Tag Archives: Mark Parkinson

Kansas state government

Under Goossen, Left’s favorite expert, Kansas was admonished by Securities and Exchange Commission

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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.

During the administration of Governor Mark Parkinson, the State of Kansas issued eight series of bonds raising $273 million. Regarding these, the U.S. Securities and Exchange Commission has determined that the state failed to adequately inform investors of significant, material, negative information.

In a nutshell, according to the SEC: The Kansas Public Employee Retirement System (KPERS) was in terrible financial condition compared to other states, and Kansas did not adequately disclose that to potential bond buyers. That violated the Securities Act. In 2011 Kansas implemented reforms to the SEC’s satisfaction.

Duane Goossen biography
Duane Goossen biography
Of interest to current Kansas public affairs is that the head of the Kansas Department of Administration at the time the SEC found these violations was Duane Goossen. In its findings, the SEC specifically criticized the Department of Administration for its preparation of financial statements included in bond offerings — statements that were missing materially important, and negative, information.

Since his departure from Kansas government, Goossen has remained active in shaping Kansas policy, first as vice president for fiscal and health policy at Kansas Health Institute. 1 In 2015 Goossen joined Kansas Center for Economic Growth as Senior Fellow. 2 In announcing Goossen’s appointment, KCEG executive director Annie McKay noted his “wealth of expertise and knowledge.”

KCEG advocates for more taxes on Kansans, with the Goossen announcement mentioning “unprecedented and unaffordable tax cuts.” Goossen added he was excited to continue “contributing to the conversation across Kansas about the importance of budget and tax policy and the consequences of drastic tax cuts on everyday investments critical to Kansans.”

It’s ironic that Goossen mentioned “investments,” as we now know that under his leadership Kansas violated Sections 17(a)(2) and 17(a)(3) of the Securities Act, materially misleading bond investors while other states made full disclosure.

While critics of current Kansas government — including Goossen 3 — use KPERS underfunding as evidence of failure, this incident shows that KPERS has had funding problems for a long time, under leadership of both parties, and of both conservatives and moderates.

The SEC findings

According to a press release from the Securities and Exchange Commission, the State of Kansas “failed to disclose that the state’s pension system was significantly underfunded, and the unfunded pension liability created a repayment risk for investors in those bonds.” 4

The nature of the SEC’s inquiry involved “the disclosures surrounding eight bond offerings through which Kansas raised $273 million in 2009 and 2010.” 5

In its order, the SEC found: “The failure to disclose this material information in the Official Statements resulted from insufficient procedures and poor communications between KDFA and the Kansas Department of Administration (“KDA”), which provided information to KDFA for inclusion in the Official Statements, including preparing the State’s financial statements that were included as part of the Official Statements.” 6 (emphasis added)

The SEC also found that Kansas was an outlier among the states in failing to disclose negative information: “Kansas’s practice of not disclosing the underfunded status of KPERS became increasingly inconsistent with the practice of most states issuing municipal securities, which generally provided disclosure in their CAFRs or the body of their Official Statements regarding the financial health of their pension funds. By 2008, with the exception of Kansas, the overwhelming majority of the Official Statements for state-level bond issuances at a minimum disclosed the UAAL or funded ratios of the associated state-level pension plans, particularly if those plans were significantly underfunded.”

Prior to a new issue of bonds in November 2011, the SEC found that the State of Kansas instituted satisfactory policies and procedures regarding disclosure of material information.

  1. Kansas Health Institute. Budget director leaving for new post. Available at www.khi.org/news/article/budget-director-leaving-new-post. ↩
  2. Kansas Center for Economic Growth. Duane Goossen joins Kansas Center for Economic Growth. Available at realprosperityks.com/media/press-releases/duane-goossen-joins-kansas-center-for-economic-growth/. ↩
  3. Duane Goossen. The FY15 Budget Is Not Fixed Yet. Kansas Center for Economic Growth. Available at realprosperityks.com/duane-goossen-fy15-budget-fixed-yet/. ↩
  4. SEC.gov. SEC Charges Kansas for Understating Municipal Bond Exposure to Unfunded Pension Liability. Sec.gov. Available at www.sec.gov/News/PressRelease/Detail/PressRelease/1370542629913. ↩
  5. ibid. ↩
  6. SEC. Administrative proceeding file no. 3-16009. Order instituting cease-and desist proceedings pursuant to section 8a of the Securities Act of 1933, making findings, and imposing a cease-and-desist Order. Available at www.sec.gov/litigation/admin/2014/33-9629.pdf. ↩
Wichita and Kansas schools

Kansas school spending and achievement

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Following, from Dr. Walt Chappell, a discussion of Kansas school spending. Chappell served on the Kansas State Board of Education from 2009 to 2012.

The truth is, Governor Brownback and most Kansas legislators have worked hard to get more money into K-12 classrooms and have increased funding to educate our children each of the last four years. Claims that funds for schools have been cut, supposedly causing test scores to drop, schools to close, class sizes to go up and college tuition to increase are totally false.

apple-chalkboard-books-2Yes, there was a large reduction of $419 million to fund Kansas schools in 2009 when Mark Parkinson was Governor. The 2008 Great Recession hit Americans hard and state tax revenues dropped like a rock. Then, in 2011, the Federal government stopped sending emergency TARP funds to all states.

The Kansas Legislature made up the $219 million in Federal cuts by raising the amount spent from state tax revenues by $223 million. Brownback signed that budget bill.

Continue reading Kansas school spending and achievement →

Wichita city government

Beechcraft incentives a teachable moment for Wichita

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The case of Beechcraft and economic development incentives holds several lessons as Wichita considers a new tax with a portion devoted to incentives.

In December 2010 Kansas Governor Mark Parkinson announced a deal whereby the state would pay millions to Hawker Beechcraft to keep the company in Kansas. The company had been considering a purported deal to move to Baton Rouge, Louisiana. (Since then the company underwent bankruptcy, emerged as Beechcraft, and has been acquired by Textron.) The money from the state was to be supplanted by grants from the City of Wichita and Sedgwick County.

At the time, the deal was lauded as a tremendous accomplishment. In his State of the City address for 2011, Wichita Mayor Carl Brewer told the city that “We responded to the realities of the new economy by protecting and stabilizing jobs in the aviation industry. … The deal with Hawker Beechcraft announced last December keeps at least 4,000 jobs and all existing product lines in Wichita until at least 2020.”

Kansas Payments to Hawker Beechcraft and Employment

The nearby table shows data obtained from the Kansas Department of Commerce for Hawker Beechcraft. “MPI” means “Major Project Investment,” a class of payments that may be used for a broad range of expenses, including employee salaries and equipment purchases. SKILL is a program whereby the state pays for employee training. The MPI payments have been reduced below the $5 million per year target as the company has not met the commitment of maintaining at least 4,000 employees.

Besides these funds, the City of Wichita and Sedgwick County approved incentives of $2.5 million each, to be paid over five years at $500,000 per year (a total of $1,000,000 per year). The company has also routinely received property tax abatements by participating in an industrial revenue bond program.

It’s unfortunate that Beechcraft employment has fallen. The human cost has been large. But from this, we can learn.

First, we can learn it’s important to keep the claims of economic development officials and politicians in perspective. Mayor Brewer confidently claimed there would be at least 4,000 jobs at Beechcraft and the retention of existing product lines in Wichita. As we’ve seen, the promised employment level has not been maintained. Also, Beechcraft shed its line of business jets. The company did not move the production of jets to a different location; it stopped making them altogether. So “all existing product lines” did not remain in Wichita — another dashed promise.

