Tag Archives: Wichita Eagle opinion watch

Intrust Bank Arena loss for 2016 is $4,293,901

As in years past, a truthful accounting of the finances of Intrust Bank Arena in downtown Wichita shows a large loss.

The true state of the finances of the Intrust Bank Arena in downtown Wichita are not often a subject of public discussion. Arena boosters cite a revenue-sharing arrangement between the county and the arena operator, referring to this as profit or loss. But this arrangement is not an accurate and complete accounting, and hides the true economics of the arena. What’s missing is depreciation expense.

An example: In February 2015 the Wichita Eagle reported: “The arena’s net income for 2014 came in at $122,853, all of which will go to SMG, the company that operates the facility under contract with the county, Assistant County Manager Ron Holt said Wednesday.” A reading of the minutes for the February 11 meeting of the Sedgwick County Commission finds Holt mentioning depreciation expense not a single time. Neither did the Eagle article.

In December 2014, in a look at the first five years of the arena, its manager told the Wichita Eagle this: “‘We know from a financial standpoint, the building has been successful. Every year, it’s always been in the black, and there are a lot of buildings that don’t have that, so it’s a great achievement,’ said A.J. Boleski, the arena’s general manager.”

The Wichita Eagle opinion page hasn’t been helpful, with Rhonda Holman opining with thoughts like this: “Though great news for taxpayers, that oversize check for $255,678 presented to Sedgwick County last week reflected Intrust Bank Arena’s past, specifically the county’s share of 2013 profits.”

Even our city’s business press — which ought to know better — writes headlines like Intrust Bank Arena tops $1.1M in net income for 2015 without mentioning depreciation expense.

All of these examples are deficient in an important way, and contribute confusion to the search for truthful accounting of the arena’s finances. As shown below, recognizing depreciation expense is vital to understanding profit or loss, and the “net income” referred to above doesn’t include this. In fact, the “net income” cited above isn’t anything that is recognized by standard accounting principles.

The problem with the reporting of Intrust Bank Arena profits

There are at least two ways of looking at the finance of the arena. Nearly all attention is given to the “profit” (or loss) earned by the arena for the county according to an operating agreement between the county and SMG, a company that operates the arena. 1

This agreement specifies a revenue sharing mechanism between the county and SMG. For 2106, the accounting method used in this agreement produced a profit of $680,268 to be split (not equally) between SMG and the county. The county’s share was $140,134. 2

While described as “profit” by many, this payment does not represent any sort of “profit” or “earnings” in the usual sense. In fact, the introductory letter that accompanies these calculations warns readers that these are “not intended to be a complete presentation of INTRUST Bank Arena’s financial position and results of operations in conformity with accounting principles generally accepted in the United States of America.” 3

That bears repeating: This is not a reckoning of profit and loss in any recognized sense. It is simply an agreement between Sedgwick County and SMG as to how SMG is to be paid, and how the county participates.

A much better reckoning of the economics of the Intrust Bank Arena can be found in the 2016 Comprehensive Annual Financial Report for Sedgwick County.4 This document holds additional information about the finances of the Intrust Bank Arena. The CAFR, as described by the county, “… is a review of what occurred financially last year. In that respect, it is a report card of our ability to manage our financial resources.”

Regarding the arena, the CAFR states:

The Arena Fund represents the activity of the INTRUST Bank Arena. The facility is operated by a private company; the County incurs expenses only for certain capital improvements or major repairs and depreciation, and receives as revenue only a share of profits earned by the operator, if any, and naming rights fees. The Arena Fund had an operating loss of $4.6 million. The loss can be attributed to $4.4 million in depreciation expense.

Financial statements in the same document show that $4,434,035 was charged for depreciation in 2016, bringing accumulated depreciation to a total of $35,126,958.

If we subtract SMG payment of $140,134 from depreciation expense, we learn that the Intrust Bank Arena lost $4,293,901 in 2016.

Depreciation expense is not something that is paid out in cash. That is, Sedgwick County did not write a check for $4,434,035 to pay depreciation expense. Instead, depreciation accounting provides a way to recognize and account for the cost of long-lived assets over their lifespan. It provides a way to recognize opportunity costs, that is, what could be done with our resources if not spent on the arena.

But not many of our public leaders recognize this. In years past, Commissioner Dave Unruh made remarks that illustrate the severe misunderstanding under which he and almost everyone labor regarding the nature of spending on the arena: “I want to underscore the fact that the citizens of Sedgwick County voted to pay for this facility in advance. And so not having debt service on it is just a huge benefit to our government and to the citizens, so we can go forward without having to having to worry about making those payments and still show positive cash flow. So it’s still a great benefit to our community and I’m still pleased with this report.”

Earlier in this article we saw examples of the (then) Sedgwick County Assistant Manager, the Intrust Bank Arena manager, and several Wichita Eagle writers making the same mistake.

Intrust Bank Arena commemorative monument
Intrust Bank Arena commemorative monument
The contention — witting or not — of all these people is that the capital investment of $183,625,241 (not including an operating and maintenance reserve) in the arena is merely a historical artifact, something that happened in the past, something that has no bearing today. There is no opportunity cost, according to this view. This attitude, however, disrespects the sacrifices of the people of Sedgwick County and its visitors to raise those funds. Since Kansas is one of the few states that adds sales tax to food, low-income households paid extra sales tax on their groceries to pay for the arena — an arena where they may not be able to afford tickets.

Any honest accounting or reckoning of the performance of Intrust Bank Arena must take depreciation into account. While Unruh is correct that depreciation expense is not a cash expense that affects cash flow, it is an economic reality that can’t be ignored — except by politicians, apparently. The Wichita Eagle and Wichita Business Journal aid in promoting this deception.

We see our governmental and civic leaders telling us that we must “run government like a business.” Without frank and realistic discussion of numbers like these and the economic facts they represent, we make decisions based on incomplete and false information.


Notes

  1. Management Agreement between Sedgwick County and SMG. August 1, 2007. Available here.
  2. The Operations of INTRUST Bank Arena, as Managed by SMG. December 31, 2016. Available here.
  3. Ibid.
  4. Sedgwick County. Comprehensive Annual Financial Report of the County of Sedgwick, Kansas for the Year ended December 31, 2016. Available here.

Fake government spawns fake news

Discussions of public policy need to start from a common base of facts and information. An episode shows that both our state government and news media are not helping.

A recent Hutchinson News article1 started with this:

Once you wake up to where Kansas was in 1992 at funding schools and what it needs to do to get caught up, said the Kansas Department of Education’s Deputy Commissioner Dale Dennis, it’s a shocker.

In 1992, base state aid per pupil was $3,600. That amount, taking into account the Consumer Price Index, would be the equivalent of $6,001.12 in 2013. Base state aid, however, has been frozen at $3,852 since 2014-15.

“The numbers are shocking, shocking,” Dennis told the Hutchinson Rotary Club at its Monday luncheon meeting at the Hutchinson Town Club.

Why is a speech by a government bureaucrat, as covered in a major newspaper, important? It illustrates two problems we face in understanding, discussing, and debating important matters of public policy.

First, can government be truthful and accurate? Dale Dennis — the state’s top official on school finance — certainly knows that the numbers he presented do not accurately characterize the totality of school spending in Kansas. But the problem is even worse than that. To use base state aid as the indicator of state spending on schools is deceptive. It’s deceptive in that, after adjusting for inflation, base state aid has declined. But total state aid to school districts has increased.

