By Audrey Spalding
Show-Me Institute

To the readers of Policy Pulse:

The Show-Me Institute will be discontinuing the Policy Pulse website.

When the Show-Me Institute launched this site, the purpose was to increase government transparency. Although Missouri has relatively strong public information laws, there are many ways that public information is kept private, and many ways that public comment is systematically ignored. As we’ve seen during the past six months, closed discussions, special fee laws, and blatant disregard for public comment at government meetings are all ways in which aspects of our state and local governments are kept hidden.

There are other ways, which are our own fault. Extremely small local government meetings are often almost unattended. Sometimes, journalists and others, who are supposed to be watching out for the public good, fail to double-check the facts used by legislators in attempts to justify wasteful government projects.

The initial vision for Policy Pulse was that it would be a source for daily updates about policy news in Missouri. But, the truth is, with a large number of capitol beat reporters, bloggers, Twitterers, and press releases, Policy Pulse doesn’t add much value by contributing to the daily slew. On any day, a number of newspapers are running the same article adapted from the same press release. What good is Policy Pulse doing if it is covering the same legislative hearing that seven other reporters also attended?

Let’s leave that to the other professionals.

Other state-based think tanks are employing a number of grant-funded “reporters.” Some have taken the approach that I tried to take, which was to highlight those stories that were being ignored, and to attend government meetings that others deemed too boring to cover. Others have attempted to make capitol news a 24/7 job, covering absolutely everything related to the state capitol with vigor.

But, of all the state think tanks, I most admire the Goldwater Institute’s approach. Goldwater has treated its reporter as an analyst with a different toolbox. At the Show-Me Institute, we have scholars who approach policy issues with different skill sets; some use economic analysis to evaluate a policy, others look at the constitutionality of policy proposals. Bringing together detailed information requests, computer-assisted reporting, and interviews with relevant stakeholders, it is possible to examine public policy on an incredibly small and intimate scale. And that work is a better fit, in our opinion, with the structure and purpose of the Show-Me Institute. After all, we try every day to bring thoughtful analysis to policy issues, and take the time to do so.

So, what does this mean for Policy Pulse? All of the content posted on this website will be exported to a new publication section of the Show-Me Institute’s main website, and categorized as “Reports.” From that page, you will also soon be able to find a “declassified” page, where we’ll post public information obtained through information requests, that anyone can download. That will also be where we’ll post more in-depth reports, which we expect to publish about once every two months.

Of course, if you haven’t already done so, check out our latest online tools, which track state spending, state employee pay, stimulus dollars spent in Missouri, and state tax credits. You can draw graphics directly on the web, and print or download your work. Best of all, the data that drives those tools is updated on our site every week.

And, finally, for more frequent updates, be sure to subscribe to our Twitter feed.

Thank you all for reading, and hopefully we can do even more to encourage government transparency and accountability.

—Audrey

By Andrew Guevara
For the Show-Me Institute

On Wednesday, the state’s Department of Elementary and Secondary Education (DESE) presented its application for nearly $750 million in federal funding to the state Senate Committee on Education. The program, “Race to the Top,” is a federal competitive grant program that will distribute $4.35 billion to states for the purpose of education reform.

Of the $743 million the state has requested, $355 million will go directly to public school districts, Chris Nicastro, DESE Commissioner of Education, said. The bulk of the remainder, about $272 million, is set to pay for providing broadband Internet access to all of the state’s public school districts.

The 299-page application can be read online here.

The grant program is intended to encourage states to adopt standards and assessments that allow students to succeed, to build data systems that track student performance, to recruit and retain the most effective teachers, and to create programs that will help “turn around” lowest-achieving schools.

Interestingly, Nicastro said that the reforms outlined in DESE’s grant application would be put in place regardless of the amount of money awarded to the state.

“We do intend, with or without this grant, to use the work we’ve put in and the application as a framework for redesigning the department itself and for driving educational reform in Missouri over the next decade,” Nicastro said.

She continued, “we do believe the plan will serve as the catalyst to propel Missouri’s public education system into the Top 10, nationally and internationally, and that is our goal.”

Some of the following reforms have been outlined in the application:

• Adopting and implementing cross-state standards for curriculum and testing;
• giving MOBroadbandNow broadband Internet access to all school districts;
• developing web-based teacher quality databases to effectively monitor successful teaching practices;
• evaluating teacher performance based on student performance;
• developing assessment methods at the state level;
• creating teams to intervene quickly in failing schools;
• and, allowing the state education board to close failing charter schools.

