2020 BLUEPRINT Moving Missouri Forward
ShowMeInstitute.org/Blueprint
Contents CERTIFICATE OF NEED 3 CHARTER SCHOOL EXPANSION 4 EARNINGS TAX 5 ECONOMIC DEVELOPMENT SUBSIDIES 6 EDUCATION FUNDING FORMULA 7 EDUCATION SAVINGS ACCOUNTS 8 INCENTIVE PAY FOR TEACHERS 9 INCOME TAX REFORM 10 LOW-INCOME HOUSING TAX CREDIT 11 MEDICAID 12 MoDOT FUNDING 13 OPEN COLLECTIVE BARGAINING 14 SCHOOL REPORT CARDS 15 SPECIAL TAXING DISTRICTS 16–17 SPENDING TRANSPARENCY 18 TEACHER RETIREMENT ACCOUNTS 19
CERTIFICATE OF NEED Patrick Ishmael
THE PROBLEM: Missouri’s Certificate of Need (CON) law restricts health care competition by requiring many health care providers to get state approval before entering new markets or expanding services offered in existing facilities. This restriction hampers innovative startups and market newcomers that would provide Missourians care. It also puts upward pressure on health care prices.
States without Certificate of Need Laws Thirteen states (blue) have either repealed or declined to enact certificate of need laws.
THE SOLUTION: Repeal the Certificate of Need law. Eliminating CON requirements would allow Missourians to benefit from true marketplace competition in the health care arena. WHO ELSE DOES IT? California, Colorado, Idaho, Kansas, New Hampshire, New Mexico, North Dakota, Pennsylvania, South Dakota, Texas, Utah, and Wyoming have no CON law.
Source: National Conference of State Legislatures.“CON-Certificate of Need Laws,” February 28, 2019.
THE OPPORTUNITY: Missouri would join a growing list of states that have opened the door to real health care competition. KEY POINTS • CON laws create a barrier between patients who need care and doctors who want to provide it. • More competition would create pressure to reduce health care prices. • Missouri would be able to compete with nearby states, including Kansas, where smaller hospitals are opening up because they aren’t restricted by CON laws. • CON reform is an opportunity to help communities threatened by the loss of existing hospitals. • Ending CON would empower patients to make choices that benefit their families.
SHOW-ME INSTITUTE RESOURCES Essay: “Demand Supply: Why Licensing Reform Matters to Improving American Health Care” Blog Post: “Missouri’s Certificate of Need Law Needs to Go”
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CHARTER SCHOOL EXPANSION Abigail Burrola THE PROBLEM: Demand for charter schools far outstrips supply. A 2014 survey of Missourians found that while 2 percent of children are enrolled in charter schools, 11 percent of parents said they would like to enroll their children in a charter school. Unfortunately, charter schools in Missouri are functionally limited to the Kansas City and City of Saint Louis school districts. Establishing a charter school is nearly impossible in any district that meets minimum state accreditation requirements. Charter schools are only allowed under strict conditions, meaning many families who want to attend one will not be able to do so.
over 3,000 charter schools in suburban, small town, and rural communities across the country.
THE SOLUTION: Expand charter schools statewide.
KEY POINTS
Charter schools should be allowed to have non-district sponsors, regardless of whether a district meets minimum state accreditation standards. Per-student funding should be the same for both charter school and traditional publicschool students. Charter school authorizers, such as the state Charter School Commission and universities, are already willing to authorize charter schools. Demand among families should determine where and when charter schools open in Missouri.
• Thousands of Missouri students are trapped in poor schools due to needless restrictions on school choice. • Allowing charter school expansion will meet demand from families. • Charter schools have a proven track record elsewhere in the country and in Missouri.
WHO ELSE DOES IT? Over 7,000 charter schools operate in 43 states, the District of Columbia, and Guam, serving more than 3.2 million students. Twenty-three states place no caps on the number of charter schools, and many fund charters and traditional public schools at equal or nearly equal levels. Unlike Missouri, almost all other states allow charter schools to operate anywhere. In fact, there are
Blog Post: “Charter Schools Are Working in Kansas City”
Charter Schools by Locale, Nationwide 2016–17 332
THE OPPORTUNITY: Charter schools are growing. Nearly 23,000 students were enrolled in 71 charter schools in Missouri for the 2017–18 school year. University Academy, one of the top-performing charter schools in the state, has a waiting list of 700 students. The demand is there. Simply by getting government out of the way, we can offer students a way out of underperforming schools and into schools they want to attend.