Base state aid is a false indicator of total spending on schools by the state. It’s fake — fake government. And for a newspaper to uncritically present this as news illustrates the second problem we face.

Background on base state aid and school spending

Kansas school spending, showing base state aid and total state aid. See article for notes about 2015. Click for larger.
Base state aid per pupil — the statistic Dennis presented — is an important number.2 It’s the starting point for the Kansas school finance formula used before the 2015-2016 (fiscal 2016) school year, and something like it may be used in a new formula.3

Base state aid, however, is not the only important number. To calculate the funding a school district receives, weightings are added. If students fall into certain categories, weightings for that category are added to determine a weighted enrollment. That is multiplied by base state aid to determine total state aid to the district. 4

While this may seem like a technical discussion that doesn’t make a difference, it’s very important, because some of the weightings are large. The at-risk weighting, intended to cover the additional costs of teaching students from low-income families, started at five percent in 1993. In other words, for every student in this category, a school district received an extra five percent of base state aid. The value of this weighting has risen by a factor of nine, reaching 45.6 percent starting with the 2008-2009 school year.

There’s also the high-density at-risk weighting. Starting with the 2006-2007 school year districts with a high concentration of at-risk students could receive an extra weighting of four percent or eight percent. Two years later the weightings were raised to six percent and ten percent. (This formula was revised again in 2012 in a way that may have slightly increased the weightings.)

Kansas school spending, showing ratio of total state aid to base state aid. See article for notes about 2015. Click for larger.
Kansas school spending. See article for notes about 2015. Click for larger.
The weightings have a large effect on school funding. For example: During the 2004-2005 school year, base state aid was $3,863 and the at-risk weighting was ten percent. An at-risk student, therefore, generated $4,249 in state funding. (Other weightings might also apply.)

Ten years later base state aid was $3,852 — almost exactly the same — and the at-risk weighting was up to 45.6 percent. This generates funding of $5,609. For a district that qualified for the maximum high-density at-risk weighting, an additional $404 in funding was generated. (These numbers are not adjusted for inflation.)

So even though base state aid remained (almost) unchanged, funding targeted at certain students rose, and by a large amount.

Over time, values for the various weightings grew until by 2014 they added 85 percent to base state aid. A nearby chart shows the growth of total state aid as compared to base state aid. (Starting in fiscal 2015 the state changed the way local tax dollars are counted. That accounts for the large rise for the last year of data in the chart. For school years 2016 and 2017, block grants have replaced the funding formula, so base aid and weightings do not apply in the same way.)

What have we learned?

We’re left wondering a few things:

  • Did Deputy Superintendent Dale Dennis tell the audience that base state aid is just part of the school funding landscape, and not reflective of the big picture? Did he tell the audience that total state aid to schools has increased, and increased substantially? If so, why wasn’t it mentioned in the article?
  • If Dale Dennis did not tell the audience these things, what conclusions should we draw about his truthfulness?
  • Why didn’t the Hutchinson News article explain to readers that base state aid is not an accurate or total indicator of total state spending on schools?
  • What is the duty of reporters and editors? We’re told that experienced journalists add background and context to the news — things that the average reader may not know. (This article is designated as “Editor’s Pick” by the Hutchinson News.)

By the way, the Wichita Eagle, on its opinion page, cited in a positive and uncritical manner the Hutchinson News article.5 This is notable as the writer of the Eagle piece, opinion editor Phillip Brownlee, was a certified public accountant in a previous career. This is someone we should be able to trust to delve into numbers and tell us what they mean. But that isn’t the case.

Whatever your opinion on the level and trend of school spending, we need to start the discussion from a common base of facts and information. From this episode, we see that both our state government and news media are not helping.

For another take on the problems with this episode, see Paul Waggoner’s column in the Hutchinson News.6 (If not able to access that link, try Shocking News about Kansas Education!)


Notes

  1. Clarkin, Mary. Department of Education’s Dennis: Shocking number when looking at funding gap. Hutchinson News. April 17, 2017. http://www.hutchnews.com/news/local_state_news/department-of-education-s-dennis-shocking-number-when-looking-at/article_4abe359e-8421-53f9-a8d7-1eaa56e95423.html.
  2. Weeks, Bob. Kansas school weightings and effects on state aid. In making the case for more Kansas school spending, the focus on base state aid per pupil leaves out important considerations. https://wichitaliberty.org/wichita-kansas-schools/kansas-school-weightings-and-effects-on-state-aid/.
  3. For the fiscal 2016 and 2017 school years, the formula was replaced by block grants.
  4. AMENDMENTS TO THE 1992 SCHOOL DISTRICT FINANCE AND QUALITY PERFORMANCE ACT AND THE 1992 SCHOOL DISTRICT CAPITAL IMPROVEMENTS STATE AID PROGRAM (FINANCE FORMULA COMPONENTS), Kansas Legislative Research Department, May 20, 2014
    http://ksde.org/Portals/0/School%20Finance/amends_to_sdfandqpa_2015.pdf
  5. Brownlee, Philip. School funding numbers are ‘shocking.’ Wichita Eagle. April 22, 2017. http://www.kansas.com/opinion/opn-columns-blogs/now-consider-this/article146084839.html.
  6. Waggoner, Paul. Shocking news about Kansas education. Hutchinson News. April 21, 2017. http://www.hutchnews.com/opinion/columnists/shocking-news-about-kansas-education/article_2ebea7d3-6659-51fc-b3b5-409d5b0aa243.html. Or, see https://wichitaliberty.org/kansas-government/shocking-news-kansas-education/.

For Wichita Eagle, no concern about relationships

Should the Wichita Eagle, a city’s only daily newspaper and the state’s largest, be concerned about the parties to its business relationships?

It’s a question that the Wichita Eagle should be considering. But the newspaper’s top executives seem to have no concern.

On February 14 I sent a message to the publisher and executive editor of the Wichita Eagle expressing my concerns about the newspaper’s future landlords. That letter appears below. After several follow-up attempts by email and telephone, neither would respond.

Sent I sent this message, I’ve found I was mistaken about the ownership of the building to where the Eagle will move and become a tenant. Brandon Steven is not an owner. I had relied on Eagle reporting1 from January, naming Steven as an owner. The reporter confirmed to me that was an error.

An error in the digital archives of the Wichita Eagle which could easily be corrected.

Of note, the Eagle portrays itself as a digital entity. One of the things about material published digitally is it can be easily corrected. As of today, the erroneous story from January 3 has not been corrected, even though the reporter knows she made an error.

Is it important that a newspaper avoid business relationships or entanglements with parties that are frequently in the news? I’ve been told that the Eagle has to rent from someone, and Wichita is a small town. Well, not really. The Eagle owns its current building, which eliminated the relationship with a landlord. And if the newspaper wants to be a rental tenant, it could rent from the many landlords who are not frequent newsmakers, especially those that the Eagle needs to hold accountable.

This is a sad episode for the Eagle. When Eagle reporters ask someone about uncomfortable topics and the subject does not respond to messages, the newspaper reports that, and in a negative light. Here, the top two executives at the Eagle would not comment on something they may be uncomfortable discussing. I think we deserve a newspaper with greater capacity for self-examination, and one whose executives are responsive to legitimate concerns.

Following, the message I sent. Note the corrections indicated in footnotes.