Second, Wichita officials contend that our city can’t compete with others because our budget for incentives is too small. The figure of $1.65 million per year is commonly cited. As we see, Beechcraft alone received much more than that, and in cash. Local economic development officials are likely to say that the bulk of these funds are provided by the state, not by local government. I doubt it made a difference to Beechcraft. The lesson here is that Wichita officials are not truthful when telling citizens the amounts of incentives that are available.

Third, this incident illuminates how incentives are extorted from gullible local governments. In his 2011 address, the Wichita mayor said “We said NO to the State of Louisiana that tried to lure Hawker Beechcraft.” (Capitalization in original.) But a Baton Rouge television station reported that the move to Louisiana was never a possibility, reporting: “Today, Governor Bobby Jindal said the timing was not right to make a move. He says Hawker could not guarantee the number of jobs it said it would provide.”

The Associated Press reported this regarding the possible move to Louisiana: “They [Hawker Beechcraft] weren’t confident they could meet the job commitments they would have to make to come to Baton Rouge so it just didn’t make sense at this time.”

The threat the mayor said Wichita turned back with tens of millions of dollars? It was not real. This is another lesson to learn about the practice of economic development.

Kansas state government

SEC orders Kansas to stop doing what it did under Sebelius and Parkinson

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The Securities and Exchange Commission found that Kansas mislead bond investors. It ordered the state to implement reforms, which it has.

Kansas Capitol
Kansas Capitol
According to a press release from the Securities and Exchange Commission, the State of Kansas “failed to disclose that the state’s pension system was significantly underfunded, and the unfunded pension liability created a repayment risk for investors in those bonds.”

This refers to a series of eight debt, or bond, issues in 2009 and 2010. Collectively they were worth $273 million. The SEC press release explains:

According to the SEC’s order against Kansas, the series of bond offerings were issued through the Kansas Development Finance Authority (KDFA) on behalf of the state and its agencies. According to one study at the time, the Kansas Public Employees Retirement System (KPERS) was the second-most underfunded statewide public pension system in the nation. In the offering documents for the bonds, however, Kansas did not disclose the existence of the significant unfunded liability in KPERS. Nor did the documents describe the effect of such an unfunded liability on the risk of non-appropriation of debt service payments by the Kansas state legislature. The SEC’s investigation found that the failure to disclose this material information resulted from insufficient procedures and poor communications between the KDFA and the Kansas Department of Administration, which provided the KDFA with the information to include in the offering materials.

“Kansas failed to adequately disclose its multi-billion-dollar pension liability in bond offering documents, leaving investors with an incomplete picture of the state’s finances and its ability to repay the bonds amid competing strains on the state budget,” said LeeAnn Ghazil Gaunt, chief of the SEC Enforcement Division’s Municipal Securities and Public Pensions Unit. “In determining the settlement, the Commission considered Kansas’s significant remedial actions to mitigate these issues as well as the cooperation of state officials with SEC staff during the investigation.”

In other words, Kansas had a grossly underfunded state pension system, and did not adequately disclose that to potential purchasers of new state debt. The full text of the order gives more detail as to how Kansas was an outlier among the states, not only in the magnitude of its problem, but in its lack of disclosure:

Kansas’s practice of not disclosing the underfunded status of KPERS became increasingly inconsistent with the practice of most states issuing municipal securities, which generally provided disclosure in their CAFRs or the body of their Official Statements regarding the financial health of their pension funds. By 2008, with the exception of Kansas, the overwhelming majority of the Official Statements for state-level bond issuances at a minimum disclosed the UAAL or funded ratios of the associated state-level pension plans, particularly if those plans were significantly underfunded.

Here’s what this means to public policy:

First, the Kansas Public Employee Retirement System (KPERS) was in terrible financial condition, compared to other states.

Second, Kansas did not adequately disclose that to potential investors, according to the SEC.

Third, reforms have been implement to the satisfaction of the SEC.

Kansas Department of Administration logoFourth, the SEC was quite critical of the Kansas Department of Administration, or KDA.

Fifth, the head of KDA at the time was Duane Goossen. On his blog his biography contains: “[Goossen] was appointed by Sebelius in 2004 to concurrently serve as Secretary of the Kansas Department of Administration, the agency that manages state facilities, accounting, information services and employee programs.”

Although retired from state government, Goossen maintained a role in public affairs as former Vice President for Fiscal and Health Policy at Kansas Health Institute, and now authors a blog concerning issues related to the Kansas budget.

More reporting on this matter from Kansas Watchdog is at SEC charges Kansas with fraud for Parkinson-era omissions.

Kansas state government

Women for Kansas voting guide should be read with caution

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If voters are relying on a voter guide from Women for Kansas, they should consider the actual history of Kansas taxation and spending before voting.

A political advocacy group known as Women for Kansas has produced a voting guide, listing the candidates that it prefers for Kansas House of Representatives. But by reading its “Primer on the Issues,” we see that this group made its endorsements based on incorrect information.

One claim the group makes is this regarding taxes in Kansas: “Income taxes were reduced for many Kansans in 2012 and 2013, and eliminated entirely for some, with a corresponding increased reliance on sales taxes and local property taxes. This shifted the tax burden to the less affluent and from the state to counties, cities and school districts.”

This is a common theme heard in Kansas the past few years. But let’s unravel a few threads and look at what is actually happening. First, keep in mind that the lower tax rates took effect on January 1, 2013, just 1.5 years ago.

Then, Women for Kansas may be relying on information like this: A university professor who is a critic of Sam Brownback recently wrote in a newspaper column that “Property taxes are on track to increase by more than $400 million statewide during Gov. Sam Brownback’s term in office.”

Through correspondence with the author, Dave Trabert of Kansas Policy Institute found that this claim is based on increases of $300 million plus an estimated $100 million increase yet to come. Trabert noted that this amounts to an increase of 11 percent over four years. To place that in context, property taxes increased $767 million and 29 percent during the first term of Kathleen Sebelius. Inflation was about the same during these two periods. A more accurate claim would be that Kathleen Sebelius shifted taxes to counties, cities, and school districts, and that Sam Brownback’s administration has slowed the rate of local property tax increases compared to previous governors.

Another claim made by Women for Kansas concerns school spending: “Reflecting decreased revenues due to tax cuts, per-pupil spending is down, and both K-12 and higher education are facing further reductions in the immediate future.”

The allegations that per-pupil spending is down due to tax cuts is false. The nearby chart of Kansas school spending (per pupil, adjusted for inflation) shows that spending did fall, but under budgets prepared by the administrations of Kathleen Sebelius and Mark Parkinson. Since then, spending has been fairly level. (Remember, lower tax rates have been in effect for just 1.5 years.)

Kansas school spending, per student, from state, local, and federal sources, adjusted for inflation.
Kansas school spending, per student, from state, local, and federal sources, adjusted for inflation.

If we look at other measures of school support, such as pupil teacher ratios, we find that after falling during the administrations of previous governors, these ratios have rebounded in recent years.

When spending figures for the just-completed school year become available, it’s likely that they will show higher spending than the previous year. That’s been the trend.

If you’ve received or read the voter guide from Women for Kansas, please consider the actual history of Kansas taxation and spending before voting.

Kansas state government

Job growth in the states and Kansas

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Let’s ask critics of current Kansas economic policy if they’re satisfied with the Kansas of recent decades.

Critics of Kansas Governor Sam Brownback and his economic policies have pounced on slow job growth in Kansas as compared to other states.

Private sector employment growth in the states, Kansas highlighted. Click for larger version.
Private sector employment growth in the states, Kansas highlighted. Click for larger version.
The nearby illustration shows private sector job growth in the states during the period of the Graves/Sebelius/Parkinson regimes. This trio occupied the governor’s office from 1994 to 2011. Kansas is the dark line.