SHOW-ME INSTITUTE RESOURCES Essay: “Expanding Charter Schooling in Missouri”
Blog Post: “Charter Schools Can Exist in Rural Areas, Too” Podcast: “Education in Missouri Is Moving Backward” Podcast: “Charter Schools Could Be Coming to a Suburb Near You” Charter Schools by Authorizer Type, Nationwide 2016–17
508 22%
Urban 2,182
4,039
Suburban
4%
Town
Rural
10%
1%
15%
Higher Education Institution
Independent Chartering Board School District Municipality
48%
Non-Profit Agency State Education Agency
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EARNINGS TAX Corianna Baier and Patrick Ishmael
THE PROBLEM: Like state income taxes, local earnings taxes are harmful to economic growth, steering money from private investment and making cities less competitive compared to their regional and national neighbors. In Missouri, two cities have an earnings tax: Kansas City and St. Louis. Earnings taxes don’t just affect city growth; they harm the regional economies that have St. Louis and Kansas City at their center. They also affect the poor, taxing them on dollar one. THE SOLUTION: Repeal the earnings tax. Opponents have argued that eliminating the earnings tax would simply force equivalent taxes to be imposed elsewhere, but that isn’t necessarily the case. Under current law, should Kansas City or St. Louis vote not to renew its earnings tax, the tax would phase out over ten years, giving ample time for each city to gradually reorient its revenue strategy and reassess its spending priorities. Wasteful spending shouldn’t be supported with a new revenue stream—it should be eliminated. The earnings tax phase-out would facilitate that serious discussion. WHO ELSE DOES IT? Kansas City and St. Louis are the only cities in Missouri that impose an earnings tax. This type of tax is most commonly found in the Rust-Belt region of the country, but most cities, including most of the country’s largest cities, do not have earnings taxes.
businesses and talent. Moreover, businesses and residents in the region would have more incentive to move into those cities. Current residents would have a greater incentive to stay. KEY POINTS • Earnings taxes take money from the private sector at the very moment it’s earned, denying people the opportunity to invest that money in themselves or their businesses. • Earnings taxes aren’t just a Kansas City and St. Louis issue. Because these cities sit at the center of Missouri’s regional economic engines, their bad policies have negative ripple effects in economies elsewhere in the state. • Earnings taxes are a burden on the poor, who are taxed the full earnings tax rate on the first dollar they earn. SHOW-ME INSTITUTE RESOURCES Essay: “Updated Estimates on the Effects of Earnings Taxes on City Growth” Essay: “A New Tax Policy Vision for Missouri” Blog Post: “Missouri Suffers from the Saint Louis and Kansas City Earnings Taxes”
THE OPPORTUNITY: Kansas City and St. Louis would be able to compete on a more even playing field for
General Revenue Breakdown: Saint Louis 0.86%
General Revenue Breakdown: Kansas City 1.88%
1.36%
Business Tax 15.26%
15.83%
Property Tax 37.75%
Miscellaneous Tax
Property Tax
18.23%
Earnings Tax Sales Tax
30.31%
Business Tax
44.61% 33.93%
Earnings Tax Sales Tax Miscellaneous Tax
ECONOMIC DEVELOPMENT SUBSIDIES Patrick Tuohey THE PROBLEM: Excessive use of economic development subsidies has diverted much-needed tax revenue to developers and away from schools and other public services. In the past 15 years, Saint Louis City alone has distributed $709 million originally intended for municipal services to developers via tax-increment financing (TIF) and tax abatement. Studies from across the country indicate that these subsidies fail to generate promised jobs and growth.
TIF in Saint Louis In St. Louis City, TIF projects, marked by white dots, appear more often in wealthy areas (red) than in poor areas (blue).
For a project to qualify for some subsidies, the city must declare a parcel of land “blighted,” but the standards for doing so are very low—developers can qualify for subsidies for undeveloped fields or for buildings that are merely vacant. Under the current definition even the governor’s mansion could be blighted! THE SOLUTION: Economic development reform.
Source: United States Census Bureau American Community Survey.
The legal definition of blight should be narrowed to ensure that only truly needy projects would qualify. Other reforms that would help rein in these giveaways include moving TIF decision-making to the county level, providing greater voice for other impacted taxing jurisdictions such as schools, and capping subsidies. WHO ELSE DOES IT? Various TIF and economic development reform efforts are underway in other states. California, which pioneered TIF in 1952, ended the existing program in 2012 due to the cost. THE OPPORTUNITY: Focusing state law on addressing actual blight and doing so in communities suffering from high unemployment and poverty will go a long way in making sure that public policy addresses real needs and doesn’t just reward the politically well connected.
KEY POINTS • TIF projects active in Missouri have collected almost $2.5 billion since their inception and do not deliver their promised benefits. • Many subsidies are not used in the economically depressed areas they were designed to assist. In Saint Louis, less than 25% of TIF spending occurs in the poorer half of the city. SHOW-ME INSTITUTE RESOURCES Policy Study: “Does Tax-Increment Financing Pass the ‘ButFor’ Test in Missouri?” Policy Study: “Tax-Increment Financing and Missouri”
EDUCATION FUNDING FORMULA Susan Pendergrass Missouri School Districts Using 2004 Property Values for Local Effort
Number of Districts
THE PROBLEM: Missouri’s school funding formula is not designed for 2020. The formula was last revised in 2004, with several “hold-harmless” provisions that have outlived their usefulness. According to one such provision, the local effort portion of the formula (the amount that districts are expected to raise through local property taxes) uses property values from 2005 unless those values have declined since then. However, the outdated 2005 values now skew fund distributions and often result in state money going to districts with very high property values.
154
2010
163
160
2011
2012
In addition, the formula funds charter school students at a lower level than their traditional public school counterparts, and there is a particular facet of the current formula that will result in charter school students being short-changed in their state funding. Specifically, the state does not fund charter schools directly; instead, public school districts remit a portion of their own state funding to charter schools within their boundaries. But if the amount due to charter schools exceeds a district’s total state funding, then the charter schools will receive less than the amount they are due.