February 14, 2017

Mr. Roy Heatherly
Mr. Steve Coffman
The Wichita Eagle

I’m writing because I’m concerned about some issues regarding the Wichita Eagle and its news coverage.

Specifically, I’m concerned about the Eagle entering into business arrangements with the parties who purchased the Eagle building, and then becoming a tenant of the same parties.2

The three parties are Brandon Steven, Dave Wells, and David Burk. While the Eagle is certainly free to do business with anyone it wants to, these three men are newsmakers that the Eagle has covered in the past, and will likely need to cover in the future.

Mr. Heatherly, you may remember that last year at a Wichita Pachyderm Club meeting I asked you about the arrest of Brandon Steven (although I did not use his name), and why the Eagle did not cover this news. Other newspapers did, including the Topeka Capital-Journal and The Morning Sun in Pittsburg.3 4 Those newspapers thought the item newsworthy as Steven had recently been an applicant for a Kansas casino license, and factors such as a person’s reputation are relevant to these applications. Many thought it curious that the Eagle did not report this news.

Regarding David Burk, he is a continual newsmaker in Wichita, and not always in a positive way. A notable incident was his appeal of property taxes on property located within a tax increment financing district, which defeats the purpose of TIF.5 6 Worse, he misrepresented himself as an agent of the city in order to obtain this benefit. When the Eagle reported on this, it rated designation of “special report.” Other than this, Burk is a newsmaker in that he has, for many years, made large and regular campaign contributions to many city council members, and has received much subsidy from the city through many different programs.

For Dave Wells, a principal of Key Construction, he is often in the news for the same reasons as Burk: Large and continual campaign contributions, and a frequent recipient of subsidy. A particularly troubling matter involving Key Construction and public policy occurred in 2012, regarding the awarding of the contract for the new Wichita air terminal, a contract worth around $100 million. Key was one of the parties pursuing the contract. We learned that Key and its partners were making campaign contributions to one Wichita city council member, Jeff Longwell, immediately before and after he participated in a council vote on awarding the contract to Key.7 Several months later after additional campaign finance reports were filed, we saw that Key made contributions to other council members during the run-up to the contract dispute.8

When it was announced that the Eagle was selling its building to these parties, I was not comfortable with this transaction. But it was a one-time deal. Later we learned that the Eagle is to become a tenant of the same parties,9 a business relationship that is likely to last for a long time.

When the Eagle gives these parties free publicity in future news stories, will readers need to be concerned about the motivation for the Eagle printing the stories?

But more important: When these parties do something wrong, will the Eagle vigorously pursue an investigation? An investigation against its landlord?

I hope you can understand my concern.

I would appreciate receiving comments on this matter for a story I am writing for the Voice for Liberty. In addition, if either of you would like to appear on WichitaLiberty.TV to discuss that matter, we can do that too.

Thank you,
Bob Weeks


Notes

  1. Rengers, Carrie. Wichita Eagle signs deal for new downtown headquarters. January 3, 2017. http://www.kansas.com/news/business/article124312049.html
  2. An error. See introduction.
  3. Kansas casino bidder Brandon Steven busted for public nudity. Topeka Capital-Journal, October 1, 2015. http://cjonline.com/blog/tim-carpenter/2015-10-01/kansas-casino-bidder-brandon-steven-busted-public-nudity.
  4. Castle Rock developer arrested. The Morning Sun, October 8, 2015, http://www.morningsun.net/article/20151008/NEWS/151009892.
  5. Developer appealed taxes on city-owned property. Wichita Eagle, February 14, 2010. http://www.kansas.com/news/special-reports/article1024583.html.
  6. Report: Errors made in Old Town Cinema district tax appeal. Wichita Eagle, March 10, 2010. http://www.kansas.com/news/local/article1027324.html.
  7. Sedgwick County Commissioner Karl Peterjohn questions out-of-state contributions to challenger Jeff Longwell. Wichita Eagle, August 1, 2012. http://www.kansas.com/news/politics-government/article1096574.html.
  8. Campaign contributions show need for reform in Wichita. Voice for Liberty, January 11, 2013. https://wichitaliberty.org/wichita-government/campaign-contributions-show-need-for-reform-in-wichita/.
  9. An error. See introduction.

Wrong direction for Wichita public schools

A letter in the Wichita Eagle illustrates harmful attitudes and beliefs of the public school establishment.

The letter is titled “Wrong direction.” It was submitted by John H. Wilson, was published on February 26, 2017, and may be read here.

What’s wrong in this letter? Here’s one thing: “First, the ill-founded assertion is that parents are well equipped to identify the best school for their children. Wrong.”

This is an incredibly bigoted assertion. This is one of the standard arguments against school choice, that parents — particularly minority and low-income families — don’t have the ability to make wise choices in schools for their children. Instead, an educated elite, of Wilson is a member, must make these decisions, they say.

There is a whif of plausibility in Wilson’s claim. In Wichita, where there is no school choice except for a small tax credit scholarship program, parents don’t have much experience making decisions regarding schools for their children. Across the country, however, where parents are given choices, we see parents becoming involved. With school choice programs, parents have a chance to make a difference.

Here’s something else that is rich in irony. With school choice, Wilson says, “Public schools organization and management would become a nightmare.” The private sector, however, manages situations like this every day. The irony is that the fleet of public school administrators hold many advanced degrees in public school administration. But school choice, evidently, is too complicated to manage.

Finally, Wilson references “a highly successful and proud institution, our public schools.” I’d like to call his attention to the nearby chart of results from the Kansas school assessments for the Wichita school district. According to the Kansas State Department of education, “Level 2 indicates that the student is doing grade-level work as defined by the standards but not at the depth or level of rigor to be considered on-track for college success. Level 3 indicates that the student is performing at academic expectations for that grade and is on track to being college ready.”

Looking at fourth grade reading — a very important benchmark — we see that considering college-level readiness, 35.5 percent of students are at that standard. But only 17.6 of African-American students are at that level, and 29.7 percent of Hispanic students. The performance is worse for math, and worse again at eighth grade for both subjects.

I don’t think this is “highly successful,” and I don’t see how Wilson is proud of this legacy. Except: He’s part of the public school establishment, which vigorously protects itself from any meaningful competition.

Kansas school assessments for Wichita. Click for larger.

The Wichita Eagle on Kansas sales tax exemptions

The Wichita Eagle editorial board writes an editorial that gives false hope to advocates of more taxation and more spending.

Advocates of eliminating sales tax exemptions in Kansas point to the great amount of revenue that could be raised if Kansas eliminated these exemptions, given at about $6 billion per year, according to a recent Wichita Eagle editorial.1

Analysis of the nature of the exemptions and the amounts of money involved, however, leads us to realize that the additional tax revenue that could be raised is much less than spending advocates claim, unless Kansas was to adopt a severely uncompetitive, and in some cases, unproductive and harshly regressive tax policy.

The unsigned editorial notes this: “And sales tax exemptions are costing the state a fortune — about $6 billion a year.” For context, general fund spending in Kansas is about the same amount. That’s a lot of money. Further, the tone of the sentence calls for more taxation so that government can spend more. In a previous op-ed on this topic Phillip Brownlee, opinion page editor for the Eagle, wrote ” And with each added exemption, the state is losing out on more revenue — $5.9 billion this fiscal year, according to the Kansas Department of Revenue. That’s money the state could be using to cover its budget shortfalls, increase funding to public schools or further reduce its income-tax rates.” At least he mentioned reducing other tax rates. Usually advocates of closing sales tax exemptions simply want more tax money to spend.