During a brief question-and–answer period, senators mostly asked questions about how the proposed reforms would affect charter schools.

Sen. Scott Rupp (R-Wentzville), said he was concerned that DESE’s application didn’t remove the geographic limitations placed on charter schools, which can currently operate only in Kansas City and Saint Louis.

Others asked about how charter schools would report student academic performance.

“We’ve not been as we transparent about reporting the performance of charter schools as we should be,” Nicastro said. She added, however, that “Race to the Top” would make more information available, and would help make charter schools more accountable.

Nicastro was referring in part to legislative proposals that tweak charter school statutes, which DESE recently submitted to Missouri’s General Assembly.

By Andrew Guevara
For the Show-Me Institute

During the past month, Missouri tax revenues continued to fall short. According to Linda Luebbering, state budget director, revenues were down more than $170 million in December 2009, as compared to December 2008. The slide amounts to a 21.7-percent decrease.

Despite the most recent decline, state officials say they expect tax revenues to bounce back slightly during the next fiscal year.

A joint forecast made by the governor’s office, state budget leaders, and financial experts predicts a slight increase in general revenue collections for fiscal year 2011, above those in fiscal year 2010. According to that forecast, the Consensus Revenue Estimate (CRE), general revenue collections are expected to be $7.223 billion. This would be a decrease of $780 million from actual revenue collections from fiscal year 2008.

State revenues collected from individual income taxes, corporate income and franchise taxes, and sales and use taxes were all down in December by 26.5 percent, 13.5 percent, and 1.8 percent, respectively.

The only increase in revenue came from liquor sales, which saw a 10.25-percent increase. Liquor sales have generally remained stagnant or have increased during recent months, although beer revenues declined by 6.71 percent. (See a detailed spreadsheet here.)

In addition to the falling numbers for December, the general revenues for the 2010 fiscal year to date have declined 10.6 percent for the same time during the 2009 fiscal year, from $3.7 billion last year to $3.3 billion this year.

Legislators responsible for the state’s budget, such as Senate Appropriations Chairman Rob Mayer and House Budget Chairman Allen Icet, have repeatedly warned the state to prepare for reductions in spending in order to maintain a balanced budget. In recent months, officials have cut hundreds of millions from the state budget, and may soon cut more.

Gov. Jay Nixon will announce budget details for his fiscal year 2011 at the State of the State address on Jan. 20.

Andrew Guevara is a student at the University of Missouri–Columbia.

By Audrey Spalding
Show-Me Institute

A much-debated $8 billion development in the city of Saint Louis’ north side has been awarded $19.6 million in state tax credits. Those are in addition to city tax incentives, which could total up to $398 million.

The state’s Department of Economic Development has made public only a small portion of the development company’s application for the state tax credits. You can read those four cover pages here.

According to the cover pages, NorthSide Regeneration LLC has spent about $25 million to purchase property, and expects to spend $66 million to acquire additional properties. The company spends about $415,000 each year to maintain its properties, and interest costs are estimated to be about $1 million each year.

The rest of the application, department spokesman John Fougere said, is so large that it isn’t feasible to send it electronically. The remainder will be made available in a few days, he said, but only in the department’s Jefferson City office, where people can view and copy the additional documents.

Documents that haven’t been made available to the public yet include a breakdown of property acquisition costs, interest costs, a map of the development area showing where NorthSide-acquired properties are located, and a list of owner-occupied residences in the development footprint.

Those application documents could shed light on as-yet unanswered questions, such as where within the development area NorthSide has acquired most of its properties, and what it has paid so far to purchase properties. Records kept with the city’s Recorder of Deeds office are unclear — according to deeds of trust filed with the office, properties acquired by the developer were traded among various shell companies.

More interesting is the $66 million NorthSide says it plans to spend acquiring additional properties. Previously, Paul Puricelli, a lawyer for NorthSide, has said that the company has about 20 properties left to acquire, which, if true, would mean a much higher purchase price for the remaining properties.

CHALLENGES TO THE STATE TAX CREDITS

The $19.6 million in state tax credits are authorized by the Distressed Area Land Assemblage (DALA) Tax Credit Act, which allows large-scale developers in urban areas to collect up to $20 million each year in reimbursements for 50 percent of property acquisition costs and 100 percent of interest costs.