184
175
2013
2014
196
196
193
195
2015
2016
2017
2018
THE OPPORTUNITY: Updating the property assessments with current values, along with updating eliminating the hold-harmless provisions, would help ensure that the funding formula accurately accounts for every district’s local effort. Giving charter school students access to all funding streams for traditional public school students and distributing funds to charter schools directly from the state would ensure more equitable treatment for charter school students.
THE SOLUTION: Revise the school funding formula.
KEY POINTS
The formula should adjust for property value assessments yearly. All hold-harmless provisions in the formula should be revisited. Finally, provisions for the funding of charter school students should be revised so that these students receive funding from the same sources as traditional public school students and are not negatively impacted by the share of charter school enrollment in a district.
• A student funding formula based on 2005 property values creates outdated, biased state funding patterns. • Charter school students are public school students, and they should be funded similarly to traditional public school students.
WHO ELSE DOES IT? Ten states offer equal access to all applicable federal and state funding to charter school students.
Policy Study: “A Primer on Missouri’s Foundation Formula For K-12 Public Education: 2017 Update.”
SHOW-ME INSTITUTE RESOURCES
Report: “Opportunities to Improve Missouri’s Education Funding Formula”
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EDUCATION SAVINGS ACCOUNTS Susan Pendergrass THE PROBLEM: Demand for school choice far outstrips supply. According to a 2014 survey, just 28 percent of Missouri parents of school-aged children would choose a traditional public school if they could choose any type of school for their child. The same survey found support levels of 60 percent or higher among registered voters for school vouchers, education savings accounts, and a taxcredit scholarship program. Missouri students need more options. Only 22 percent of Missouri high school graduates met the ACT College Readiness Benchmark in 2018.
Voucher, ESA, and Scholarship Tax Credit Programs
THE SOLUTION: Education savings accounts (ESAs). Tax-Credits, ESA, Tax-Credits, Voucher ESA, Voucher Tax-Credits, ESA ESAs are flexible-use savings accounts Voucher used solely for education purposes. Voucher None Tax-Credits ESA They could be funded through tax credits, whereby individuals Source: EdChoice, accessed at https://www.edchoice.org/school-choice/school-choice-in-amerior corporations would donate to ca/#map-overlay. organizations that manage these and no scholarships were awarded. Bryce’s Law will sunset in accounts. Families could use the funds to purchase school January 2020. supplies, tutoring services, or private school tuition.
WHO ELSE DOES IT?
KEY POINTS
Six states have ESA programs, and 17 states have tax credit–funded scholarships, including Kansas, Iowa, Illinois, Indiana, and Oklahoma.
• Missouri parents want and deserve more choice regarding their children’s education. • Many Missouri students are not being well prepared to succeed as adults. • ESAs could support many different types of students, like low-income gifted or bullied students.
THE OPPORTUNITY: Missouri is among a shrinking number of states without a private school choice program. It does, however, have a large stock of private schools and as many as 28,000 available seats. In 2014, the Missouri legislature recognized that children with disabilities need access to different educational options. The legislature created a scholarship program called Bryce’s Law, with the stated objective of providing children with certain disabilities scholarships to attend private institutions. Because the program was not structured properly, no money was donated
SHOW-ME INSTITUTE RESOURCES Essay: “Estimating the Fiscal Impact of a Tax-Credit Scholarship Program” Essay: “Bryce’s Law Revisited: Serving Missouri’s Neediest Students Through Targeted Scholarships”
INCENTIVE PAY FOR TEACHERS Susan Pendergrass THE PROBLEM: Missouri’s schools offer career and technical education (CTE) programs, but those programs do not adequately prepare students for a career if they don’t include an industryrecognized credential (IRC) upon completion. IRCs are tangible evidence that an applicant has the necessary skills for the job. CTE certificates issued by schools rather than industry groups do not carry as much weight with prospective employers as an IRC. Without an IRC, CTE students may have bought into a false promise of a job after graduation. THE SOLUTION: Teacher bonus pay for IRC completion.
INDUSTRY CERTIFICATION SUCCESS IN FLORIDA In the 2007–2008 school year Florida began an incentive program to encourage schools to offer industry certification programs to students. Percentage of Florida high school students enrolled in courses that lead to a qualifying industry certification.
Number of students earning qualifying industry certifications in Florida.
86,417
43% 1,873%
10,662%
2.2% 803
2007– 2016– 2007– 2016– The number of students who 2008 2017 2008 2017 obtain an IRC before leaving high school should be factored into a Source: ExcelinEd. Industry Certification Policy Brief, 2018. district’s weighted average daily attendance (WADA), which then requirements, students are not taking full advantage of them. affects its state funding allocation. Districts with successful Providing teacher bonus pay for students who attain an IRC CTE programs should receive additional money from the is a proven method to increase the number of students who state, and teachers should receive bonuses of $25 to $50 for leave school with a credential that employers value. each of their students who earn IRCs. This program would provide an incentive for teachers to encourage students to KEY POINTS pursue an IRC. A student who receives an IRC has a clear path to a job after graduation and is also better prepared for • Too many Missouri high school graduates leave school further education. unprepared for a career or college.