In 2015 I looked at the nature of Kansas sales tax exemptions, using data from 2014. The numbers would be a different if I repeated the analysis today. But not different by much, and the same conclusions apply.

Kansas sales tax exemptions, simplified. Click for larger version.
Kansas sales tax exemptions, simplified. Click for larger version.
We need to look at the nature of these exemptions. I’ve prepared a simplified table based on data from the Kansas Department of Revenue.2 I simplified because there are many deductions that probably should be eliminated, but they represent relatively small amounts of money.

Some sales tax exemptions are for categories of business activity that shouldn’t be taxed, at least if we want to constrain the state to a retail sales tax only. An example is exemption 79-3606 (m), described as “Property which becomes an ingredient or component part of property or services produced or manufactured for ultimate sale at retail.” The tax that could be collected, should the state eliminate this exemption, is given as $3,083.24 million ($3,083,240,000).

But this exemption isn’t really an “exemption,” at least if the sales tax is a retail sales tax designed to be levied as the final tax on consumption. That’s because these goods aren’t being sold at retail. They’re sold to manufacturers who use them as inputs to products that, when finished, will be sold at retail. Most states don’t tax this type of sales. If Kansas decided to tax these transactions, it would place our state’s manufacturers at a severe disadvantage compared to almost all other states.

There are two other exemptions that fall in this category of inputs to production processes, totaling an estimated $632 million in lost revenue. Another similar exemption is “Machinery and equipment used directly and primarily in the manufacture, assemblage, processing, finishing, storing, warehousing or distributing of property for resale by the plant or facility.” Its value is nearly $159 million.

Together, these exemptions account for $3,874 million of the $5,900 million in total exemptions.

It’s curious that the Eagle editorial did not mention these sales tax exemptions and the disadvantage that taxing these transactions would create. The authors — Brownlee, likely — did mention how other sales taxes would affect Kansas: “For example, eliminating the exemption on legal and accounting services could put Kansas at a competitive disadvantage, as other states don’t tax those services.”

Another big-dollar exemption is “items already taxed” such as motor fuel. This is an estimated $318.90 million loss in revenue. Other exemptions are purchases made by government, or purchase made by contractors on behalf of government. These exemptions account for an estimated $624.90 million in lost revenue. If these two exemptions were eliminated, the government would be taxing itself, with no net gain.

Not taxing prescription drugs means lost revenue estimated at $96.49 million. If the state started taxing residential and agricultural use utilities, it could gain an estimated $169.98 million. These taxes, like the sales tax on food and the motor fuel tax, fall hardest on low-income families. As Kansas is one of the few states to tax food, do we want to make life even more difficult for low-income households?

Adding these exemptions comes to about $5,084 million. There are other exemptions for which we could make similar arguments for their retention. What’s left over — the exemptions that really should not exist — isn’t much at all. The entire category of “Exemptions to Charitable Organizations by Name.” amounts to $3.05 million in exempted sales tax. These represent the organizations where a lawmaker has crafted an exemption like “Property and services purchased by Jazz in the Woods and sales made by or on behalf of such organization.”

So when the Eagle editorial board writes “As is, favored groups are saving billions of dollars a year, worsening the tax burden for everybody else,” It must be including broad categories of business like “all Kansas manufacturing companies” as a “favored group.” Or maybe he means prescription drug users are a “favored group.” Or families struggling to pay utility bills.

But there are more problems. The Eagle editorial board writes these sales tax exemptions are “costing the state a fortune.” The only way this makes sense is if one thinks that our property (our money) first belongs to the state, and that in order to spend it, we have to give the state its cut. That’s an opinion that you may agree with, or you may oppose. What’s remarkable — shocking, really — is that in his previous career Brownlee — the opinion page editor — was a Certified Public Accountant. He ought to understand the nature of sales taxes meant to be applied to retail sales, not components of manufactured goods.


Notes

  1. Eagle Editorial Board. Reduce sales-tax exemptions. Wichita Eagle, February 3, 2017. http://www.kansas.com/opinion/editorials/article130438759.html.
  2. Kansas Department of Revenue. Annual Reports. http://www.ksrevenue.org/annualreport.html.

WichitaLiberty.TV: Wichita and Kansas economics, and government investment

In this episode of WichitaLiberty.TV: Wichita sells a hotel, more subsidy for downtown, Kansas newspaper editorialists fall for a lobbyist’s tale, how Kansas can learn from Arizona schools, and government investment. View below, or click here to view at YouTube. Episode 131, broadcast October 30, 2016.

Shownotes

Kansas construction employment

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

When investigating the claims of a lobbying group, Kansas Policy Institute found that the statistics — when examined closely — do not support the narrative the group promotes. Unfortunately, the Wichita Eagle editorial board did not examine the group’s claims closely enough to determine their validity.

Kansas Construction Employment, 12-Month Moving Average. Click for larger.
Kansas Construction Employment, 12-Month Moving Average. Click for larger.

At issue is the claim that transfers from the Kansas highway fund have lead to the loss of highway construction jobs. It’s repeated not only by the state’s highway construction lobbyists, but also by others. The statistics that are cited deserve further investigation, which is what KPI did on its article Media and highway contractors mislead again. KPI’s Dave Trabert found:

Had the Eagle bothered to examine Mr. Totten’s claim, they would have learned that only 2 percent of the construction job decline was attributable to highway construction and that the loss of 100 jobs is less than 1 percent of total highway jobs.

In addition to learning that Mr. Totten was grossly exaggerating, they would have learned that employment for construction of new homes and non-residential buildings showed very nice growth and the real problem is in specialty trade contractors for non-highway projects.

Trabert is referring to the Wichita Eagle editorial board citing figures from a self-interested lobbying group — in this case, Bob Totten, executive vice president of the Kansas Contractors Association — without investigating the true nature of the figures.

KDOT spending on major road programs. Click for larger version.
KDOT spending on major road programs. Click for larger version.
I’ve taken the same numbers from the Bureau of Labor Statistics. Because these values are available only in not seasonally adjusted form, I’ve created a chart using the moving average of the past 12 months. A second chart shows the change from the same month of the previous year. The charts confirm what KPI found, which is employment in the “Heavy and Civil” category is not responsible for the decline in Kansas construction jobs. In fact, employment in this category is on an upward trend over the past 18 months. It is employment in the category “Specialty Trade” that has fallen. This isn’t related to highway construction.

This data is available in an interactive visualization which you may access here. For more information on highway spending in Kansas, see Kansas highway spending.

Kansas Construction Employment, Change From Year Before. Click for larger.
Kansas Construction Employment, Change From Year Before. Click for larger.

Intrust Bank Arena loss for 2015 is $4.1 million

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

The true state of the finances of the Intrust Bank Arena in downtown Wichita are not often a subject of public discussion. Arena boosters cite a revenue-sharing arrangement between the county and the arena operator, referring to this as profit or loss. But this arrangement is not an accurate and complete accounting, and hides the true economics of the arena. What’s missing is depreciation expense.

There hasn’t been much talk of the arena’s finances this year. But in February 2015 the Wichita Eagle reported: “The arena’s net income for 2014 came in at $122,853, all of which will go to SMG, the company that operates the facility under contract with the county, Assistant County Manager Ron Holt said Wednesday.” A reading of the minutes for the February 11 meeting of the Sedgwick County Commission finds Holt mentioning depreciation expense not a single time.