Two active critics of the development, Barbara Manzara and Keith Marquard, are the plaintiffs in a lawsuit that claims that the act is unconstitutional. From the lawsuit: “… the state provides public credit to prospective applicants to secure and pay for private investments, private property and does not serve a primarily public purpose because a direct private benefit is derived by the borrowers and investors to the detriment of the state.”

Paul McKee, the developer who put forward the north side redevelopment project, has repeatedly pointed to the dismal education, vacancy, and employment statistics in the area as evidence that development is needed, and will improve the area.

The lawsuit is set to be heard in Cole County Circuit Court on Jan. 27.

By Audrey Spalding
Show-Me Institute

SAINT LOUIS — A chapter of the American Civil Liberties Union (ACLU) filed a lawsuit today claiming that a city ordinance banning people from putting pamphlets on car windshields violates the constitutional right to free speech. You can read the organization’s press release here.

The arrest of Gustavo Rendon that spurred this lawsuit happened after Rendon placed fliers advertising a petition drive on car windshields. His fliers promoted a referendum on a recently approved 1,500-acre development of the city’s north side.

Details of Rendon’s arrest records are unclear, mostly because of heavy redactions. According to Donald Re, counselor at the city’s police department, those redactions were made because the charges against Rendon were dropped.

The ordinance, 11.18.180, reads: “No person shall throw or deposit any commercial or noncommercial handbill in or upon any vehicle without the owner’s consent. Provided, however, that it shall not be unlawful in any public place for a person to hand out or distribute without charge to the receiver thereof a noncommercial handbill to any occupant of a vehicle who is willing to accept it.”

From the lawsuit: “Most recently Plaintiffs have been alarmed by their perception that the City of St. Louis is acting together with a particular developer to the detriment of residents who do not have an effective voice in St. Louis City government.” You can read the entire lawsuit here.

By Audrey Spalding
Show-Me Institute

SAINT LOUIS — The state’s largest teacher union, the Missouri National Education Association (MNEA), argued in court on Friday that public school teachers should be represented by either a single union or none. The lawsuit against the Bayless School District’s collective bargaining policy, “Bayless Working Together,” is one of two lawsuits that the union has filed against public school districts that allow non-exclusive representation. The other, against the Springfield School District’s teacher union election policy, has already been argued in circuit court, with the judge ruling in favor of the district. The union is appealing the decision.

Circuit Court Judge Thomas Prebil likely won’t issue a decision about the validity of the Bayless policy before 2010. Both the Bayless union affiliate, the Bayless National Educational Association (BNEA), and the school district have until Dec. 22 to file post-trial briefs.

Bayless’ bargaining policy is unusual. Many school districts simply hold an election for teachers to choose a union, which then bargains exclusively with the district. But exclusivity isn’t required. Patrick Harvey, director of field services and organizing for the MNEA, testified that about 86 percent of Missouri school districts don’t actually require the majority teacher union to serve as the representative during contract negotiations.

If Prebil rules that “bargain collectively” entails bargaining through exclusive representation only, about 450 school districts would need to change their union bargaining policies, if Harvey’s calculations are correct.

The Bayless bargaining policy doesn’t grant any particular union every seat at the bargaining table; instead, teachers vote for two bargaining representatives for each school building, and the majority teacher union gets to elect one additional representative. The school district says this process can help ensure minority participation.

From the policy: “… the majority employee group receives additional representation, and no groups or individuals are excluded from the process.”

In other states, school districts and teacher unions can look to state statute for direction. In Illinois, for example, legislation governing teacher–school district negotiations is extensive. But in Missouri, there is little law to guide the collective bargaining between teacher unions and school districts. Article 1, Section 29 of the state Constitution merely states “that employees shall have the right to organize and to bargain collectively through representatives of their own choosing.”

The union’s position is that “bargain collectively” is a phrase historically known to mean bargaining with exclusive representation, while the district’s position is that the word “representatives” allows either exclusive or multiple representation. You can read the union’s lawsuit here.

Sally Barker, an attorney for the BNEA, argued that exclusive representation is like an election, where the winner of the majority represents all.

“That is all we are asking for,” Barker said. “A simple election. The same kind of labor democracy that prevails in every other labor context in this country.”