At the end of this period, Kansas is just about in the middle of the states. But notice that early in this period, the line for Kansas is noticeably nearer the top than the bottom. As time goes on, however, more states move above Kansas in private sector job creation.

Private sector employment growth in the states, year-over-year change, Kansas highlighted. Click for larger version.
Private sector employment growth in the states, year-over-year change, Kansas highlighted. Click for larger version.
The second illustration shows the one-year change in private sector job growth, Kansas again highlighted. Note there are some years during the first decade of this century where Kansas was very near the bottom of the states in this measure.

Some Kansas newspaper editorialists and candidates for office advocate for a return to the policies of Graves/Sebelius/Parkinson. Let’s ask them these questions: First, are you aware of the poor record of Kansas? Second, do you want to return to job growth like this?

How to use the visualization.
How to use the visualization.
I’ve gathered and prepared jobs data in an interactive visualization. You may click here to open the visualization in a new window and use it yourself. Data is from Bureau of Labor Statistics, U.S. Department of Labor. This data series is the Current Employment Statistics (CES), which is designed to measure employment, hours, and earnings with significant industrial and geographic detail. More information about his data series is at Understanding the employment measures from the CPS and CES survey.

Kansas state government

Two versions of the Kansas income tax cuts

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From Kansas Policy Institute.

Two Versions of the Income Tax Cuts: The Media’s Story and Reality

By Steve Anderson

In January 2011, when I was first appointed State Budget Director, the state was on the verge of what appeared to be a financial meltdown. Under the previous administration, the first negative ending balance in state history had been allowed exist. Kansas was $27.6 million “in the hole” and this headline was on the front page of the Wichita Eagle “Shortfall for ’11 State Budget Tops $500 million.” Much of the first six months was spent trying to not bounce checks and finding areas to cut spending immediately. We also spent considerable time giving agencies more flexibility to spend down unencumbered funds as agencies had previously been allowed to overspend available funding, a typical policy of Gov. Mark Parkinson and his Budget Director Duane Goosen. However, even as I was using the power the Budget Director holds to operationally limit spending I realized the media’s claim of a $500 million shortfall was an exaggeration.

At the end of the first six months Kansas had $188 million in the bank and within eighteen months the state ended fiscal year 2012 with a $502.9 Million ending balance. This would have been lost to citizens who weren’t doing their own research. They never would have known that the “budget” crisis had passed because the media had moved onto their next “crisis” without revisiting the initial headlines and, in the process, calling into question their first reports.

The media’s next “crisis” was centered on the individual income tax cuts that were passed in 2012. The bill to reduce the tax burden on citizens “would slash income taxes and is expected to produce a $2 billion deficit within five years” according to theWichita Eagle’s article. The Kansas City Star led with this quote of “state fiscal analysts projecting budget deficits reaching $2.5 billion in 2018.” Just to further emphasize the dire situation the Star added this scare from a representative of a special interest group with no known expertise on the economic impact of lower tax burdens by saying that the tax cuts, “have an enormous impact on everything from public education to public health coverage to infrastructure to other vital social safety-net services.”

Who are these “state fiscal analysts” that the media used to fan the flames and how did this version of a looming fiscal crisis occur? The state fiscal analysts are staff of the Kansas Legislative Research Division (KLRD) which presents their projection of the impact on the state’s finances of any change in tax regulations. Here are the numbers from KLRD’s analysis of Senate Bill Substitute for House Bill 2117 — the tax cut bill — and the impact on the state’s budget:***

The approach used by KLRD to generate these numbers is not consistent with the realities of state finances. There are three fundamental problems with KLRD’s analytic techniques which create these illusions of fiscal crises where none exists.

  1. It is impossible for the state to have a negative ending balance of this size because the state cannot print money (unlike Washington) which precludes the ability to carry such huge imbalances forward year after year.
  2. The projection of spending growth the KLRD staff uses ignores the reality of the first issue. Spending cannot continue at a rate that exceeds revenue once the first negative balance occurs. KLRD’s analysis ignores options to control spending that are available to the state’s elected officials and instead shows increasing negative balances. In reality shortfalls and surpluses are dealt with each year through a multitude of available options.
  3. KLRD uses a static view of what will happen to revenues when money is returned to the state’s citizens. For example, the assumption is that if a tax cut is $500 million there will be $500 million less in revenues that come into the state coffers the next year. To believe that one of two things would have to happen, 1) either the money would be buried in a jar in the back yard, or 2) every dollar would have to be spent out of state. In reality, that $500 million in tax cuts means that business owners will reinvest some part of that money and wage earners will spend some of it in the local economy.

A more realistic view of Senate Bill Substitute for House Bill 2117 puts things in perspective. The following chart shows what has transpired, to date, based on the effects of the tax cuts. It is very good example of why citizens should take media accounts based on KLRD’s numbers with a full shaker of salt.

Kansas-division-budget-kpi-2014-04

The net difference between KRLD’s ending balance and what the current actual receipts show is $913.4 million. The crisis of the “enormous impact on everything from public education to public health coverage to infrastructure to other vital social safety-net services” that the Kansas City Star’s “expert” on the tax cuts predicted hasn’t occurred. But, we have not yet heard the Eagle or the Star report these facts.

Kansans simply haven’t heard that, after returning $231.2 million to taxpayers in FY-2013 and ANOTHER $802.8 million in fiscal year 2014, ending balances were actually up nearly a billion dollars over the estimates! Estimates that directly led to some dire headlines upon their initial release. Returning nearly a billion dollars to Kansans’ pocket books while ending balances have been steady or increasing is an incredible story of success that media would want to share with readers.

Citizens of Kansas have a right to hear forecasts of disasters but they also deserve to be told by those same media outlets that those forecasts didn’t match what actually took place and that things are going well. Citizen should insist that their legislators request that KLRD begin a policy of only producing projections for a reasonable number of future years based on the realities of the Kansas Constitution. This would limit the use of statistically flawed data being used to fuel for the fire of those who are playing politics under the guise of “news reporting.”

I will follow up shortly with part two of this story on where the state’s finances are headed including commentary and possible adjustments to April 2014 Consensus Revenue Estimates.

*** Kansas Legislative Research Division Senate Tax Plan with Adjusted Severance Tax Receipts 2/15/2012 — full version on file. Expenditures and Revenues Totaled in order to fit the page

Wichita and Kansas schools

Shortchanging Kansas schoolchildren, indeed

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School blackboardThis month the New York Times published an editorial that advocates for more spending on Kansas public schools. While getting some facts wrong, the piece also overlooks the ways that Kansas schoolchildren are truly being shortchanged.

Here’s evidence supplied by the Times (Shortchanging Kansas Schoolchildren, October 13, 2013): “State spending on education has fallen an estimated 16.5 percent since 2008, including $500 million in cuts under the Brownback administration, resulting in teacher layoffs and larger class sizes.” (Governor Brownback has responded to the editorial; see Kansas Governor responds to the Times.)

The Times editorial board doesn’t say how it calculated the 16.5 percent decline in spending, but it’s likely that it used only base state aid per pupil, which is the starting point for the Kansas school finance formula. Much more spending is added to that. A nearby table holds spending figures for recent years, and a similar chart with inflation-adjusted figures may be found in Kansas school spending rises.

kansas-school-spending-2013-10-table-02

Perhaps the Times didn’t notice that at the time base state aid was falling, total state spending on schools rose. Base state aid per pupil, adjusted for inflation, is lower than it was during the previous decade. Total Kansas state spending on schools, however, has recovered to the same level as 2006, in inflation-adjusted dollars.