Payments by Intrust Bank Arena to Sedgwick County, tableIn December 2014, in a look at the first five years of the arena, its manager told the Wichita Eagle this: “‘We know from a financial standpoint, the building has been successful. Every year, it’s always been in the black, and there are a lot of buildings that don’t have that, so it’s a great achievement,’ said A.J. Boleski, the arena’s general manager.”

I didn’t notice the Eagle opinion page editorializing this year on the release of the arena’s profitability figures. So here’s an example of incomplete editorializing from Rhonda Holman, who opined “Though great news for taxpayers, that oversize check for $255,678 presented to Sedgwick County last week reflected Intrust Bank Arena’s past, specifically the county’s share of 2013 profits.” (Earlier reporting on this topic in the Eagle in 2013 did not mention depreciation expense, either.)

All of these examples are deficient in some way, and contribute only confusion to the search for truthful accounting of the arena’s finances. As shown below, recognizing depreciation expense is vital to understanding profit or loss, and the “net income” referred to above doesn’t include this. In fact, the “net income” cited above isn’t anything that is recognized by standard accounting principles.

The problem with the reporting of Intrust Bank Arena profits

There are at least two ways of looking at the finance of the arena. Most attention is given to the “profit” (or loss) earned by the arena for the county according to an operating agreement between the county and SMG, a company that operates the arena.1

This agreement specifies a revenue sharing mechanism between the county and SMG. For 2105, the accounting method used in this agreement produced a profit of $1,150,206, to be split (not equally) between SMG and the county. The county’s share was $375,103.

While described as “profit” by many, this payment does not represent any sort of “profit” or “earnings” in the usual sense. In fact, the introductory letter that accompanies these calculations warns readers that these are “not intended to be a complete presentation of INTRUST Bank Arena’s financial position and results of operations and are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America.”2

That bears repeating: This is not a reckoning of profit and loss in any recognized sense. It is simply an agreement between Sedgwick County and SMG as to how SMG is to be paid, and how the county participates.

A much better reckoning of the economics of the Intrust Bank Arena can be found in the 2015 Comprehensive Annual Financial Report for Sedgwick County.3 This document holds additional information about the finances of the Intrust Bank Arena. The CAFR, as described by the county, “… is a review of what occurred financially last year. In that respect, it is a report card of our ability to manage our financial resources.”

Regarding the arena, the CAFR states:

The Arena Fund represents the activity of the INTRUST Bank Arena. The facility is operated by a private company; the county incurs expenses only for certain capital improvements or major repairs and depreciation, and receives as revenue only a share of profits earned by the operator, if any, and naming rights fees. The Arena Fund had an operating loss of $4.1 million. The loss can be attributed to $4.4 million in depreciation expense.

Financial statements in the same document show that $4,443,603 was charged for depreciation in 2015, bringing accumulated depreciation to a total of $30,791,307.

Depreciation expense is not something that is paid out in cash. Sedgwick County didn’t write a check for $4,443,603 to pay depreciation expense. Instead, depreciation accounting provides a way to recognize and account for the cost of long-lived assets over their lifespan. It provides a way to recognize opportunity costs, that is, what could be done with our resources if not spent on the arena.

But not many of our public leaders recognize this. In years past, Commissioner Dave Unruh made remarks that show the severe misunderstanding that he and almost everyone labor under regarding the nature of the spending on the arena: “I want to underscore the fact that the citizens of Sedgwick County voted to pay for this facility in advance. And so not having debt service on it is just a huge benefit to our government and to the citizens, so we can go forward without having to having to worry about making those payments and still show positive cash flow. So it’s still a great benefit to our community and I’m still pleased with this report.”

Earlier in this article we saw examples of the Sedgwick County Assistant Manager, the Intrust Bank Arena manager, and several Wichita Eagle writers making the same mistake.

Intrust Bank Arena commemorative monument
Intrust Bank Arena commemorative monument
The contention — witting or not — of all these people is that the capital investment of $183,625,241 (not including an operating and maintenance reserve) in the arena is merely a historical artifact, something that happened in the past, something that has no bearing today. There is no opportunity cost, according to this view. This attitude, however, disrespects the sacrifices of the people of Sedgwick County and its visitors to raise those funds. Since Kansas is one of the few states that adds sales tax to food, low-income households paid extra sales tax on their groceries to pay for the arena — an arena where they may not be able to afford tickets.

Any honest accounting or reckoning of the performance of Intrust Bank Arena must take depreciation into account. While Unruh is correct that depreciation expense is not a cash expense that affects cash flow, it is an economic fact that can’t be ignored — except by politicians, apparently. The Wichita Eagle aids in promoting this deception.

We see our governmental and civic leaders telling us that we must “run government like a business.” Without frank and realistic discussion of numbers like these and the economic facts they represent, we make decisions based on incomplete and false information.


Notes

  1. Management Agreement between Sedgwick County and SMG. August 1, 2007. Available here.
  2. The Operations of INTRUST Bank Arena, as Managed by SMG. December 31, 2015. Available here.
  3. Sedgwick County. Comprehensive Annual Financial Report of the County of Sedgwick, Kansas for the Year ended December 31, 2015. Available here.

Wichita Eagle opinion watch

Another nonsensical editorial from the Wichita Eagle.

Stop messing with Sedgwick County ZooThis is contained in an editorial urging Sedgwick County government to “stop messing” with the zoo.1

Nor is there any justification for a “non-disparagement clause” in the proposed operating agreement about the zoo director’s public statements, including a prohibition against doing anything to bring the county or society “unwanted or unfavorable publicity.” Even if the county is right — and the society wrong — about the constitutionality of such a gag rule on a public employee, it’s an insult to longtime director Mark Reed’s professionalism and another case of the county trying to pre-empt criticism and punish critics.

It’s common for employees, especially those in managerial and executive positions, to have such agreements. Companies don’t want their employees bad-mouthing the company. I would not be surprised if Holman herself has such an agreement with her employer, the Wichita Eagle. Even if there is no such agreement, can you imagine how long she would last in her job if she started complaining in public about her low pay, her drab office, how her editor censors her best editorials, the crappy publisher, etc.

Employees have protection through whistleblower laws, so if there is corruption or criminality, employees can report it. And the fact that the zoo director is a government employee: I don’t know if that makes a difference, constitutionally speaking.

  1. Holman, Rhonda. Stop messing with Sedgwick County Zoo. Wichita Eagle, July 20, 2016. Available at www.kansas.com/opinion/editorials/article90624332.html.

WichitaLiberty.TV: News media, hollow Kansas government, ideology vs. pragmatism

In this episode of WichitaLiberty.TV: New outlets for news, and criticism of the existing. Is Kansas government “hollowed out?” Ideology and pragmatism. View below, or click here to view at YouTube. Episode 124, broadcast July 17, 2016.

Shownotes

Wichita mayor’s counterfactual op-ed

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

In the pages of the Wichita Eagle Wichita Mayor Jeff Longwell wrote: “The city of Wichita has held its mill levy steady for the past 22 years.”1

That’s the mayor’s opinion. The facts, as can be easily found in government documents, are that the Wichita mill levy rises nearly every year.2 Since 2005 it has risen every year.