WHO ELSE DOES IT? Seven states currently have IRC teacher bonus pay policies. In Florida, 803 students had an IRC in the 2007–08 school year before the bonus pay was implemented. By the 2016–17 school year, the number of students who earned an IRC had jumped to over 86,000. THE OPPORTUNITY: Missouri already has CTE programming that offers IRC attainment, but only around 12 percent of high school seniors earned an IRC in 2018. While IRC tests are already an option to fulfill CTE
• Financial incentives to encourage students to pursue IRCs would lead to stronger CTE programs and reward CTE teachers for excellence in preparing students for success. SHOW-ME INSTITUTE RESOURCES: Blog Post: “What Can Credentials Get You?” Blog Post: “IRCs Open the Door to Career Opportunities” Podcast: What Is “Workforce Development?”
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INCOME TAX REFORM Corianna Baier and Patrick Ishmael
THE PROBLEM: Missouri’s economy has been stalled for almost two decades as startup growth has slowed and entrepreneurs and taxpayers are leaving the state. Missouri’s economy is shrinking relative to other states, ranking 44th in real GDP growth between 2008 and 2018. In the same period, Missouri’s compound annual GDP growth rate was 0.5 percent while growth for the United States was 1.8 percent. Missouri’s tax structure is a big part of the problem. Individual and corporate income taxes are destructive to the state’s economic growth, productivity, and wealth, encouraging taxpayers to move their work or investments elsewhere. This not only lowers economic output for the state, but also destabilizes revenue for state and local governments. THE SOLUTION: Reduce or eliminate the individual income tax. Lowering or eliminating individual income taxes increases take-home pay and business investment opportunities for Missourians. It will also make Missouri more competitive with other states, encouraging population growth through in-migration. WHO ELSE DOES IT? Seven states currently have no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Two other states, New Hampshire and Tennessee, levy income tax only on dividends and income from investments, though the tax in Tennessee will be eliminated by 2021. THE OPPORTUNITY: Income tax reductions could be achieved in several ways. Reductions in tax incentives and spending can provide the budgetary space to cut taxes. If the state imposes a sales tax on internet transactions, an income tax reduction for all Missourians can ensure that the combined adjustments to the tax code are revenue-neutral. Whatever the pathway, reducing an obstacle to state and personal income growth should be a high priority in efforts to jump-start Missouri’s economy.
REAL GDP GROWTH, MISSOURI AND NEIGHBORING STATES, 2008 TO 2018
Area
Growth
Ranking
United States Nebraska Oklahoma Tennessee Iowa Arkansas Illinois Kansas Kentucky Missouri
1.8 1.8 1.8 1.7 1.4 0.9 0.9 0.9 0.8 0.4
N/A 10 11 13 21 32 34 36 38 45
KEY POINTS • Missourians work hard for their money and deserve to keep what they earn. • Income taxes penalize and discourage work. • If you include the 1 percent earnings tax in our two biggest cities, Missouri has a top income tax rate of 6.4 percent, which is 20th highest in the nation. Our top income tax rate equals or exceeds those of many of our neighboring states. • A reduction in individual income taxes raises take-home pay and encourages more consumption of Missouri goods and services, making Missouri more competitive with other states. SHOW-ME INSTITUTE RESOURCES Essay: “The 49th State: Revisiting Missouri’s GDP Sector by Sector” Essay: “Taxes Matter and They’re Too High for Missouri” Essay: “A New Tax Policy Vision for Missouri”
LOW-INCOME HOUSING TAX CREDIT Elias Tsapelas
THE SOLUTION: Move on from the state’s low-income housing tax credit.
LIHTC Approved Units Per Year Halting the state’s contribution to the LIHTC program in 2017 (vertical line) does not appear to have negatively impacted the number of units approved for federally-subsidized construction. 2500
Units Approved
THE PROBLEM: Despite being halted more than two years ago, Missouri’s lowincome housing tax credit (LIHTC) program remains the state’s largest tax credit in terms of annual redemptions due to credits issued years ago that are still eligible to be claimed. Reports from the Missouri Housing Development Commission (MHDC), along with and academic research on the topic, show that the program fails to effectively improve the availability of affordable housing across the state. Nevertheless, efforts persist to revive the flawed program.