Total state aid per pupil this past school year was $6,984. Base state aid per pupil was $3,838. Total state spending, therefore, was 1.82 times base state aid. It’s important to consider the totality of spending and not just base state aid. It’s important because total spending is so much greater than base state aid. Also, total spending accounts for some of the difficulties and expenses that schools cite when asking for higher spending.

For example, advocates for higher school spending often point to non-English speaking students and at-risk students as being expensive to educate. In recognition of this, the Kansas school finance formula makes allowances for this. According to the Kansas Legislator Briefing Book for 2013, the weighting for “full-time equivalent enrollment in bilingual education programs” is 0.395. This means that for each such student a school district has, an additional 39.5 percent over base state aid is given to the district.

For at-risk pupils, the weighting is 0.456. At risk students, according to the briefing book, “are determined on the basis of at-risk factors determined by the school district board of education and not by virtue of eligibility for free meals.”

Taken together, bilingual students considered to be at-risk generate an additional 85.1 percent of base state aid to be sent to the district, per student.

Teachers and class sizes

The Times wrote that under Brownback, Kansas experienced “teacher layoffs and larger class sizes.” Figures from the Kansas State Department of Education tell a different story. Considering the entire state, two trends emerge. For the past two years, the number of teachers employed in Kansas public schools has risen. Correspondingly, the pupil-teacher ratio has fallen.

Kansas school employment

The trend for certified employees is a year behind that of teachers, but for the last year, the number of certified employees has risen, and the ratio to pupils has fallen. Pupil-teacher ratio is not the same as class size, but it’s the data we have.

Here’s the question we need to answer: If school districts have been able to hire more teachers and other certified employees, and if the student to teacher ratio is improving at the same time, but there are still high class sizes, what are school districts doing with these teachers and employees?

Kansas school employment ratios

By the way, the Times editorial writers might be interested in learning that the declines in school employment occurred during the administrations of Kathleen Sebelius and Mark Parkinson, Democrats both.

I’ve created interactive visualizations that let you examine the employment levels and ratios in Kansas school districts. Click here for the visualization of employment levels. Click here for the visualization of ratios (pupil-teacher and pupil-certified employee).

If the Times really wanted to help Kansas schoolchildren from being shortchanged, it might have noticed that at a time when Kansas was spending more on schools due to an order from the Kansas Supreme Court, the state weakened its already low standards for schools. This is the conclusion of the National Center for Education Statistics, based on the most recent version of Mapping State Proficiency Standards Onto the NAEP Scales. More about that can be found in Why are Kansas school standards so low?

Another thing the Times could have done to increase the public’s awareness of the performance of Kansas schools is to investigate why Kansas schools perform relatively well on national tests. I and others have done this; see Kansas school test scores, a hidden story and Kansas and Texas schools and low-income students.

Politics

Kansas school employment trends are not what you’d expect

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Listening to Kansas school officials and legislators, you’d think that Kansas schools had very few teachers left, and that students were struggling in huge classes. But statistics from the state show that school employment has rebounded, both in terms of absolute numbers of teachers and certified employees, and the ratios of pupils to these employees.

Kansas school employment

The story is not the same in every district. But considering the entire state, two trends emerge. For the past two years, the number of teachers employed in Kansas public schools has risen. Correspondingly, the pupil-teacher ratio has fallen.

Kansas school employment ratios

The trend for certified employees is a year behind that of teachers, but for the last year, the number of certified employees has risen, and the ratio to pupils has fallen.

By the way, the declines in school employment occurred during the administrations of Kathleen Sebelius and Mark Parkinson, Democrats both.

Facts like these may not have yet reached those like Kansas House of Representatives Democratic Leader Paul Davis. On Facebook, he continually complains about the lack of funding for Kansas schools.

paul-davis-facebook-2013-04-14

It’s little wonder that Davis and others focus exclusively on Kansas school funding. If they were to talk about Kansas school performance, they’d have to confront two unpleasant realities. First, Kansas has set low standards for its schools, compared to other states. Then, when the Kansas Supreme Court ordered more spending in 2005, the state responded by lowering school standards further. Kansas school superintendents defend these standards.

I’ve created interactive visualizations that let you examine the employment levels and ratios in Kansas school districts. Click here for the visualization of employment levels. Click here for the visualization of ratios (pupil-teacher and pupil-certified employee).

Data is from Kansas State Department of Education. Visualization created by myself using Tableau Public.

Politics

Kansas Democrats mailing again, and wrong again

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It’s campaign season, and mail pieces are flying fast, replete with more Kansas Democratic errors.

Examples come from two mailers from the Kansas Democratic Party targeting Joseph Scapa, a one-term Republican incumbent seeking to return to the House or Representatives.

Here’s one: “SCAPA voted for the largest cut to school funding in Kansas history — schools are closing, class sizes are increasing and fees are going up on parents. Sub HB 2014 (HJ 5/12/11, p. 1570)”

This is a repeat of a mistaken claim made on other anti-Scapa mailings, for which Kansas Democrats have apologized.

Here’s something from another ant-Scapa mail piece from the Kansas Democratic Party: “The Brownback Agenda included the largest cut to public education funding in Kansas history in order to pay for tax cuts for the wealthy and big corporations.”

This claim is incorrect, too. As explained in Kansas Democrats wrong on school spending, the claims of education cuts generally consider only Kansas state spending on schools, neglecting federal and local sources of funds. In the 2008-2009 and 2009-2010 schools years, federal aid soared as a result of the Obama stimulus program. These funds almost made up for the decline in state spending, meaning that total spending on Kansas schools declined only slightly.

(You’d think that Kansas Democrats would want to remind us of the supposedly wonderful things the Obama stimulus accomplished, but evidently not when the facts are inconvenient.)

Then, who was Kansas governor during the years that Kansas state spending on schools actually declined? Kathleen Sebelius and Mark Parkinson. They’re Democrats, I believe.

Here’s something else from a mailer from the Kansas Democrats:

JOE SCAPA is just another rubber stamp for Sam Brownback.
JOE SCAPA VOTES WITH SAM
BROWNBACK 92.33% OF THE TIME.*
Instead of working to create jobs and improve education, Scapa has been nothing more than a rubber stamp for Governor Brownback’s irresponsible agenda.
*www.KanFocus.com, Republican Support Rankings

Most people don’t have access to KanFocus, a useful but expensive subscription information service. The rankings that the mailer refers to, according to KanFocus, “… show the percentage of votes on which each Representative voted with and against the majority of Republicans.”

So it’s not a measure of how closely Representatives’ votes align with Governor Brownback, but with the majority of Republicans. Oops.

Aside from that, Scapa ranked 56 out of 93 Republicans that cast votes in 2012. Then, consider that most of the Republicans who ranked “higher” than Scapa (meaning they voted less often with the Republican majority) are legislators who in most states would be Democrats.

An accurate assessment, then, of Scapa’s voting record is that he is relatively independent from the Republican majority in his voting. Which is not the same as the Brownback agenda, as the Democratic Party mailer erroneously claims.

Wichita and Kansas schools

Kansas Democrats wrong on school spending

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While the Kansas Democratic Party apologized last week for misstating candidates’ voting record on two mail pieces, the party and its candidates continue a campaign of misinformation regarding spending on Kansas public schools.

Many of the allegations are made against Kansas Governor Sam Brownback for purportedly cutting school spending. An example is on the Kansas Democratic Party Facebook page, which can be seen nearby.

As part of the party’s website, on a page titled Restore Education Funding, Kansas Democrats make this claim:

An Education Fact

Between FY2008-2009 and FY2011-2012, general state aid to education was cut by nearly $400 million. In just thee [sic] years, that’s a reduction of $620 for every schoolchild in the state.