Change in Wichita mill levy rates, year-to-year and cumulative. Click for larger version.
Change in Wichita mill levy rates, year-to-year and cumulative. Click for larger version.
The mayor, city council, and bureaucrats say they have not taken action to raise the mill levy. They also say the mill levy is set by the county. All this is true.

But the county sets the mill levy based on two factors, one the city controls: The amount it decides to spend. The other factor, the assessed valuation of property, is not controlled by the city. So it is understandable that the mill levy may vary by small amounts from year to year when the two numbers are melded to form the actual mill levy. Some years the levy might rise, and in some years, it may fall. If it is a truly random matter, we should expect that over time the number of rising years and falling years should be equal, and that the overall change should be near zero.

But in Wichita, the mill levy rises nearly every year. And over time, since 1995, it has risen by 4.46 percent.

Wichita mill levy, percent dedicated to debt service. Click for larger version.
Wichita mill levy, percent dedicated to debt service. Click for larger version.
(Besides that, there has been a shift in the application of property tax revenue, with revenue was diverted from debt service to current spending. As recently as 2007 the city devoted 31 percent of property tax revenue to debt service. In 2015 it was 26 percent.)

What should concern Wichitans about their mayor’s op-ed is that he knows these facts. Or, at least he should. Despite the data that is readily available in the city’s comprehensive annual financial reports, Mayor Longwell has chosen to remain misinformed and/or uninformed, and to spread that to citizens.

Following are excerpts from the minutes of the August 7, 2012 council meeting, which Jeff Longwell attended as council member, and following that, video.

Wichita City Council, August 7, 2012

Bob Weeks 2451 Regency Lakes Court stated we say the City has not raised its mill levy in a long time and thinks it is true that this Council has not taken action to raise the mill levy, but it has increased. Stated in 2002 the City’s mill levy was 31.845 and last year 32.359, which is an increase of about half a mill or 1.6 percent. Stated we should also recognize that property tax revenue increased from about $83 million to $118 million dollars or 42 percent. Stated we did not experience anything near that in the rate of growth of population or inflation? even the two put together. Stated in the City sales tax collection for the same years, $41 million to about $55 million or 34 percent increase. Stated City revenues have increased quite a bit even though the Council has not taken explicit action to increase either the sales tax rate or the property tax rate. Stated another thing he is concerned about is shifting one mill of property tax revenue from the debt service fund to the general fund. Stated over the past years since 2007 there has been a shift of about 2.5 mills, which is more than the explicit policy of one mill, which will be ending over the next two years. Stated we have not delayed paying off debt in the sense that we have not made our scheduled bond payments but that 2.5 mills could have been used to retire debt instead of supporting current spending. Stated we could have repurchased some of our outstanding bonds or we could have used that money to pay for things that we borrowed for. Stated we need to realize that we have been not taking advantage of opportunities to retire longterm debt and had been redirecting that spending to current fund spending, which is where Cowtown and the Nature Center come from. Stated we need to be aware of these types of things as we make the policies going forward.

Mayor Brewer asked staff to explain the figures that Mr. Weeks was talking about.

Kelly Carpenter Finance Director stated regarding the mill levy, they started out at 10 mills in the capital improvement plan. Stated they reduced that down to 7.5 mills and now we are gradually increasing that mill levy back up in the debt service fund to 8.5 mills over the next two years.

Council Member O’Donnell stated he was referring that the mill levy has actually increased.

Kelly Carpenter Finance Director stated the overall mill levy has not increased within the last 19 years. Stated there has been a shift between the general fund and the debt service fund but the overall mill levy of the 32 mills has not increased.

Council Member O’Donnell asked Mr. Weeks to return to the podium and asked where his figures are from.

Bob Weeks stated from the 2011 Comprehensive Annual Financial Report, page H17. Stated they are the numbers that he extracted from that report. Stated it may not be that this Council took an action to raise the mill levy but somehow it did increase.

Council Member O’Donnell asked staff to answer that.

Mark Manning Finance Department the mill levy is set by the county and what they tell the Council each year is that the mill levy in the proposed budget is not changed from the mill levy certified by the county, the prior year. Stated they do not know what the mill levy will be for 2013 right now and will not know until November when the county finalizes its evaluation. Stated it may be slightly higher or lower and that is why you see those annual fluctuations. Stated Mr. Weeks is correct? some years it goes up and some years it goes down a little bit. Stated it does fluctuate and there is nothing we can do to control that but the general policy has been to keep it level for the last 19 years.

  1. Mayor Jeff Longwell: Property tax lid needs exemption for public safety. Wichita Eagle. Available at www.kansas.com/opinion/opn-columns-blogs/article74286642.html.
  2. Weeks, Bob. Wichita property tax rate: Up again. Voice For Liberty in Wichita. Available at.wichitaliberty.org/wichita-government/wichita-property-tax-rate-up-again/.

WichitaLiberty.TV: Trump and the Wichita Eagle, property rights and blight, teachers union, and capitalism

In this episode of WichitaLiberty.TV: Was it “Trump” or “Bernie” that incited a fight, and how does the Wichita Eagle opine? Economic development in Wichita. Blight and property rights. Teachers unions. Explaining capitalism. View below, or click here to view at YouTube. Episode 117, broadcast April 24, 2016.

‘Trump, Trump, Trump’ … oops!

An event in Wichita that made national headlines has so far turned out to be not the story news media enthusiastically promoted.

When two Wichita State University students — one a Muslim and also a student leader — reported they were victims of a hate crime, national news media took up the story. A Washington Post headline read “‘Trump! Trump! Trump!’ attacker allegedly yelled as he beat Hispanic man, Muslim student.” USA Today headlined with “Muslim student claims attacker yelled ‘Trump, Trump!”

From the Wichita Eagle: “A Muslim student at Wichita State University says he and a Hispanic friend, who also is a student, were attacked over the weekend by a man who shouted racial epithets and ‘Trump, Trump, Trump’ before riding away on his motorcycle.” 1

The Kansas chapter of the Council on American-Islamic Relations (CAIR-Kansas) demanded that the incident be investigated as a hate crime.

On this matter, Wichita Eagle editorialist Rhonda Holman opined “Yet, regrettably, Wichita is making national headlines this week for an incident early Saturday at the KwikShop at 21st and Oliver that’s being investigated by the Wichita Police Department as a hate crime. … As described, the deplorable incident further confirms that GOP front-runner Donald Trump’s divisive, nativist talk is finding an audience willing to not only vote for him but also target Muslims and ethnic minorities for verbal abuse and even violence.” 2

But now it is reported that one of the two student “victims” has been charged with a crime. 3 The police report charges that one of the students — not the Muslim student — “provoked another to commit battery or breach of peace by shouting ‘Bernie Sanders’ at Joseph Bryan, rolling up his sleeves and stepping toward him.” 4 Bryan, who is the motorcycle rider alleged to have used the word “trump” in a hateful manner — has been charged, also. But apparently not for using the word “trump,” as that word does not appear in the police report. No one has been charged with a hate crime.

Complaint against Christian Saldana-Banuelos

So shouting “Bernie Sanders” doesn’t seem to rise to the level of a hate crime, while yelling “Trump” does. Go figure.

But there’s something else. The Wichita Eagle jumped all over this story, both the newsroom and opinion page. But so far I haven’t seen an Eagle story on the actual charges that have been filed. (Oh. As I write this, the Eagle has belatedly filed a small story.)