But if Prebil ruled in favor of the BNEA, argued D. Shane Jones, an attorney for the school district, he would be overstepping his authority.

Establishing a framework for public school bargaining is up to the legislature, Jones said, and if the legislature does nothing, then school districts are left to establish their own policies.

“The plaintiffs are asking you to write a statute for them,” he said. “They’re asking you to fill that statutory void.”

According to Harvey, the state teacher union has been trying to get the legislature to write exclusive bargaining into state statute. The NEA has been introducing exclusive bargaining bills since the ’90s, he said.

Jones said that the legislature’s inaction for so many years is an indication that it’s leaving the policy-writing authority up to the school districts.

The Missouri State Teachers Association, which had joined the Springfield School District in defending its collective bargaining policy, did not join the Bayless case.

By Andrew Guevara
For the Show-Me Institute

COLUMBIA — On Monday night, Sen. Kurt Schaefer (R-Columbia) told the Columbia Board of Education that more cuts to the state budget seemed certain, and that the steep decline in state tax revenues would likely affect funding for public schools.

“I don’t know the public really has a full understanding of how difficult of a budget situation we’re in,” he said.

According to Schaefer, who is vice chairman of the Senate Appropriations Committee, general tax revenues were down 6.9 percent for fiscal year 2009 and are down 10.8 percent for the current fiscal year. The percentage declines translate to about a $500 million revenue loss in fiscal year 2009, and at least another $500 million by the end of this fiscal year.

The state last saw such a decline during fiscal years 2002 and 2003, when the state’s general revenue fell $463 million for both years and then rebounded, Schaefer said.

Schaefer said that the Department of Elementary and Secondary Education (DESE) has this year requested $105 million in order to fully fund the amount of money that the state promises each year to local school districts.

Jan Mees, board president, asked whether there would be any more state withholdings from the budget.

There likely would be, Schaefer said. He said that Gov. Jay Nixon’s cuts seemed to be based on the expectation of a 4-percent decrease in revenues for the year, but pointed out that revenues will likely fall short even of that decline. The state seems poised for a 7-percent decrease for the current fiscal year, he said.

“What can we as a school board do other than to continue to lobby our legislators?” asked district Chief Financial Officer Linda Quinley.

So far, Schaefer said, the best testimony given during the senate appropriations hearings came from experts who knew how money could be spent the most effectively. Also, he said, school districts should show legislators how they have already cut their budgets.

Schaefer said that for him personally, K–12 education and higher education are priorities when drafting the state’s budget.

But, he said, “I don’t think that anybody should be under the illusion that these cuts aren’t going to be painful, because I think that they’re going to be very painful for people. Our job in the General Assembly is to make sure that the cuts that are going to be made are the least negative and the least harmful cuts that can be made.”

Andrew Guevara is a student at the University of Missouri–Columbia.

By Audrey Spalding
Show-Me Institute

SAINT LOUIS — A circuit court judge ruled on Thursday that a contested 1,500-acre development of the city’s north side can move forward. Critics had claimed in court that the city ordinance authorizing the development was invalid because the city hadn’t thoroughly vetted the development company’s funding before granting it up to $390.6 million in tax increment financing (TIF). However, Judge Robert Dierker wrote in his ruling that it isn’t the job of the courts to second-guess the city’s decision to approve the project. You can read that ruling here.

“The Court is concerned not with wisdom but with legality,” Dierker wrote. “If St. Louis ordinances 68484 and 68485 are within the scope of the authority conferred on the City’s Board of Aldermen by relevant statutes, the Court has no further role to play.”

Developer Paul McKee and the development company, NorthSide Regeneration, LLC, can count this as a win, but barely. Dierker peppered his ruling with offhand remarks about the wisdom of such a large-scale plan, and even began his ruling with a quote from economist Friedrich von Hayek about the weaknesses of centrally planned cities. And Dierker isn’t done with the case yet. On Feb. 16, he will hear another set of arguments against the ordinances from attorneys Eric Vickers, W. Bevis Schock, and James Schottel, Jr.

D.B. Amon, the attorney who had originally brought the lawsuit against NorthSide, had claimed that the city’s TIF Commission hadn’t investigated the ownership of NorthSide, nor had it received sufficient evidence of a financing commitment for the $8 billion project.