This claim is repeated on candidates’ web sites, such as this example from senatorial candidate Tim Snow, which reads: “In the last three years, conservatives in Topeka have slashed education spending by $620 per student.”

The problem is that these claims aren’t factual. Consider the numbers from the Kansas Democrat website. In 2008-2009 Kansas state spending on schools was $3,287,165,278, according to the Kansas State Department of Education. In 2011-2012, that figure was $3,184,163,559. That’s a difference of $103,001,719, which is a long way from $400 million, the number claimed by Democrats.

Looking at spending per pupil figures, the change was from $7,344 to $6,983. That’s $361, not $620 as Democrats claim.

The Democrats are also considering only Kansas state spending on schools, neglecting federal and local sources of funds. In the 2008-2009 and 2009-2010 schools years, federal aid soared as a result of the Obama stimulus program. These funds almost made up for the decline in state spending, meaning that total spending on Kansas schools declined only slightly.

(You’d think that Kansas Democrats would want to remind us of the supposedly wonderful things the Obama stimulus accomplished, but evidently not when the facts are inconvenient.)

Then, who was Kansas governor during the years that Kansas state spending on schools declined? Kathleen Sebelius and Mark Parkinson. They’re Democrats, I believe.

There are more examples of Democrats misleading Kansans. Here’s Senate Minority Leader Anthony Hensley: “But Gov. Brownback is acting on the assumption that schools aren’t stretching every dollar to the last cent, even after he made the largest cut to public education in Kansas history.” (Dems seek input from parents, educators on impact of school funding cuts.) (emphasis added)

Paul Davis, the Kansas House of Representatives Minority Leader, was quoted in the Lawrence Journal-World as saying “Instead of hosting an online forum to complain about public schools, why not discuss all the innovative ways our teachers and administrators have done more with less since Gov. Brownback implemented the largest cut to education funding in Kansas history?” (emphasis added)

Hensley and Davis are two of the top Democrats in Kansas, absolutely so in the Kansas Legislature.

It’s easy to understand why Democrats focus on school spending. It’s easy to persuade parents — and anyone, for that matter — that if we want the best for Kansas schoolchildren, we need to spend more.

More spending in schools means more spending in largely Democratic hands, and more public sector union members, a key Democratic constituency.

The school spending advocates have done a good job promoting their issue, too. On a survey, 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. Kansans also thought spending had declined, when it had increased. See Kansans uninformed on school spending. Similar findings have been reported across the country.

Spending more on schools is seen as an easy way to solve a problem. But the problems facing Kansas schools will require different approaches, and the Kansas school establishment won’t consider them. For a list of reforms that are needed, but resisted, see Kansas school reform issues.

Kansas Democrats should consider themselves fortunate that our governor isn’t pressing for the reform that Democrats really hate: school choice.

Regulation

Dangers of texting while driving: Are laws the solution?

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There’s no doubt that texting while driving is dangerous, as illustrated in this KAKE Television news story. But the government solution — passing laws against texting while driving — haven’t worked, and some states have experienced an increase in crashes after implementing texting bans.

A news release from the Highway Loss Data Institute summarizes the finding of a study: “It’s illegal to text while driving in most US states. Yet a new study by researchers at the Highway Loss Data Institute (HLDI) finds no reductions in crashes after laws take effect that ban texting by all drivers. In fact, such bans are associated with a slight increase in the frequency of insurance claims filed under collision coverage for damage to vehicles in crashes. This finding is based on comparisons of claims in 4 states before and after texting ban, compared with patterns of claims in nearby states.”

The study does not claim that texting while driving is not dangerous. Rather, the realization by drivers that texting is illegal may be altering their behavior in a way that becomes even more dangerous than legal texting. Explains Adrian Lund, president of both HLDI and the Insurance Institute for Highway Safety: “If drivers were disregarding the bans, then the crash patterns should have remained steady. So clearly drivers did respond to the bans somehow, and what they might have been doing was moving their phones down and out of sight when they texted, in recognition that what they were doing was illegal. This could exacerbate the risk of texting by taking drivers’ eyes further from the road and for a longer time.”

When Kansas passed its texting ban in 2010, newspapers editors praised the legislature and Governor Mark Parkinson for passing the law. In an editorial, the Wichita Eagle’s Rhonda Holman wrote “But it’s nice to know the state finally has a law against this brainless and dangerous practice.” In his written statement, Parkinson said “I am pleased to sign this legislation that will encourage more aware drivers and save Kansas lives.”

While Kansas was not included in the HLDI study, there’s no reason to think that Kansas will experience anything different from the states that were studied: Kansas drivers may be under greater risk of being in a crash after the passage of this law.

Paradoxically, higher fines and stricter enforcement of this law will encourage the dangerous law-evading texting behavior.

Texting while driving will be a subject on the KAKE Television public affairs program This Week in Kansas to be aired Sunday at 9:00 am. Dr. Alex Chaparro of Wichita State University will appear to present his findings on the dangers of texting while driving and what can be done to improve safety.

Quick takes

Kansas and Wichita quick takes: Saturday January 8, 2011

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This Week in Kansas. This Sunday on This Week in Kansas, host Tim Brown produces a double-length show. The first 30 minutes will be an interview with outgoing Kansas Governor Mark Parkinson, and then a second show immediately following will feature incoming Kansas Governor Sam Brownback. This Week in Kansas airs on KAKE TV channel 10, Sunday morning at 9:00 am.

Tax cuts are not a cost to government. In an article in the Lawrence Journal-World discussing the possibility of repealing the Kansas statewide sales tax increase, reporter Scott Rothschild makes the same error that most media outlets do: he says that cutting taxes is a cost to government: “Repeal of the levy would cost state government another $300 million per year.” The only way tax cuts constitute a cost to government is if you believe that our property — all of it — belongs first to government. Instead, taxes are a cost that people and business pay, and reducing them is a savings for the parties that really matter. How about writing this instead: “Repeal of the levy would reduce revenues to the state by an estimated $300 million.” And if the Journal-World wanted to be accurate, it could add “This action would leave those funds in the productive private sector rather than transferring them to the wasteful and inefficient public sector.”

Sedgwick County officeholders to be sworn in. On Sunday January 9, three Sedgwick County Commissioners and a new county treasurer will be sworn in. New commissioners Jim Skelton and Richard Ranzau and returning commissioner Dave Unruh will participate. New treasurer Linda Kizzire will also be sworn in. The time is 2:00 pm, in the jury room of the courthouse. Enter on the north side.

Kansas state government

Kansas: business-friendly or capitalism-friendly?

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Plans for the Kansas Republican Party to make Kansas government more friendly to business run the risk of creating false, or crony capitalism instead of an environment of genuine growth opportunity for all business.

An example is the almost universally-praised deal to keep Hawker Beechcraft in Kansas. This deal follows the template of several other deals Kansas struck over the past few years, and outgoing Governor Mark Parkinson is proud of them. Incoming Governor Sam Brownback approved of the Hawker deal, and probably would have approved of the others.

Locally, the City of Wichita uses heavy-handed intervention in the economy as its primary economic development tool, with several leaders complaining that we don’t have enough “tools in the toolbox” to intervene in even stronger ways.

The problem is that these deals, along with many of the economic development initiatives at the state and local level in Kansas, create an environment where the benefits of free market capitalism, as well as the discipline of a market-based profit-and-loss system, no longer apply as strongly as they have. John Stossel explains:

The word “capitalism” is used in two contradictory ways. Sometimes it’s used to mean the free market, or laissez faire. Other times it’s used to mean today’s government-guided economy. Logically, “capitalism” can’t be both things. Either markets are free or government controls them. We can’t have it both ways.

The truth is that we don’t have a free market — government regulation and management are pervasive — so it’s misleading to say that “capitalism” caused today’s problems. The free market is innocent.