Now we have to wait and wonder whether the Eagle editorial staff will walk back its — shall we say, “regrettable” — conclusions drawn before facts were known.

Who knows what really happened? Does it really matter? Does a scuffle involving three young people in Wichita rise to the level of national news, and does it really say much about the state of race relations in America?

But if the police report accurately describes the event, I have to wonder what charges will be filed against the two WSU student “victims” for lying to the police and the public. Will the Eagle editorial board pursue this deception with the same enthusiasm it showed for covering the original purportedly “deplorable” act?

  1. Morrison, Oliver. Muslim student at Wichita State reports attack by man shouting ‘Trump, Trump, Trump”. Wichita Eagle, March 14, 2016. Available at www.kansas.com/news/local/crime/article65903602.html.
  2. Holman Rhonda. Stand up to intolerance and hate. Wichita Eagle, March 15, 2016. Available at www.kansas.com/opinion/editorials/article66248057.html.
  3. Farris, Deb. WSU students accused of provoking fight KAKE Television. Available at www.kake.com/home/headlines/Students-accused-of-provoking-fight-they-called-hate-crime-376138421.html.
  4. Wichita Municipal Court. Available at lintvksnw.files.wordpress.com/2016/04/charging-documents.pdf.

What else can Wichita do for downtown companies?

With all Wichita has done, it may not be enough.

Within a month, these two headlines appeared in the opinion pages of the Wichita Eagle:

Investment in downtown Wichita is impressive 1

State and local leaders need to help meet Cargill’s needs 2

The second headline was in response to the news story “Cargill plans to move its Wichita headquarters — but where?” 3 In this story, Carrie Rengers reports “Cargill is looking to move its Wichita headquarters, but whether that’s within downtown, where it already is, or outside of it or even outside of Kansas is unclear. … City and state officials are working in full gear to make sure Wichita — downtown specifically — is the option Cargill selects.”

Rengers reports that Wichita city officials say no specific incentives have been offered to Cargill, but “any incentives likely would involve infrastructure help, such as with parking, or assistance with easing the process for a new building, such as with permitting.” Wichita Mayor Jeff Longwell says “cash incentive won’t be an option,” according to Rengers.

A Cargill official says that the company needs to attract millennials and younger people, who are not attracted to “traditional office space and office-type buildings.”

Now, consider the first opinion headline: “Investment in downtown Wichita is impressive.” In this op-ed, Phillip Brownlee writes “It’s encouraging that investment in downtown Wichita is continuing — and that it is mostly privately funded. A vibrant downtown is important to the city’s image and to attracting and retaining young adults. More than $1 billion in private and public investment has occurred downtown in the past decade. About $675 million of that investment has been privately funded, and $411 million has been public projects, according to Wichita Downtown Development Corp.”

Brownlee goes on to note other investments, such as 800 new apartment units “in the works.”

On the importance of downtown, Brownlee writes “City leaders have long recognized the value of a healthy downtown. Besides the symbolic importance of not having a lot of empty buildings, many young adults prefer an urban environment. That makes downtown important even for businesses not located there, because it can help or hurt their ability to recruit and retain young professionals.”

I see a discontinuity. Our city’s leaders — opinion, elected, and bureaucratic — brag about all the investment in downtown Wichita, public and private, yet it doesn’t seem to be enough to retain a major Wichita employer in downtown.

At least editorialist Rhonda Holman recognizes the problem in her column: “It’s concerning that Cargill’s stated intentions to relocate and consolidate have not included a commitment to remain downtown or even in Wichita or Kansas.” What is her solution? “Elected and business leaders need to be creative and assertive in helping Cargill meet its needs.”

I share Holman’s concern. It’s very troubling that with $411 million in private investment over the past decade, downtown Wichita still isn’t attractive enough to retain Cargill, if the company’s intent to move is real and genuine. And advising the same group of people who have been in power during the decline of the Wichita economy to be “creative and assertive” is a solution?

What’s even more disconcerting is that the person who has overseen much of this downtown spending has been promoted. Now Jeff Fluhr of Wichita Downtown Development Corporation is president of Greater Wichita Partnership, with responsibility “to grow the regional economy.”

Forgive me if I’m underwhelmed.

Regulation
One of the things that may be offered to Cargill, according to Rengers, is “assistance with easing the process for a new building, such as with permitting.” This is a big red flag on a very tall flagpole. If the city has regulations so onerous that they are a consideration as to whether to locate in Wichita, this is something that must be fixed immediately. But the instinct of the Wichita City Council and city bureaucrats is to create more regulations covering everything from the striping of parking lots to the personal hygiene of taxi drivers.

Cash incentives
Mayor Longwell says there will be no cash incentives offered to Cargill. Instead, something like help with parking may be offered. This might take the form of building a parking garage for Cargill. We should ask: What is the difference between giving cash to Cargill and building a parking garage for Cargill’s use? There really isn’t a meaningful difference, except for Cargill. That’s because cash incentives are taxable income. Free use of a parking garage isn’t taxable. 4 5

Further, Cargill may qualify for PEAK, or Promoting Employment Across Kansas.6 This program allows companies to retain 95 percent of the payroll withholding tax of employees. The original intent of this program was to lure companies to locate in Kansas, but in recent years the program has been expanded to include incentivizing companies to remain in Kansas. While this is a state program and not a city program under the mayor’s control, PEAK benefits are more valuable than cash.


Notes

  1. Brownlee, Phillip. Investment in downtown Wichita is impressive. Wichita Eagle. March 5, 2016. Available at www.kansas.com/opinion/editorials/article64129977.html.
  2. Holman, Rhonda. State and local leaders need to help meet Cargill’s needs. Wichita Eagle. April 1, 2016. Available at www.kansas.com/opinion/opn-columns-blogs/now-consider-this/article69534982.html.
  3. Rengers, Carrie. Cargill plans to move its Wichita headquarters — but where? Wichita Eagle. March 29, 2016. Available at www.kansas.com/news/business/biz-columns-blogs/carrie-rengers/article68700517.html.
  4. Journal of Accountancy, (2009). Location Tax Incentive Not Federal Taxable Income. Available at: www.journalofaccountancy.com/issues/2009/apr/locationtaxincentive.html.
  5. American Institute of CPAs, (2015). Federal Treatment of State and Local Tax Incentives. Available at: www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2008/CorpTax/Federaltreat.jsp.
  6. Weeks, Bob. In Kansas, PEAK has a leak. Voice For Liberty in Wichita. Available at wichitaliberty.org/kansas-government/kansas-peak-leak/.

Kansas support for higher education

How does Kansas state support for higher education compare to other states?

In the Wichita Eagle, Chapman Rackaway contributes a satirical look at Kansas Governor Sam Brownback and his handling of Kansas government. And, the governor deserves many of Rackaway’s jabs. But there is something that needs clarification, which is the contention that Kansas is a backwater state when it comes to higher education funding, at least compared to Washington state. (Chapman Rackaway: How about Brownback as K-State president?, April 8, 2016.)

Rackaway writes: “That Washington State could pay [departing Kansas State University president Kirk] Schulz so much more is unsurprising to anyone paying attention to states’ budget priorities.” He goes on to write that Kansas government has not prioritized higher education funding, and that Washington state recently committed to additional higher education support.