2000 1500 1000 500 0
2014 2015 2016 2017 2018 Data from the MHDC confirm that Missouri’s approach to subsidizing affordable housing development has not worked. Source: Missouri Housing Development Commission. Policymakers should forego resuming the state’s version of the program, and instead KEY POINTS implement new transparency and accountability measures for the federal LIHTC program to better understand why • Missouri’s LIHTC program is the state’s most expensive Missouri’s investment in the program failed to produce tax credit in terms of annual redemptions, and costs results. taxpayers more than $100 million per year. • For every $1 Missouri invests in the LIHTC program, WHO ELSE DOES IT? Thirty-five other states get by only $0.42 goes toward the actual construction of without providing a state low-income housing tax credit. affordable housing. Only 14 other states have programs that match federal • Since Missouri’s contribution to the program was stopped dollars for a state low-income housing tax credit, and prior more than two years ago, the amount of affordable to Missouri halting its annual contribution, it was the housing units being developed has not decreased but in second most generous in the country. fact has increased. THE OPPORTUNITY: While Missouri’s contribution to the LIHTC program is halted, the state needs a new SHOW-ME INSTITUTE RESOURCES approach to building affordable housing. Instead of Blog Post: “More Proof that Missouri’s LIHTC Doesn’t doubling down on a program that has historically failed to Work” deliver, policymakers should improve the administration of the federal LIHTC program and address the underlying Blog Post: “LIHTC 101: Program Basics” reasons that can make housing unaffordable in the first place, such as lessening the regulatory burden surrounding Blog Post: “No, Low-Income Housing Tax Credits Aren’t new construction. Effective”
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MEDICAID Elias Tsapelas and Patrick Ishmael
THE PROBLEM: Medicaid is Missouri’s single largest government-run program, and its costs continue to grow. The program is now growing faster than Missouri’s economy and now jeopardizes the state government’s ability to fund other public policy priorities such as roads and education. Expanding Medicaid under the Affordable Care Act before addressing this troubling cost trajectory could prove disastrous for the state. THE SOLUTION: Reform the Medicaid program. Instead of expanding Medicaid, steps should be taken to reform the program and ensure Missouri’s continued financial stability. To start, policymakers should address the program’s many misaligned incentive structures. Reforming Missouri’s outdated payment systems would improve quality of care, contain costs, and increase accountability. Additionally, applying for a waiver from the federal government to block grant the program’s federal funding would allow Missouri policymakers greater flexibility to administer the program in ways that best meet the needs of Missourians who rely on it. WHO ELSE DOES IT? Thirteen other states have refused to expand Medicaid under the Affordable Care Act. Most of those states have applied for a federal waiver to reform their state programs. Tennessee recently applied to receive federal Medicaid funding via block grant. THE OPPORTUNITY: Missouri’s own Department of Social Services commissioned an audit that offered a series of recommendations that would help control Medicaid spending growth. Further, the federal government has FY 2010 Operating Budget
18.4% 81.6%
indicated increased willingness to support state-based reforms to customize and improve the Medicaid program. KEY POINTS • Medicaid is Missouri’s largest government-run program, and its costs are growing unsustainably. • Each year that Medicaid grows faster than Missouri’s budget, the program jeopardizes the state’s ability to fund its other public policy priorities. • Reforming Missouri’s Medicaid payment structures would create incentives to improve quality of care, contain costs, and increase program accountability. • Following the lead of states like Tennessee and Florida, Missouri should apply for a federal waiver to allow greater flexibility in administering the state’s Medicaid program. • Block granting federal funding for Medicaid will put downward pressure on program spending by encouraging efficiencies and allowing those closest to patients more control over how funds are spent. SHOW-ME INSTITUTE RESOURCES Essay: “Medicaid in Missouri: Budgetary Impact and a Path Forward” Essay: “Move Missouri’s Medicaid Program Forward, Not Backward” Blog Post: “Opportunities for Medicaid Reform” Blog Post: “Medicaid is Stifling Economic Growth in Missouri” FY 2020 Operating Budget
37.2%
Total State Medicaid Rest of Budget
62.8%
Total State Medicaid Rest of Budget
MoDOT FUNDING Graham Renz and Patrick Tuohey
THE SOLUTION: User fees. User fees are about having the people who use things pay for them. That means the people driving on the roads are the ones who pay for the roads. Raising Missouri’s fuel taxes— which haven’t been raised since 1996—to account for inflation would raise hundreds of millions of dollars to help MoDOT maintain the state’s road system in the near term. But other, long-term solutions, such as tolling on major interstates and bridges, can help keep infrastructure funding sustainable. Public– private partnerships (P3s) could also help raise funds. Furthermore, expanding MoDOT’s use of design-build1 could save roughly 20 percent per project.
Missouri Highway User-Fee Revenue (2018 Dollars) Fuel taxes, which aren’t tied to inflation, have brought in less and less revenue over the past decade. $700,000 Annual Revenue (Thousands)
THE PROBLEM: The Missouri Department of Transportation (MoDOT) will likely face funding shortfalls in the near future. New revenue will be needed, and it should be generated in a way that is both economically sound and fair to all Missourians.
$600,000 $500,000 $400,000 $300,000 $200,000 $100,000
Lorem ipsum
$0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Year Fuel Taxes
Motor Vehicle Sales Taxes
Licenses, Fees, and Permits
Source: Missouri Department of Transportation. 2018 Comprehensive Annual Financial Report.
WHO ELSE DOES IT? Various forms of tolling are either planned or implemented in many states. Dozens of projects are funded by P3s in more than 10 states. THE OPPORTUNITY: Missouri has the 2nd-lowest tax rate in the country for both gasoline and diesel fuel. Adjusting these fuel taxes to inflation—raising them by less than 10 cents per gallon—would provide the funding necessary to keep Missouri’s infrastructure in good repair. With I-70 soon requiring a full rebuild, simple tolling infrastructure and a design-build workflow could be implemented to help increase available capital and reduce costs.