But it’s fair to say that crony capitalism created the economic mess.

But wait, you may say: Isn’t business and free-market capitalism the same thing? Here’s what Milton Friedman had to say: “There’s a widespread belief and common conception that somehow or other business and economics are the same, that those people who are in favor of a free market are also in favor of everything that big business does. And those of us who have defended a free market have, over a long period of time, become accustomed to being called apologists for big business. But nothing could be farther from the truth. There’s a real distinction between being in favor of free markets and being in favor of whatever business does.” (emphasis added.)

Friedman also knew very well of the discipline of free markets and how business will try to avoid it: “The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses generally prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.”

The danger of Kansas government having a friendly relationship with Kansas business leaders is that these relationships will be used to circumvent free markets and promote crony, or false, capitalism in Kansas. It’s something that we need to be on the watch for, as the relationship between business and government is often not healthy. Appearing on an episode of Stossel Denis Calabrese, who served as Chief of Staff for Majority Leader of the U.S. House of Representatives Congressman Richard Armey, spoke about crony capitalism and its dangers:

“The American public, I guess, thinks that Congress goes and deliberates serious issues all day and works on major philosophical problems. Really a typical day in Congress is people from the private sector coming and pleading their cases for help. It may be help for a specific company like the [window manufacturing company] example, it may be help for an entire industry, it may be help for United States companies vs. overseas companies.”

He went on to explain that it is wrong — corrupt, he said — for Congress to pick winners and losers in the free enterprise system. Congress wants us to believe that free enterprise will be more successful when government gets involved, but the reverse is true. Then, the failures are used as a basis for criticism of capitalism. “This is an unholy alliance,” he said, and the losers are taxpayers, voters, and stockholders of companies.

Later in the show Tim Carney said that “A good connection to government is the best asset a company can have, increasingly as government plays a larger role in the economy.”

Host John Stossel challenged Calabrese, wondering if he was part of the problem — the revolving door between government, lobbyists, and business. Calabrese said that “Every time you see a victim of crony capitalism you’re looking at a potential client of mine, because there’s somebody on the other side of all these abuses. When Congress tries to pick a winner, there are losers, and losers need representation to go tell their story.” He added that he lobbies the American people by telling them the truth, hoping that they apply pressure on Congress to do the right thing.

He also added that it is nearly impossible to find a single area of the free enterprise system that Congress is not involved in picking winners and losers.

While the speakers were referring to the U.S. federal government, the same thing happens in statehouses, county courthouses, and city halls across the country — wherever there are politicians and bureaucrats chasing economic development with government as the tool.

It is difficult to blame businessmen for seeking subsidy and other forms of government largesse. They see their competitors do it. They have a responsibility to shareholders. As Stossel noted in the show, many companies have to hire lobbyists to protect them from harm by the government — defensive lobbying. But as Carney noted, once started, they see how lobbying can be used to their advantage by gaining favors from government.

The danger that Kansas faces is that under the cover of a conservative governor and legislature, crony capitalism will continue to thrive — even expand — and the people will not notice. The benefits of a dynamic Kansas economy as shown by Dr. Art Hall in his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy may never be achieved unless Kansas government — at all levels — commits to the principles of free market capitalism.

Kansas state government

In Kansas, prosperity is achievable — if we’re willing to change

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The health of the Kansas economy — past and future — is the subject of some debate, with supporters of big government like the Wichita Eagle’s Rhonda Holman thanking outgoing Governor Mark Parkinson for his promotion of the increase in the statewide sales tax and other forms of economic interventionism. These policies, with the exception of the approval of the expansion of a coal-fired electrical plant, largely carried forward the programs of his predecessor Kathleen Sebelius. As a result, Kansas is in the situation that Dave Trabert of the Kansas Policy Institute describes below.

Prosperity Is Achievable — If We’re Willing To Change

By Dave Trabert, President, Kansas Policy Institute

“The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” — Thomas Sowell, The Hoover Institution, Stanford University

Sowell’s point about the scarcity of resources is essential to understanding economics, which may be as much about human behavior as supply, demand and other commonly-associated factors. Taxpayers have finite resources, so the more they must pay in taxes, the less they have to spend on goods and services. Accordingly, raising taxes always has a negative impact and especially so when taxes rise faster than the ability to pay.

Unfortunately, the last ten years were defined by Sowell’s first law of politics. State and local governments in Kansas ignored the implications of finite resources and significantly increased the tax burden. From 2000 to 2009, state and local taxes increased 59 percent but personal income available to pay taxes only rose 44 percent. (The 2010 figures aren’t yet published but last year’s increase in sales, unemployment and property taxes certainly didn’t ease the burden.)

Predictably, we suffered the consequences.

Kansas had 18,800 fewer private sector jobs in 2009 than in 2000, a reduction of 1.7 percent. There was job growth prior to the recession but it was well below the national average. From 1998 to 2008 (Kansas employment peaked in April, 2008) private sector jobs increased 7.9 percent nationwide but only 5.2 percent in Kansas. And comparing the performance of low-burden and high-burden states (as ranked by the non-partisan Tax Foundation) makes the implications of defying Sowell’s first law of economics even more clear. The ten states with the highest combined state and local tax burden averaged 6.1 percent private sector job growth, whereas the ten states with the lowest burdens averaged a remarkable 16.5 percent gain.

Domestic migration (U.S. residents moving in and out of states) is another good measure. Between 2000 and 2009, the ten states with the lowest tax burdens averaged a 3.8 percent population increase from domestic migration; the ten states with the highest burdens lost an average of 3.3 percent. Kansas lost 2.5 percent population from domestic migration.

Jobs and people naturally gravitate toward low-burden states where they get to keep more of their hard-earned, finite resources. The next ten years must therefore be defined by Sowell’s first law of economics or Kansas will continue to suffer the consequences. In order to compete for jobs and attract new residents, the state and local tax burden must be reduced — and that means government must spend less.

Fortunately, there are many ways to reduce spending and still provide essential services. Ineffective and unnecessary programs have to go and government must operate much more efficiently.

Change won’t be easy but the choice is simple — reduce the tax burden and create an environment that attracts jobs and new taxpayers or preserve big government and continue to suffer the consequences.

Quick takes

Kansas and Wichita quick takes: Thursday December 30, 2010

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Kansas Meadowlark blog recast. Earl Glynn of Overland Park has reformed his Kansas Meadowlark site from a blog to a news site along the lines of the Drudge Report. Glynn’s full-time job is working for Kansas Watchdog.

Longwell site noted. A website supporting the candidacy of Wichita Vice Mayor Jeff Longwell for re-election to his current position has been spotted. Title: Vote for Jeff Longwell.

Kansas legislative issues to watch. Fort Hays State University political science professor Chapman Rackaway lists the things to watch for in the upcoming session of the Kansas Legislature, which opens on January 10. Here’s his list: The budget, K-12 education funding, economic growth, higher education, entitlements, a balancing act between the “interests of the center-right and polar-alliance wings of the party,” and redistricting. The full article is in the Wichita Eagle at Seven legislative issues to watch in 2011.

Local governments are a model. H. Edward Flentje, public affairs professor at Wichita State University, explains the difference between the finances of local governments — cities and counties — as compared to states and the federal government: “So, why aren’t our cities and counties wallowing in red ink? For the most part, they do the basics right. They keep revenues and spending in balance. When times are tough, they tighten the belt. In good times, they pay off debt or pay for projects that might otherwise require debt. They maintain reasonable fund balances that buffer economic downturns and avoid unnecessary tax increases or draconian cuts in services. They use debt sparingly but never for ongoing obligations.” He also mentions the role of professional managers in local government, something that Kansas has a long tradition of using. Flentje plays a role in educating and training these managers, and served a stint as interim city manager for Wichita a few years ago. The full article is at State of the State KS at Insight Kansas Editorial: Local Clues for Stemming the Flow of Red Ink.