“The ownership and capitalization of Northside Regeneration is rather hazy on the record to date,” acknowledged Dierker, but he wrote that unclear financing alone isn’t enough to render the redevelopment ordinances invalid, and doesn’t show that the city necessarily violated procedure.

During the hearing, TIF Commission Chairman David Newberger had testified that NorthSide’s evidence of financing, a letter from the Bank of Washington stating that it was excited to provide financing for half of the project, was typical of the evidence submitted for other TIF projects.

“No TIF project ever has a firm commitment,” he said during the hearing. “Reason is, financial institutions are sitting on the side and waiting to see what the financial incentives are going to be.”

“As evidenced by the testimony of the chairman of the City’s TIF Commission, the Commission’s review is rather superficial, and the Commission relies heavily on staff employed by the City or one of its agencies, as well as on the redeveloper, for practically all of its information,” wrote Dierker.

But, as NorthSide argued in its post-hearing brief, the Missouri Supreme Court ruled in 1996 that courts should refuse to second-guess local government legislation unless fraud, collusion, or bad faith was involved.

Dierker echoed that decision in his ruling.

“[I]t must be borne in mind that legislation is usually presumed valid, and that the Court does not enjoy the authority to second-guess the judgment of the Board of Aldermen,” he wrote. “Absent evidence of bad faith, fraud or collusion, the burden on the plaintiffs in seeking to invalidate the ordinances is a heavy one.”

Furthermore, Dierker wrote, the plaintiffs failed to demonstrate that they would be harmed if the project continued to move forward.

“Plaintiffs’ property may have suffered a diminution in value, but there is not evidence that they have attempted to sell any property without success or that defendants have intruded in any way on their use and enjoyment of their property,” he wrote. “As to the balance of hardships, a preliminary injunction is likely to do more harm to defendants than benefit to plaintiffs.”

Of course, Dierker wrote later, if things got much worse, the plaintiffs could always renew their motion to halt the project.

Full disclosure: W. Bevis Schock, one of the intervening attorneys in the case, also serves as the secretary of the Show-Me Institute’s Board of Directors. Schock is involved in the case through his private legal practice, not through his capacity as an institute board member.

By Audrey Spalding
Show-Me Institute

SAINT LOUIS — A petition drive to put a recently approved large-scale development of the city’s north side up for city vote to failed to gather enough signatures.

The backers of the petition, critics of the 1,500-acre development put forward by NorthSide Regeneration LLC and developer Paul McKee, had gathered more than 3,000 signatures, said Jim Roos, an anti–eminent domain activist.

But that number wasn’t enough. The Saint Louis Board of Elections required at least 4,400 signatures of city voters, and the deadline was 5 p.m. Thursday. As a result, the group sponsoring the petition, Citizens for a More Responsible Saint Louis City Government, didn’t turn in any of the gathered signatures.

The effort was driven by volunteers and donations, Roos said. About 20 people had given donations for a total of close to $4,000, he said.

Roos, who said he was exhausted from the effort and in a somber mood, said the city’s deadline for signature gathering was too difficult to meet.

“The ordinance gives us 30 days from when the mayor signs the bill,” he said. “It took us a while to develop a form that would pass the test.”

He continued, “We had less than two weeks to actually gather signatures once we figured out what form to use.”

Bob Williams, another activist involved with the petition drive, said Thursday before the deadline that he didn’t think the group would make it. But, he said, if nothing else, the drive had helped educate the community about the referendum process.

Roos voiced a similar sentiment on Friday.

“I think it was a great idea both in terms of participatory democracy and to challenge 23 years of blighting and eminent domain, and I think the waste — I really mean that — the waste of future tax subsidy for one developer,” he said.

By Audrey Spalding
Show-Me Institute

SAINT LOUIS — Another plaintiff (and set of attorneys) has joined the lawsuit filed against the development company that the city of Saint Louis recently approved for $390.6 million in tax increment financing (TIF) to redevelop 1,500 acres in the city’s north side and in northern portions of downtown.

Dorian Amon, the attorney who filed the initial lawsuit against the development company, NorthSide Regeneration LLC, argued that the city’s development agreement with NorthSide was invalid because the city failed to investigate the project’s financing thoroughly.