There are organizations that collect and present data on this topic. State Higher Education Executive Officers Association publishes a report titled State Higher Education Finance (SHEF) study 1 The figures used below are for the most recent year for which data is available.

According to this report, in fiscal year 2014, Kansas appropriated $5,648 per FTE. Washington’s figure is $5,700, or 0.9 percent more than Kansas. Over the past five years, Kansas appropriations per FTE fell by 15.8 percent. In Washington they fell by 20.6 percent. (Table 5)

For fiscal year 2013, higher education support per capita in Kansas was $342. In Washington, it was $197. The same table also reports higher education support per $1000 of personal income. In Kansas the figure is $7.70, and in Washington, $4.13. For Kansas, these two figures are 132 percent and 133 percent of the national average. (Table 10)

From these two data points — and these are not the only ways to compare — I think we can conclude that Kansas appropriates nearly as much as does Washington, on a per-student basis.

Further, Kansans are much more generous in supporting its public universities, when measured by per-capita contribution. (Calling Kansans generous with their taxes is a falsehood, as taxation has nothing to do with generosity, except the generosity of politicians with money that belongs to other people.)


Notes

  1. State Higher Education Executive Officers Association. State Higher Education Finance (SHEF) study. Available at www.sheeo.org/sites/default/files/project-files/SHEF%20FY%202014-20150410.pdf.

WichitaLiberty.TV: Markets or government, legislative malpractice, and education reform

In this episode of WichitaLiberty.TV: Do corporations prefer markets or big government? Legislative malpractice in Kansas. Education reform, or lack thereof. View below, or click here to view at YouTube. Episode 115, broadcast April 3, 2016.

WichitaLiberty.TV: Bob’s shaking his head, Wichita water woes, and the harm of teachers unions

In this episode of WichitaLiberty.TV: There are a few things that make Bob wonder. Then, a troubling episode for Wichita government and news media. Finally, the harm of teachers unions. View below, or click here to view at YouTube. Episode 114, broadcast March 27, 2016.

Wichita Eagle, where are you?

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

In November 2014 Wichita voters rejected a proposed Wichita city sales tax. The largest portion of that tax, $250 million, would have gone towards expanding the capacity of the Aquifer Storage and Recharge, or ASR, project.

The Wichita Eagle editorial board urged voters to approve the tax. It told readers that spending $250 million on ASR would “assure a future for Wichita with enough water.” “The needs are clear,” the editors wrote, adding “Investing in the aquifer project seems the best thing to do to anticipate and meet Wichita’s water needs.” The Eagle warned of “much higher water rates” if the sales tax is not passed.

Since voters rejected the tax to support that spending, the cost of providing adequate water has dropped, and dropped a lot. But you wouldn’t know that by reading the Wichita Eagle or by relying on our city’s other mainstream news media.

If you viewed a Wichita City Council workshop on December 1, however, you’d have learned that the city can provide adequate water for much less than $250 million. The rise in water bills will also be much less than what the Eagle and the city used to frighten voters into approving the sales tax.

So why hasn’t the Wichita Eagle reported on the December 1, 2015 workshop, in which Director of Public Works and Utilities Alan King presented the new plans — plans which will cost much less? Why have there been no editorials celebrating that we can provide adequate water at much less expense?

I can understand the editorial writers not wanting to admit they had been duped. That’s human nature. But for the news division of the Eagle: Why no reporting on this?

As it happens, the newsroom of the Eagle was also a cheerleader for the sales tax and ASR project. As an example, the Eagle printed a fact check article that disputed claims made by opponents of the tax. When asked why there was not a similar fact check article on the proponents, the reporter said there were no errors to be found. Nothing. That was incredulous — unbelievable — at the time. There were many questionable claims made by sales tax proponents. In hindsight, we are even more certain of that.

Tubs of ink the Wichita Eagle could be using to tell us what we need to know.
Tubs of ink the Wichita Eagle could be using to tell us what we need to know.
The Eagle has plenty of reporting capacity, barrels of ink, and lots of online bandwith to report and editorialize on issues like who gets free parking at the Wichita airport. That’s important, perhaps, but trivial in terms of financial impact. But on this issue involving over $100 million in savings, there is silence.

The state’s largest newspaper has no good reason to avoid reporting and editorializing on an important issue. But that’s what the Wichita Eagle has done. We wonder why.

Small and weak government?

Do corporations prefer the marketplace or a large and powerful government?

A letter in the Wichita Eagle criticized the marketplace and the power that corporations purportedly hold over it. (Government needed, February 28, 2016). This letter refers to an op-ed by Charles Koch (Charles G. Koch: Sanders and I agree on a few issues, February 19, 2016, originally published in the Washington Post)

A few remarks:

The letter-writer states: “It was also no surprise to read that his solution is very small and weak government.” Reading the Koch op-ed to which the letter-writer refers, I didn’t see a call for weak government. Generally, libertarians favor a limited government that is strong in protecting our rights and liberties and exercising the enumerated powers outlined in the Constitution. A limited government is very different from a weak government.

The letter-writer states: “The very, very rich people and corporations do not check themselves. The marketplace system they embrace as the sole solution encourages the accumulation of more and more wealth and power — and using that power to accumulate more wealth.” With a few exceptions, corporations do not embrace the marketplace, if by marketplace the writer means a system of free markets. Instead, as Charles Koch correctly notes, most corporations seek to constrain and limit the power of free markets. Milton Friedman diagnosed the situation correctly: “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.”

It’s difficult to do the things that Friedman says business must do in a market economy — innovate, be customer-focused, and be efficient. It’s far easier to hire lobbyists at the federal, state, and local levels to gain an advantage over your competitors. The harm of this system of cronyism is explained by Koch: “Perversely, this regulatory burden falls hardest on small companies, innovators and the poor, while benefiting many large companies like ours. This unfairly benefits established firms and penalizes new entrants, contributing to a two-tiered society.” It is government, not markets, that are creating two tiers of society.

Another complaint of the writer is that the rich “fund the multitude of foundations and university professors to pitch their philosophy attacking public schools and other public services.” Well, some rich people do, and thank goodness for them. If not for the generosity of Koch and a few others in founding organizations like The Cato Institute, there might be few sources of information besides a self-serving government or those who benefit from an expansive, meddling government. The latter are the corporations that the letter-writer complains use the marketplace to gain more wealth and power, but in reality are using government to do this.

As far as funding university professors, this serves as a useful and valuable check to the multitudes of taxpayer-funded public university professors who indoctrinate and condition students to embrace more government. Shouldn’t college students be exposed to a variety of views? That doesn’t seem to be what students are receiving: “Academics, on average, lean to the left. A survey being released today suggests that they are moving even more in that direction. Among full-time faculty members at four-year colleges and universities, the percentage identifying as ‘far left’ or liberal has increased notably in the last three years, while the percentage identifying in three other political categories has declined.” (Moving Further to the Left, Inside Higher Ed, October 24, 2012)

Was Jesus a socialist, according to Crowson

If you’ve ever wondered when is the time to start ignoring Wichita Eagle editorial cartoonist Richard Crowson, perhaps the time is now.

Here’s what Lawrence Reed had to say on the topic of this cartoon: “The fact is, one can scour the Scriptures with a fine-tooth comb and find nary a word from Jesus that endorses the forcible redistribution of wealth by political authorities. None, period.”

For more from Reed on this topic, see his essay Rendering Unto Caesar: Was Jesus a Socialist?