Truce in culture wars? Michael Barone in the Washington Examiner: “The fact is that there is an ongoing truce on the social issues, because for most Americans they have been overshadowed by concerns raised by the weak economy and the Obama Democrats’ vast increase in the size and scope of government.” Somehow I don’t think this message has made it to Kansas. As reported by Fred Mann in today’s Wichita Eagle: “Before Kansas lawmakers consider such a bill, Kinzer said, they will take up a host of previous abortion measures that were vetoed by former Govs. Kathleen Sebelius and Mark Parkinson, and that are more likely to be approved by incoming Gov. Sam Brownback.” Lance Kinzer is a member of the Kansas House of Representatives from Olathe and a member of Governor-Elect Sam Brownback’s transition team. Barone, in the article mentioned above, writes “Abortion remains controversial. But we are not going to see abortion criminalized, not in a country where the Supreme Court has been ruling for 37 years that it’s a right. At the same time, we are seeing abortion disfavored and restricted by state laws that are widely popular and have at least in some cases been upheld by the courts.” In Kansas, though, anti-abortion forces are preparing a number of laws that concern, according to Mann, “tightened reporting requirements for late-term abortions, remedies against doctors who violate the laws, and provisions allowing a woman, her husband or parents to sue a doctor if they thought a late-term abortion was performed illegally.” The biggest danger is the culture war in Kansas will take our focus off the state’s economy and the need to get it on track. Chapman Rackaway, in his piece mentioned above, wrote: “If Brownback can successfully balance pragmatism and the interests of the center-right and polar-alliance wings of the party, he can be a rousing success as governor. If open warfare breaks out between wings of the party, all could be lost.”

Wind power: the transmission subsidy. From The Wall Street Journal column The Midwest Wind Surtax: The latest scheme to socialize the costs of renewable energy: “You’d think poor Michigan has enough economic troubles without the Federal Energy Regulatory Commission placing a $300 million to $500 million annual surtax on the state’s electric utility bills. But on December 16 FERC Chairman Jon Wellinghoff announced new rules that would essentially socialize the cost of transmission lines across 13 states in the Midwest. … This is another discriminatory subsidy for wind energy that will raise electricity prices on everyone, notably on those who don’t rely on wind for electric power. … Let’s be very clear on what’s happening here: Mr. Wellinghoff and FERC are trying to establish by regulatory fiat a national energy policy that Congress has refused to endorse. Last summer Congress rejected the Obama Administration’s renewable energy standard law because it would have inflated power costs.” In Kansas, outgoing Governor Mark Parkinson is proud of his accomplishments in forcing more wind power mandates on Kansans.

Economics

Wind power again reaps subsidy

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The editorial page of the Wall Street Journal is at the forefront of letting Americans know just how bad an investment our country is making in wind power, as well as other forms of renewable energy. A recent Review and Outlook piece titled The Wind Subsidy Bubble: Green pork should be a GOP budget target holds these facts:

  • The recent tax bill has a $3 billion grant for wind projects.
  • The 2009 stimulus bill had $30 billion for wind.
  • Wind power installations are way down from recent years.
  • The 2008 stimulus bill forces taxpayers to pay 30% of a renewable energy project’s costs. Wind energy also get a tax credit for each unit of power produced.
  • “Subsidies for renewable energy cost taxpayers about $475,000 for every job generated.”
  • “The wind industry claims to employ 85,000 Americans. That’s almost certainly an exaggeration, but if it is true it compares with roughly 140,000 miners and others directly employed by the coal industry. Wind accounts for a little more than 1% of electricity generation and coal almost 50%. So it takes at least 25 times more workers to produce a kilowatt of electricity from wind as from coal.”

This information is timely as Kansas Governor Mark Parkinson recently released a list of his “achievements,” three of which involve increasing wind power in Kansas.

Incoming Kansas governor Sam Brownback is in favor of wind energy too, and he also supports federal subsidies and mandates for ethanol production and use. In endorsing Brownback the Kansas Association of Ethanol Producers said “… no other public official has done more to promote the merits of ethanol than Sam Brownback. Whereas ethanol is the future of America’s fuel supply, Sam Brownback is the future of Kansas.”

The Wall Street Journal has also long been opposed to this intervention in the market for ethanol, recently quoting a report by a group of U.S. Senators: “Historically our government has helped a product compete in one of three ways: subsidize it, protect it from competition, or require its use. We understand that ethanol may be the only product receiving all three forms of support from the U.S. government at this time.”

Kansas state government

Kansas Governor Parkinson says “thank you”

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This week outgoing Kansas Governor Mark Parkinson released a “thank you” to Kansans that has been commented on — favorably — in many Kansas newspapers and media outlets. The entire piece may be read at the governor’s site at Thanks So Much.

The governor’s list of “achievements” — his language, not mine — is a reminder that under Parkinson and his predecessor Kathleen Sebelius Kansans have lost economic and personal freedom. It’s nothing that we should thank Parkinson for, and nothing he should be proud of.

Under achievement number one (“Steering the state budget through a very challenging time”) Parkinson wrote “Suffice it to say that I cut state spending more than any governor in Kansas history.” He doesn’t mention that he was forced to make these cuts, as Kansas can’t run deficits like the federal government.

Achievements two, three, and four have to do with his promotion of wind power in Kansas. It’s almost impossible to overstate how unwise these policies are. See Wind power: a wise investment for Wichita and Kansas? for a recent discussion of why wind power is a bad investment. Relying on the manufacturing of wind power equipment as an economic development strategy is an even worse idea. The governor praises legislation that requires utilities to increase their usage of renewable power such as wind. But I’d ask the governor this: If electricity from wind is so desirable, why do utilities have to be forced — and heavily subsidized — to produce it?

Achievement seven highlights “Economic development wins,” mentioning Black and Veatch, Cerner, Bombardier LearJet, and Hawker Beechcraft in particular. Each of these “wins” required large subsidy from the state. Worse, these taxpayer giveaways cement our practice of bureaucratic management of economic development instead of creating a vibrant Kansas business climate where innovation and entrepreneurship thrive. This state policy filters down to counties and cities, to the point where the first consideration for businesses and entrepreneurs is not is this something that will create value for customers and profit for me and my investors but rather what type of government help can I get?

Achievement eight is the statewide smoking ban. Parkinson’s championing of it means that he doesn’t believe that adult Kansans can decide for themselves whether they want to be around smokey places, and that he has little respect for private property rights.

Achievement nine is the new transportation plan. The governor claims it will create or keep 175,000 jobs. Most of these must be highway construction jobs, as it is that industry that heavily supported the plan. As usual, the governor and other advocates of government spending fail to see the jobs that are lost due to the government spending and the taxes necessary to pay for it. Veronique de Rugy explains: “Taxes simply transfer resources from consumers to government, displacing private spending and investment. Families whose taxes have increased will have less money to spend on themselves. They are poorer and will consume less. They also save less money, which in turn reduces the resources available for lending.” In addition, Kansas roads rate very well, even number one among the states in one highly-publicized study. Why the need to so much new investment?

Finally, achievement number ten is “Keeping Kansas a great place to do business.” If this is true, I wonder why do we have to spend so much on subsidies to keep Kansas companies from expanding elsewhere or packing up and leaving entirely, as with Hawker Beechcraft?

Kansas state government

Hawker Beechcraft deal not proud moment for Kansas

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This week the State of Kansas, City of Wichita, and Sedgwick County struck a deal with Hawker Beechcraft that allows Hawker to stay in Wichita rather than moving to another state.