The attorneys representing the new plaintiff are arguing for the same ruling, but for different reasons. Some of the allegations made in the motion to intervene filed by attorneys Eric Vickers, W. Bevis Schock, and James W. Schottle, Jr., were:

• The blighting of the properties in the redevelopment area was “unreasonable, arbitrary, and capricious,” because the city didn’t conduct an independent study to determine whether the redevelopment area should be blighted.
• The city blighted the area in “bad faith” because it didn’t seek out alternative development proposals, and because the city misled the public and plaintiffs about “the power of eminent domain provided NorthSide under the Ordinance.”
• The city failed to show that the area hasn’t had recent growth and development.

You can read the pleadings submitted by Vickers, Schock, and Schottle here.

On Wednesday, circuit court Judge Robert Dierker granted the new plaintiff’s motion to intervene, and set a hearing for 11 a.m. on Feb. 16 to hear the new arguments against the city ordinance.

Dierker is expected to decide soon whether to grant Amon’s request for a temporary injunction, which would stop the development for a short period of time. At the February hearing, Dierker will consider whether to grant a permanent injunction.

Full disclosure: W. Bevis Schock, one of the intervening attorneys in the case, also serves as the secretary of the Show-Me Institute’s Board of Directors. Schock is involved in the case through his private legal practice, not through his capacity as an institute board member.

Correction: According to city records, the Feb. 16 hearing was rescheduled for 11 a.m.

By Andrew Guevara
For the Show-Me Institute

On Tuesday, the Senate Appropriations Committee met to hear another round of public testimony from government agency spokesmen. Faced with a considerable tax revenue shortfall, state legislators will likely need to make budget cuts for the coming fiscal year. During the second day of public testimony, however, the committee heard the same message it had heard the day before from government agency representatives: Don’t make additional cuts.

On Tuesday, representatives from the Department of Mental Health, the Department of Health and Human Services, the Department of Social Services, the Department of Social Services, the Department of Public Services, the Department of Public Safety, the Department of Economic Development, the Judiciary, and the Office of the Public Defender had signed up to testify before the committee. About 65 people were set to testify before the committee for Tuesday with a few spillovers from Monday. Before the lunch recess, more than 25 people or groups had testified.

The morning testimony was filled with personal stories from former alcoholics, drug abusers, persons with disabilities, parents of children with developmental disorders, and others attempting to spare their respective programs from budget cuts.

However, committee members continued to focus on reducing the state budget. “The cuts are coming, really no one is going to be spared,” said Sen. Jim Lembke (R–Saint Louis).

At one point, Sen. Scott Rupp (R-Wentzville) asked, “Where would you point us to look to cut costs?”

Some people, such as Wendy Sullivan, president of Life Skills, urged funding cuts from existing facilities, such as the Bellefontaine Habilitation Center in Saint Louis, and downsizing state rehabilitation centers. Others, such as Dan Buck, CEO of the St. Patrick Center in Saint Louis, pointed to state tax credits.

Sen. Tom Dempsey (R–Saint Charles) said it was possible that the state could reconsider existing historical preservation and low-income housing tax credits.

Others offered ways to increase state revenues. Wayne Lee, a disability advocate, recommended that the state streamline taxes, while Gerrit DenHartog, a lobbyist for addiction rehabilitation organizations, advised an alcohol tax increase.

“The federal government doesn’t have any money. They’re borrowing from China. Their bubble is about to burst,” said Lembke, by way of advice to the St. Patrick Center and other organizations facing state funding cuts. “Let’s look to each other instead of government.”

Andrew Guevara is a student at the University of Missouri–Columbia.

By Audrey Spalding
Show-Me Institute

JEFFERSON CITY — The requests weren’t for more money, but for a halt to additional budget cuts. On Monday, the Senate Appropriations Committee began a series of public hearings to hear various government agency representatives plead for maintained funding from the state. With state tax revenues down, however, more cuts will likely be made.

“We’re looking at a billion dollar shortfall,” said Sen. Jim Lembke (R–Saint Louis), “and it’s going to be worse next year.”

About 30 people asked the committee on Monday to maintain funding for governmental programs that fall underneath the administrative umbrellas of the Department of Elementary and Secondary Education, the Department of Higher Education, the Department of Transportation, the Department of Corrections, and the Office of Administration. About 65 more are slated to testify on Tuesday, said Committee Director Dan Haug. Each person testifying is allowed three minutes to speak.

The public testimony is the first step in the state’s budgeting process, which will resume in full swing after the governor’s State of the State address in January.

