t recognize the truth. An example is a recent Wichita Eagle editorial written by Rhonda Holman. She repeated the meme of the school spending lobby, writing: “… despite state per-pupil base aid having been slashed to 1999 levels.” Most people don’t know that “base aid” is only one component of Kansas school spending. It’s the starting point for the Kansas school finance formula. After weightings are applied, most school districts receive much more funding than the base aid figure. The Wichita school district, for example, received $6,511 per pupil from the state at a time when base state aid was $4,012. Also, look at the total spending picture: From 1999 to last year, Wichita school spending jumped from $336 million to over $604 million. State aid to this district increased from $200 million to $328 million over the same time.

    It’s also likely that the current school year will see record spending on schools in Kansas.

    So why don’t Holman and the Wichita Eagle use the total spending figures, or even the total state aid numbers? Focusing on one component of Kansas school finance that is not representative of the entire picture is a disservice to Wichita Eagle readers.

  • In Kansas, tax reform is about job creation

    As explained in the new edition of Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, tax policy is vitally important to a state’s economic competitiveness. Unfortunately, Kansas does not perform well against other states.

    Two groups working to create a more competitive economic environment in Kansas are Americans for Prosperity, Kansas and Kansas Policy Institute. Their video commercial from earlier this year that explains the urgent situation in Kansas is below.

  • Kansas and Wichita quick takes: Monday April 23, 2012

    This week is … Administrative Professionals week in Kansas. Kansas Governor Sam Brownback issued this proclamation, so evidently time spent on things like this is a proper and valid function of government. We ought to end these proclamations by government at all levels. … At Wichita City Council meetings there have been cases where the meaningful business of the council has not started until nearly one hour after the start of the meeting. The hour has been consumed by proclamations, awards, remarks by council members, etc. While this happens, citizens with business before the council wait. And wait. They’re wasting their time and money. Their attorneys, representatives, or employees may be there with them, racking up legal bills and wasting time and money while listening to the mayor or other official read proclamations. … These proclamations are also more about promoting the wholesomeness and goodness of government than anything else.

    Taxpayer-funded lobbying. It’s one thing when private citizens or groups ask for more government spending. But when Kansans’ tax dollars are being spent to ask for more spending — that’s another thing, and a practice that should end. Here’s an example from the Kansas Association of School Boards (KASB). According to IRS Form 990 filings, KASB receives over $2 million in membership dues from school boards each year, money raised through taxation. Astonishingly, those same filings indicate that KASB spends no money on political lobbying. Astonishing because Mark Tallman, officially described on the KASB website as “associate executive director/advocacy,” is always described as “lobbyist” everywhere else.

    American Exceptionalism to be topic. This Friday (April 27th) the Wichita Pachyderm Club features Dr. Malcolm C. Harris, Sr., Professor of Finance, Friends University, speaking on “The Open Minded Roots of American Exceptionalism, and the Decline of America’s Greatness.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. … The club has an exceptional lineup of future speakers as follows: On May 4th: United States Senator Jerry Moran speaking on “A legislative update.” … On May 11th: Gary Oborny, Chairman/CEO Occidental Management and Real Estate Development, CCIM Designated member of the Storm Water Advisory Board to the City of Wichita, speaking on “What is the economic impact of EPA mandates on storm water quality in Wichita?” … On May 18th: Paul Soutar, Reporter for Kansas Watchdog, speaking on “The evolution of journalism and how the new media empowers citizens.” … On May 25th: Ron Estes, State Treasurer of Kansas, speaking on “A report from the Kansas Treasurer.”

    Kill the messenger. The Kansas government school establishment rallies: “Last Wednesday, April 18, the Wichita Eagle editorial page made an outrageously false claim about Kansas Policy Institute, saying we were ‘playing fast and loose’ with the truth. Our crime? We have a fact-based opinion with which they disagree! We asked for an immediate meeting to make our case and request a retraction, but the Opinion Page Editor, Phillip Brownlee, said he wasn’t available until next week but didn’t a meeting was really necessary, saying ‘It’s just that The Eagle editorial board (and the Kansas Dept. of Ed., school districts, and many other observers) thinks the ads are misleading.’… The Eagle editorial board, KSDE, local districts and others don’t like the ads because they disclosed that proficiency does not require full comprehension of grade-appropriate material.” More from Kansas Policy Institute at Attempting to Kill the Messenger .

    The Kansas Policy Institute advertisement. Since the Wichita Eagle editorial board did not think it necessary to meet with its representatives, on Sunday the Kansas Policy Institute placed an advertisement in response to a Rhonda Holman editorial. An important fact that Kansans need to understand is that school spending is increasing, despite the claims of the Kansas public school establishment: “And while you may have been told that total funding for schools was reduced this year, the truth is that KSDE estimates that 2012 spending will reach a record $5.7 billion. Some people would have you believe that the growth in total spending is deceptive because not all spending goes into the classroom, but the truth is that Instructional spending has increased at an even faster rate than total spending! Instructional spending increased 87% between 1999 and 2011; that is more than double the combined rates of increase in inflation and enrollment.” The advertisement may be viewed here: One Goal — Different Views.