While outgoing Governor Mark Parkinson and other leaders praise the deal, it was not a good day for Kansas.

It’s difficult to blame Hawker. That company saw similar Wichita-based companies receive corporate welfare, most recently Bombardier Learjet. Who can blame Hawker for wanting the same? In fact, when the state and local governments are willing to readily hand out corporate welfare, you can make a case that Hawker has a fiduciary duty to its shareholders to seek the same.

Therein lies the problem: Kansas’ approach to economic development is piecemeal. We respond to problems, as in the case of Hawker. But the state’s response gives more companies the incentive to come up with their own “problems” that require state intervention.

When recruiting or retaining companies, the state and its local governments presume they have the ability to select which companies are deserving of public subsidy.

What we have is a situation where a relatively small number of companies receive help from the state and its taxpayers, which only serves to increase the cost of business for everyone else.

Nonetheless, politicians and bureaucrats call this making an investment in, say, Hawker Beechcraft or whatever company is asking for handouts or tax breaks. The problem is that we don’t know if investing in these companies is the right investment, if government should be making these investments at all. (In the case of Hawker Beechcraft, there is some evidence that this company may need to shrink substantially in order to survive, handouts notwithstanding. See Report: Hawker should divest all but King Air.)

We need economic development policies that nurture all companies. Somewhere in Wichita or Kansas there is a small unknown company that has half a dozen or so employees — maybe more, maybe less — that is working on some innovation. If we’re lucky, we have many such companies. These companies could be working on a new technology, manufacturing process, computer software, video game, internet site, food processing technology, retail concept, chemical process, restaurant idea, engineering methodology, agricultural process, airplane wing — we just don’t know. Many will fail. But some will succeed, and few will, hopefully, succeed in a big way.

But these small startup companies may not fit in to the economic development programs the city and state have. Any of these now-small companies could become the next Cessna, LearJet, Beechcraft, or Pizza Hut. We just don’t know — we can’t know — which small companies will succeed. But these companies, when in small startup stage, struggle to pay the taxes that large companies are able to escape. Being small, they may also be disproportionally impacted by regulation. It’s not necessarily the case that a small startup aviation company is competing directly with Hawker Beechcraft and is handicapped by the larger company’s tax advantages and handouts. But these two companies could be competing for the same employees, for example, and that puts the smaller company at a disadvantage.

How can we identify which companies are deserving of government subsidy? Which companies should have their tax burden softened at the expense of others? Allocating resources — deciding what to do — in the face of uncertainty is the crux of entrepreneurship. It’s something that government is not equipped to do, as its incentives and motivations are all wrong.

In order to succeed, Kansas needs to embrace dynamism in its approach to economic development. For more on this see Kansas economic growth policy should embrace dynamism and Embracing Dynamism: The Next Phase in Kansas Economic Development Policy.

Unfortunately, the Hawker Beechcraft deal, along with most of the policies of the state and the City of Wichita move in the opposite direction: towards more state-controlled economic development.

Quick takes

Kansas and Wichita quick takes: Friday November 26, 2010

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Bill Gates on school reform. Microsoft Chairman and founder Bill Gates, in an effort to help the states save money on schools, recently gave a speech, as reported by the New York Times: “He suggests they end teacher pay increases based on seniority and on master’s degrees, which he says are unrelated to teachers’ ability to raise student achievement. He also urges an end to efforts to reduce class sizes. Instead, he suggests rewarding the most effective teachers with higher pay for taking on larger classes or teaching in needy schools.” This is a refreshing take on the issue of class size. For more background on these issues from Voice for Liberty, click on Focus on class size in Wichita leads to misspent resources, Wichita public school district’s path: not fruitful, In public schools, incentives matter, and Wichita school district policy is misguided. For what it’s worth, incoming Kansas governor Sam Brownback doesn’t seem to have these issues on his agenda for education reform.

Now the schools look for savings. The Lawrence Journal-World reports on an initiative to save on utility costs in the Lawrence public school system. “Teachers are unloading their refrigerators, flipping off computer monitors and unplugging their coffee pots — all to help the Lawrence school district save a few bucks over the Thanksgiving break. It’s all part of an ongoing program to trim utility costs, thus far saving the district at least $3.6 million.” I wonder: why hasn’t the school district been doing this already? This is more evidence that spending can be cut in ways that won’t harm children, despite the shrill claims of school spending advocates when they, like Wichita Representative Jim Ward or outgoing governor Mark Parkinson, claim that spending has already been “cut to the bone.” Lawrence, USD 497, contributed to the 2005 Kansas schools lawsuit, but is not a member of this year’s group suing taxpayers for more money. Give a small measure of credit to this district, that they’re trying to cut costs first instead of suing taxpayers.

Business climate under Brownback. A poll by the Wichita Business Journal indicates that Kansans think the state’s business climate will improve under incoming governor Sam Brownback — barely. 53 percent of respondents clicked on “Yes, it will get better.” The rest thought the business climate will remain the same or get worse. This is not a scientific poll, but represents the sentiment of those readers who chose to participate.

The parent trigger. A law in California allows parents whose children are in failing public schools to petition the school to become a charter school, close down, other undergo other reform. Called the “parent trigger,” the law was promoted from the political left, unlike most reform proposals which come from the political right. The Center for School Reform at the Heartland Institute explains in the policy brief The Parent Trigger: A Model for Transforming Education. As the full report states: “America’s $400 billion public education system exists primarily to serve grown-ups — bureaucrats, unions, and other special interests — not kids.” The primary opposition to this measure comes from — naturally — the teachers union: “Because many parents will likely choose to have their schools convert to charters and most charter schools are not unionized, powerful unions like the California Teachers Association view parental empowerment as a threat.” Anyone who has read much about school reform knows that the teachers unions and schools spending advocacy groups are the greatest threat to any meaningful reform. In Kansas, the two groups that consistently oppose meaningful reform are Kansas National Education Association (KNEA, the teachers union) and the Kansas Association of School Boards (KASB).

Public or private parks? John Stossel asks whether parks should be public or privately owned. A video clip shows several interviewees insisting that parks must be public. Unknowing to these people, they were all interviewed in a privately-owned park. In this video clip, Stossel explains the tragedy of the commons and the benefits of private property. His written article concludes: “What private property does — as the Pilgrims discovered — is connect effort to reward, creating an incentive for people to produce far more. Then, if there’s a free market, people will trade their surpluses to others for the things they lack. Mutual exchange for mutual benefit makes the community richer.”

Kansas Rep. Jim Morrison. Kansas Representative Jim Morrison of Colby has died. Services are pending.

Kansas City Mayor not happy with job poaching. The flow of jobs from Kansas City Missouri across the border to Kansas needs to stop, says Kansas City Mayor Mark Funkhouser. The Promoting Employment Across Kansas (PEAK) program is to blame, he says. This program allows companies to use nearly all the payroll withholding taxes its employees pay for its own benefit instead of supporting the Kansas budget. In urging Missouri to step up its ability to offer incentives, Funhouser used the term “nuclear deterrence.” He seems to indicate that the ability of one state to counter another state’s incentives might stop companies from moving just to get incentives. See Kansas City Star article Loss of jobs to Kansas irks Kansas City’s mayor. It’s a little ironic to hear Missouri complain about generous Kansas incentives, as Kansas politicians like Wichita Mayor Carl Brewer often complain about the incentives other states offer that Kansas can’t match, and how they wish they had other “tools in the toolbox.” Also, Star columnist Mary Sanchez is wrong when she writes “Present-day market realities call for upfront capital incentives for companies to relocate.”