• User fees are the most fair and economically sound way to fund major projects. • Design-build and public–private partnerships bring the strengths of the free market to public infrastructure investment. • User fees could prevent unfair special taxing districts from forming to fund wasteful projects. SHOW-ME INSTITUTE RESOURCES Policy Study: “Funding the Missouri Department of Transportation and the State Highway System” Blog Post: “With MoDOT’s Tank Nearly Empty, a Fuel-Tax Increase Might Be the Answer”
KEY POINTS • A robust and well-maintained transportation system is vital to a strong Missouri economy. Design-build is a project delivery method in which a single contractor both designs and builds an improvement. Overlapping these traditionally distinct project phases reduces costs and time to completion. 1
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OPEN COLLECTIVE BARGAINING Patrick Ishmael THE PROBLEM: Under the current Sunshine Law in Missouri, government bodies may close meetings, records, and votes relating to contract negotiations until the contract is executed or rejected. This lack of transparency in negotiations between government unions and government officials can lead to contractual agreements that aren’t in the public’s best interest.
Open Collective Bargaining for Government Employee Unions Several states (in blue) already require that public-sector union contract negotiations be open to the public
THE SOLUTION: Open collective bargaining. Open collective bargaining would allow the public to attend meetings where government bodies are negotiating collective bargaining agreements with unions to ensure that tax dollars are being spent wisely. The public is directly affected by policies set during collective bargaining; citizens therefore have a right to be present during such meetings. An open collective bargaining rule would not prohibit the public agency from discussing and formulating its bargaining positions in executive session.
Note: Missouri’s open collective bargaining law has been suspended, pending ongoing litigation. Source: Commonwealth Foundation State Labor Comparison.
• Missouri’s Sunshine Law allows government bodies to close meetings to the public if they relate to a negotiated WHO ELSE DOES IT? Florida, Georgia, Kansas, contract, even though there is no compelling reason why Michigan, Minnesota, Montana, Nebraska, North Dakota, negotiations between a union and a public body should be Nevada, Tennessee, and Texas all require public employee held in secret. contract negotiations to be open. • Government unions can make campaign contributions and support candidates that they will potentially bargain THE OPPORTUNITY: A transparent negotiating process with after election. This advantage makes it especially will enable the public to hold government accountable in its important that the public be aware of how the government dealings with public employee unions and help ensure that the and public employee unions interact. agreements reached between the two parties are in the interest of everyone instead of just a select group of employees. SHOW-ME INSTITUTE RESOURCES KEY POINTS Policy Study: “A Primer on Government Labor Relations in Missouri” • Open collective bargaining gives citizens the opportunity to attend union negotiations with government bodies and Video: “Government Unions: Restoring Accountability” help ensure that tax dollars are spent responsibly.
SCHOOL REPORT CARDS Abigail Burrola
THE PROBLEM: OREGON AT-A-GLANCE SCHOOL PROFILE Information about the 2017-18 Abernethy Elementary School PRINCIPAL: Heather Hull | GRADES: K-5 | 2421 SE Orange Ave, Portland 97214 | 503-916-6190 performance of individual Academic Progress Students We Serve School Environment schools in Missouri is INDIVIDUAL STUDENT PROGRESS REGULAR ATTENDERS CLASS SIZE difficult to find, and the information that is available 1% DEMOGRAPHICS is not user-friendly. The Missouri Department of 25 91% Elementary and Secondary Education (DESE) is required 25 80% Academic Success by federal law to produce MATHEMATICS SCIENCE ENGLISH LANGUAGE ARTS parent-friendly report cards on every school and district in the state. However, DESE’s 1% 4% 4% “report cards” are of little use 81% 73% 86% to parents. They are available on a website that is difficult 51% 44% 65% to navigate, and they are School Goals State Goals Safe & Welcoming Environment * 6 laden with technical jargon. DESE’s report cards do not 18% 91% 10% meet the requirements set out in the 2015 Every Student Succeeds Act (ESSA) so parents are not getting all of the information they need. The KEY POINTS information gap is so wide that other organizations, such as • Current DESE school report cards are hard to find and news outlets and academic centers, are stepping in to the do understand. the job that DESE should be doing. • Armed with better information about school performance, THE SOLUTION: Redesign the school report cards. parents and policymakers could hold school districts and administrators accountable. The school report cards should be redesigned so that they are user-friendly and provide all of the federally required SHOW-ME INSTITUTE RESOURCES information. The report cards should also be mobile- and Report: “Missouri’s Report Card and ESSA Requirements” print-friendly.
524
Median class size.
No change from previous year
Student Enrollment
Year-to-year progress in English language arts and mathematics.
Students who attended more than 90% of their enrolled school days.
Increase from previous year
American Indian/Alaska Native Students
0%
Teachers
0%
Asian
Students
4%
Teachers
7%
Oregon average
Oregon average
Black/African American Students
<1%
Teachers
3%
Hispanic/Latino Students
5%
Teachers
3%
Students meeting state grade-level expectations.
Multiracial
Students
6%
Teachers
7%
Students meeting state grade-level expectations.
Increase from previous year
Students meeting state grade-level expectations.
Increase from previous year
Increase from previous year
Native Hawaiian/Pacific Islander Students
<1%
Teachers
0%
White
Students
84%
Teachers
80%
Ever English Learners
Students with Disabilities
Languages Spoken
Required Vaccinations
Free/ Reduced Price Lunch
*Not enough students
Oregon average
Our focus is on literacy and math fluency, with the aim of refining our instructional strategies and providing all students with the skills they need to be ready to succeed in college and careers. We strive to provide a welcoming environment and equitable opportunities for students of all races, genders, and home languages. We encourage you to contact us with any questions, concerns, or information that will help us ensure success for your students.