Larry Hendren, testifying on behalf of the University of Missouri’s Alliance of Alumni, told the committee that although the university has frozen tuition and student fees, it is receiving $2 million from the federal government to balance its operating budget, and has restructured retirement benefits — neither of which are sustainable budget fixes.

But, with a predicted 6- or 8-percent shortfall for the year, committee members weren’t very sympathetic.

“Do you know anywhere we could cut?” asked Sen. Tim Green (D–Saint Louis). He explained that if the committee couldn’t make cuts in one program, it would have to cut another.

Throughout the afternoon, Green asked several others who requested the maintenance of state funding to offer suggestions of where they would make cuts. No one had a concrete answer.

With a severe tax revenue shortfall of more than 10 percent during the first quarter of fiscal year 2010, Gov. Jay Nixon made $200 million in state budget cuts, something Sen. Kurt Schaefer (R-Columbia), brought up several times during public testimony. He asked several representatives to explain the reasoning behind the cuts made to their specific government agencies, implying that the amounts seemed somewhat arbitrary.

Marcia Pfeiffer, testifying on behalf of state community colleges, said that about $7.75 million in state funding for community colleges had been cut. She said that the particular amount of funding that had been cut had no other significance than that it amounted to approximately 15 percent of the total $50 million that had been cut from state funding for higher education.

By Andrew Guevara
For the Show-Me Institute

With state tax revenues down 10.8 percent during the first quarter of the 2010 fiscal year, compared with the first quarter of 2009, experts predict that collections will continue to slide. This decline comes in addition to a 7-percent decrease seen during the previous fiscal year.

Gov. Jay Nixon responded to the decline in state tax revenues in October with $200 million in budget cuts, based on a projected decrease of 4 percent for the entire year.  However, some experts predict that the actual rate for the fiscal year could be between 6 and 8 percent, and foresee further cuts in January.

“The state budget is dramatically out of balance, the only thing that is keeping it in line are the federal stabilization dollars. Once those dollars are gone, everything will be impacted,” said James R. Moody, principal of James R. Moody and Associates, former state director of Missouri’s Office of Administration, and former state budget director.

Missouri began receiving budget stabilization funds from the federal government during fiscal year 2009. The Missouri Budget Office reports that the state will receive $2.32 billion total in federal stimulus dollars, with the money set to run out during fiscal year 2011. Of the $1.35 billion that the state will receive during the current fiscal year, $164 million will be used to balance the budget.

With an estimated decline of 7 percent for this fiscal year, Moody said he predicts that the state’s net general revenue will be $6.93 billion, falling more than $1 billion short of state operating expenses of $8.58 billion.

Amy Blouin, executive director of the Missouri Budget Project, attributes the decline in state revenue to the economic recession and to tax credits and tax cuts made in recent years.

According to Blouin, state tax credits have grown from $365 million in 2006 to $585 million in 2009, a 60-percent increase, while tax reductions have grown to about $325 million per year, combining to more than half of a billion dollars per year in additional costs.

Moody forecasts that drastic cuts will occur when the federal dollars run out unless a second federal stimulus package is created.

When asked whether there was a way to reverse the decline in state revenues, Moody said, “The revenues from income tax withholding have been very negative. I don’t think this will be changing very quickly. It’s a reflection on how many people are working.” He continued, “The state pretty much has to make draconian cuts. “

But Blouin recommends that the state needs to modernize its revenue structure. One way that the state could do that, she said, is to expand the items subject to the state sales tax.

“Currently, the state doesn’t collect tax with purchases made on the Internet,” she said. “Missouri and every other state is losing sales tax over the Internet. The University of Tennessee estimates it cost the state about $200 million per year.”

Moreover, she continued, “Some of the tax breaks that we give to certain sectors of the population are outdated. The timely filing discount, a tax reduction given to companies for paying taxes on time to offset the cost for filing and accounting in past decades, is one example. We are the only state that still does that.”

With Nixon predicted to make cuts to the state’s budget, the General Assembly is making plans to address the issue of how to balance the state’s budget.

“We don’t have any silver bullet to make this go away,” said Rep. Ron Richard (R-Joplin), speaker of the Missouri House of Representatives. He said he plans to continue meeting with Rep. Allen Icet (R-Wildwood), the state budget chairman, and other members on the legislature until the end of the year to try to alleviate the problem.