    Holman on Kansas school spending. Here’s a sample as to just how bad the Rhonda Holman editorial is on the facts. She writes: “… despite state per-pupil base aid having been slashed to 1999 levels.” Most people don’t know that “base aid” is only one component of Kansas school spending. It’s the starting point for the Kansas school finance formula. After weightings are applied, most school districts receive much more funding than the base aid figure. The Wichita school district, for example, received $6,511 per pupil from the state at a time when base state aid was $4,012. Also, look at the total spending picture: From 1999 to last year, Wichita school spending jumped from $336 million to over $604 million. State aid to this district increased from $200 million to $328 million over the same time. Why doesn’t Holman uses the total spending figures, or even the total state aid numbers? Answer: These facts are inconvenient for her.

  • Pompeo: Compromise has meant increased spending

    At the recent economic development conference produced by Kansas Policy Institute, U.S. Representative Mike Pompeo of Wichita explained how the process of political compromise has worked to increase spending. Political compromise of the type Pompeo explained is also called logrolling.

    Pompeo told the audience that in his first 15 months in office, over 260 people came to his office to ask for something, a particular request. 85 percent of those requests came from Fortune 500 companies, our largest companies. Sometimes, he said, they brought along one of his constituents to help make the argument.

    These companies were asking for money from the federal treasury or some other form of special treatment, which Pompeo referred to as crony capitalism.

    Pompeo said he’s urged to compromise, to go along and get along. But he described how compromise has worked in Congress over the past 60 years, no matter which party is in charge of Congress or the presidency, and no matter the combination: “Congressman ‘A’ needed a bridge in his district, Congressmen ‘B’ wanted a flood control project in hers, and the president wanted more money for education. And the compromise was ‘Let’s do all three.’”

    The compromise for 60 years has been not to meet in the middle, but to increase spending. The real party of interest — people whose money is being spent — wasn’t in the room.

    Later, he explained the difficulty that elected officials face. Citing his proposed legislation to end federal tax credits for all forms of energy production, Pompeo said that the beneficiaries of these credits will come to his office and point out jobs created by — for example — a wind power equipment plant in Hutchinson. These people working are easy to see. They’re concentrated in one place at one company.

    But the costs of these credits and programs are being borne elsewhere, he said, and their effects are difficult to see.

  • In Wichita, private sector employment lags behind government

    Recently Kansas Policy Institute looked at the growth of employment in the private sector versus governments. The finding is that government employment is growing much faster than private sector employment.

    In its blog post that presented results, KPI concluded “A heftier tax burden must be carried by each private sector employee to support the growing local public sector.”

    I looked at the employment statistics from the Bureau of Labor Statistics independently, going back a little farther in time than did KPI. The results are the same: Private sector employment over the last 20 years in the Wichita area has grown much slower than total government employment. Private sector employment has also grown slower than any sector of government employment: federal, state, or local.

    The figures in the chart presented below are based on an index, where the 1990 value is equal to 100.

    Employment growth in the Wichita area.

  • Kansas should improve economic climate, rely less on incentives

    By Maurice McTigue, Vice President and Distinguished Visiting Scholar, Mercatus Center at George Mason University. He participated in the forum produced by Kansas Policy Institute this week.

    Kansas policymakers left for recess on the heels of a very disappointing jobs report last week. According to the latest jobs report, the state ranked fourth in terms of jobs lost with a 5,700 decrease in employment. As legislators prepare to return in a couple weeks, they should consider what’s best for the Kansas economy. That is, pursue goals that make Kansas a better place to do business than any other state.

    Kansas has a history of giving incentives to attract business. Despite this, businesses are leaving, and taking jobs and revenue with them. Legislators should look at all the hoops businesses must go through in Kansas and decide what hurdles can be removed to eliminate uncertainty and make the state more attractive for investment. Instead of asking what subsidy Kansas can give firms to get them to do business here, policymakers should ask existing business what it needs to operate more efficiently and effectively.

    Certainty is a key component to sound economic development because it allows businesses to make permanent plans and decisions.

    If Kansas had an economic climate that made it the best place to do business, regardless of outside contracts, defense restructuring, or inside subsidies, Boeing might not be leaving in 2013. If businesses understand the tax and regulatory landscape, and can count on it to be permanent, they can make good decisions. Outside factors are offset by a predictable and stable economic climate that allows them to be profitable. Certainty keeps jobs in Kansas creating revenue, not incentives.

    The problem with incentives is that they are not free, and result in a cost to someone else since they come from tax revenue. The referendum on the Ambassador Hotel tax exemption in Wichita illustrates this lose-lose situation. If the hotel needs a tax credit to do business, it was likely not competitive in the first place. Businesses and taxpayers naturally oppose unfair advantages, and once subsidies are gone, the business may fail anyway.

    To compete, Kansas should first think about businesses and people trading in the local economy and what permanent changes it would take to expand those businesses, instead of offering subsides. For sustainable economic growth, it is better to have 1,000 local businesses hire one extra person than use an incentive to bring in one business that may hire 1,000. Those jobs stay because of the permanent and positive business climate generating revenue, as opposed to jobs resulting from incentives that may leave and cost revenue dollars.

    Once achieved, economic competitiveness is not something that can then be forgotten. A major role for any economic development agency should be vigilance in seeking competitive improvements. This includes monitoring processes and procedures that make the state unproductive and advocate for their removal or reform.

    Key battles on taxes and the budget lie ahead; jobs and Kansas’s future are at stake. Let’s hope decision makers see fit to avoid merely doing things as they have always been done. Most incentives or subsidies are payments to compensate for things in the economy that need to be fixed, but nobody wants to make the necessary changes. A better economic development program is cultivating a climate where it is unnecessary to offer any special incentives to encourage business and investors to come to your state.