School Website: www.pps.net/schools/abernethy
WHO ELSE DOES IT? Many states, such as Delaware, Illinois, Louisiana, and Oregon (see graphic) have highquality, parent-friendly report cards. THE OPPORTUNITY: Better reporting on the performance of our public schools would serve the interests of parents, policymakers, and the schools themselves. Problems that are now hidden because of the current reports’ lack of transparency could finally be identified and then addressed.
Oregon average
Oregon average
The Oregon Department of Education is working in partnership with school districts and local communities to ensure a 90% on-time, four year graduation rate by 2025. To progress toward this goal, the state will prioritize efforts to improve attendance, invest in implementing culturally responsive practices, and promote continuous improvement to close opportunity and achievement gaps for historically and currently underserved students.
We work hard to make our school a place where all students and families feel welcome and included. We celebrate our community’s diversity and we honor this diversity in our learning activities. We understand how important it is to keep our students feeling safe, both physically and emotionally, when they are with us.
For more information please visit: www.oregon.gov/ode
Blog Post: “Why Are Other Organizations Doing DESE’s Job?” Blog Post: “Missouri’s School Accreditation Doesn’t Help Students” Podcast: “It Shouldn’t Be This Hard” 15
SPECIAL TAXING DISTRICTS Patrick Tuohey and Graham Renz
Community Improvement Districts in Missouri: 1997—2017 450 400 350 300 250 200 150 100
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
0
1998
50 1997
Number of Districts
THE PROBLEM: Special taxing districts (SDs) are political subdivisions of the State of Missouri that fund specific services and improvements, such as neighborhood security, fire protection, and various kinds of infrastructure. In theory, SDs can help deliver services to taxpayers efficiently and effectively. But in practice, certain SDs—particularly transportation development districts (TDDs) and community improvement districts (CIDs)— may create more problems than they solve.
First, these districts allow narrow special interests to tax the public Sources: Missouri Department of Economic Development and Missouri Department of Revenue. for their own private gain. For example, a luxurious hotel in Kansas City instituted a CID in order to charge a 1 percent sales tax that it will use to THE SOLUTION: Stricter requirements for the creation refurbish rooms and replace carpeting. of SDs and stronger reporting requirements to ensure accountability. Second, the districts are often drawn tightly around businesses, such as shopping malls, so that no local residents Reforms that will provide greater taxpayer protection have to vote for the tax increase. The ability to draw district include (1) requiring that a minimum number of residential boundaries gives business owners a great deal of power to voters live in districts; (2) requiring that the state auditor charge local taxes without public oversight. Without that or director of revenue compile an annual report that details oversight, SD boards can extend the length of their tax statewide SD spending, revenue, and debt; (3) requiring that increases well past the initial project need. all SDs sunset unless explicitly approved by district voters, and (4) requiring more transparent public bodies, such as Lastly, the Missouri State Auditor has pointed out that city or county councils or commissions, to approve all SD SDs are not transparent and that taxpayers are often bids. To truly curb abuse, the sales taxing authority of SDs not consulted in their creation and have no idea of their could be revoked so that only property tax revenue could existence. For example, customers often choose hotels support district projects. based on room rates, but rarely by tax rate—in fact, many customers do not even know they are paying these additional THE OPPORTUNITY: Reforming these districts could sales taxes. increase transparency and provide protection for taxpayers. It would also result in lower taxes in Missouri’s largest markets The number of SDs is growing rapidly, and the combined by making sure that SDs only act with the informed consent impact of these small districts is adding to the tax burden of of voters. Missourians across the state.
Transportation Development Districts in Missouri 250 200 150 100 50
17
16
20
15
20
14
20
13
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
20
19
19
19
98
0
97
Transportation development districts
The number of all TDDs in Missouri formed as either political subdivisions or nonprofit corporations.
Data from Missouri Highways and Transportation Commission via Sunshine Law request. As of July 2017.
KEY POINTS
SHOW-ME INSTITUTE RESOURCES
• In 2014 and 2015 alone, TDDs in Missouri collected more than $176 million in tax revenue—yet only 6 percent of those TDDs had residents within their boundaries. According to the state auditor’s report, $125 million of that revenue was collected without residential voter approval. • Of the 34 TDD audits the state auditor’s office has completed over the past 10 years, one-third concluded the TDDs under consideration were in bad financial shape. And nearly all audits indicated other issues, ranging from conflicts of interest and uncompetitive bidding practices to a failure to comply with basic accounting standards. • Requiring SDs to demonstrate they are meeting their job creation and tax revenue goals would keep them accountable to taxpayers. • SD board members voting for and approving contracts for themselves is a potential conflict of interest. Requiring that contracts be put out for bid would ensure a competitive process.
Missouri State Auditor’s Report: “Transportation Development Districts” (Report No. 2017-2020) Essay: “Overgrown and Noxious: The Abuse of Special Taxing Districts in Missouri” Op-Ed: “How Missouri’s Special Taxing Districts Promote Legal Plunder” Blog Post: “Auditor’s Report Sheds Light on Special Taxing Districts” Blog Post: “Missouri’s Troubling Sales Tax Mosaic” Blog Post: “Missouri’s Dubious Tax Honor” Blog Post: “A Fine First Step in the Right Direction for Special Taxing District Reform”
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SPENDING TRANSPARENCY Patrick Ishmael and Philip Oehlerking
THE PROBLEM: Missouri’s local governments are not required to make their spending data accessible to the public. THE SOLUTION: “Checkbook” transparency. Local governments should be required to make their spending data a matter of public record—not only easy to access but easy to search as well. In the summer of 2018, the treasurer’s office retooled the state’s transparency portal and included this kind of expenditure information for state spending, and legislation passed earlier in 2018 requires school districts to provide spending information in a similar format. If the state and its school districts can be transparent, then cities, counties, and other taxing districts can be, too.
Quotes for Spending Records: Cities, Counties, and School Districts In 2019, Show-Me Institute researchers submitted Sunshine Law requests for spending information to cities, counties, and school districts throughout the state. The prices quoted for those records varied widely. Prices quoted for spending records
45
42
40 35 30 25
22 20
19
20 15 10
8 5
5 0
1
0
Over $1,000
WHO ELSE DOES IT? Most states have transparency tools that touch on spending, but few are as comprehensive as Ohio’s Online Checkbook, which includes state and local spending in its records. THE OPPORTUNITY: Missouri can improve government transparency and accountability by ensuring that all of Missouri’s local entities, most of which are free from in-depth state oversight, can at least be scrutinized by the public. Modern technology allows government to crowdsource the task of keeping government honest, and while a checkbook transparency portal should never be viewed as a replacement for formal audits, it can serve as an intermediate step that ensures government actors at every level are spending taxpayer money appropriately. KEY POINTS • Missouri’s local governments are not required to keep their expenditure records electronically. This can make records less accessible and more expensive to request.
Cities
2
4
3
0
$250–$999 Counties
$100–$249
$1–$99 School Districts
• The cost and ease of access to your local government’s spending records should not depend on where you live. • Adding local governments and special taxing districts to the treasurer’s spending transparency portal would allow taxpayers to monitor how their tax dollars are spent from the convenience of their electronic devices. • The Missouri State Treasurer’s spending transparency portal needs to be made more robust through the inclusion of the date that expenses were incurred, the addresses of vendors, and a map feature so that viewers can visualize where money is being spent. In addition, data from the site should be downloadable into an Excel file. SHOW-ME INSTITUTE RESOURCES Essay: “Government Spending Records Should Be Free and Open to the Public” Blog Post: “Missouri’s Checkbook: 2000–2017” Video: “The Cost of Transparency”
TEACHER RETIREMENT ACCOUNTS Susan Pendergrass Example of How Pension Benefits and Employee Contributions Grow Over Time $350,000 Constant 2014 Dollars
THE PROBLEM: Missouri has three separate teacher pension plans: the Public School Retirement System of the City of St. Louis (PSRSSTL); the Kansas City Public School Retirement System (KCPSRS); and the Public School Retirement System (PSRS), which serves all teachers other than those in the City of St. Louis and Kansas City. These plans face many problems. Both PSRSSTL and KCPSRS have assets totaling less than 70 percent of what is owed to future retirees, and KCPSRS has more retirees than active members. PSRS appears to be more financially sound, but it is using unrealistic assumptions for future investment returns. Attempts to shore up the finances of plans usually involve burdening the youngest (or future) teachers with most of the cost. Further, Missouri teachers must teach for at least 24 years before their pension is worth more than what they have contributed to it.
$300,000
This teacher’s pension is finally worth more than her own contributions after 24 years.
$250,000 $200,000 $150,000 $100,000 $50,000 $0
0
5
10
Expected lifetime pension benefits
15
20
25
30
Value of employee plan contributions
Notes: The figure displays the value of lifetime pension benefits and required employee contributions for employers hired at age 25 earning average salaries and enrolled in a traditional plan that provides annual benefits equal to 2 percent of final average salary times years of service. Benefits vest after 5 years, and retirees may begin collecting at age 60. The required employee contribution rate is 7 percent. Calculations assume 8 percent nominal interest and 3 percent inflation.
Source: Author’s calculations from the Urban Institutes State and local Employee Pension Plan database.
THE SOLUTION: Teacher retirement savings accounts. The next generation of teachers in Missouri should have the option of choosing a transportable defined contribution plan. The defined contribution plan, or Teacher Retirement Account (TRA), would be similar to a 401(k) and could include a matching contribution from the school system. Teachers could be fully vested within a year and would be able to take their accounts with them if they change jobs.
THE OPPORTUNITY: Missouri could support its next generation of teachers by giving them retirement options rather than forcing them into plans that are becoming more financially unhealthy. KEY POINTS • Missouri’s three teacher pension plans have made promises that are becoming financially unsustainable. • We can better support our next generation of teachers by giving them retirement benefit options.
WHO ELSE DOES IT?
SHOW-ME INSTITUTE RESOURCES
Twenty-nine states and the District of Columbia offer teachers plans other than traditional defined benefit pensions.
Blog post: “A Retirement House of Cards” Blog post: “Public Employee Pensions: Time to Get Our Heads out of the Sand” Podcast: “They Want to Take My Pension”
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