Icet was not able to be available for comment.

On Dec. 7 and 8, 2009, the Senate Appropriations Committee will hear public testimony on how to allocate the state’s funds for the upcoming year.

Andrew Guevara is a student at the University of Missouri–Columbia.

By Audrey Spalding
Show-Me Institute

On Thursday, a circuit court judge heard arguments that the city of Saint Louis’ Tax Increment Finance (TIF) Commission had not thoroughly investigated the financial backing of a proposed redevelopment of the city’s north side before approving it. The lawsuit, by no means a certain bet, could halt the recently approved project put forward by developer Paul McKee and his company NorthSide Regeneration LLC.

Judge Robert Dierker has not yet decided the case, but is working to reach a decision as soon as possible. Attorneys for all involved parties have until Dec. 7 to file additional documents, and Dierker will make his decision at some point after that.

Dorian Amon, the attorney who brought the lawsuit and who is representing several north side residents, spent nearly three hours questioning TIF Commissioner David Newburger about the efforts that the commission had made to determine whether NorthSide had the ability to raise enough money for its $8 billion project.

In NorthSide’s application for $390.6 million in TIF funds from the city, the company included a letter from an executive of the Bank of Washington, which stated that the bank was reiterating its financial support for the first half of the project. However, no specific loan amounts were included in the letter, nor did the bank executive sign it.

Amon argued that the letter wasn’t sufficient evidence of financial support for the project, pointing to its vague language. During questioning, Newburger, who said he has considered at least 50 development projects while serving on the commission, acknowledged that details are often hard to pin down.

“The terms of the plan is in constant flux,” he said.

The Bank of Washington letter, Newburger said, is typical of the evidence of financial backing submitted for all projects.

“No TIF project ever has a firm commitment,” he said. “Reason is, financial institutions are sitting on the side and waiting to see what the financial incentives are going to be.”

Later, when questioned by Paul Puricelli, who is representing NorthSide, Newburger explained that if concrete and sufficient evidence of financial backing had been submitted to the city, the city would have no reason to grant TIF funds.

“Fundamental reality of this, is this is an incentive program,” Newburger said. “We have to have testimony that without this TIF assistance that the transaction can’t be accomplished.”

Alderman April Ford-Griffin, who represents a ward that lies mostly within the development’s footprint, was also called to the stand to testify about what she and the Board of Aldermen had done to verify financial backing for the project.

Ford-Griffin said that there hadn’t been any formal investigation into the financial backing of the project, or into other statements made by McKee.

Instead, she said, the Board of Aldermen was more concerned with the amount of money McKee had already investigated in the project, and the efforts NorthSide was taking to acquire other government assistance.

“We were looking to make sure that they were leveraging everything,” she said, referring to all of the applications that the developer has made for federal and state subsidies.

When Amon and Puricelli were done making their respective cases about whether the TIF Comission and Board of Aldermen had done due diligence, Dierker left the attorneys with some advice.

“What we’re dealing with is not an administrative review of the commission’s procedures,” he said. “We’re dealing with the validity of the ordinance.” Dierker’s comment referred to the redevelopment ordinance passed by the Board of Aldermen establishing a redevelopment agreement between the city and NorthSide.

It’s possible, Dierker continued, that missteps by either the TIF Comission or the Board of Aldermen could invalidate the ordinance, but he firmly suggested that when the attorneys make their final written arguments on Monday, they focus on the city ordinance.

ANOTHER APPROACH

At the beginning of the hearing, three more attorneys, Eric Vickers, W. Bevis Schock, and James Schottel, Jr., attended the hearing in order to intervene in the case. Essentially, they would be also would be arguing that the redevelopment ordinance is invalid, but for different reasons than presented by Amon. Their motion to intervene will be held at 11 a.m., Dec. 9.

Full disclosure: W. Bevis Schock, one of the intervening attorneys in the case, also serves as the secretary of the Show-Me Institute’s Board of Directors. Schock is involved in the case through his private legal practice, not through his capacity as an institute board member.

By Audrey Spalding
Show-Me Institute

The lawyer for a recently approved redevelopment of 1,500 acres in the city of Saint Louis’ north side says that the development company, NorthSide Regeneration LLC, will likely need eminent domain to acquire about 20 properties in the redevelopment area. The project, put forward by developer Paul McKee, has been contentious in the past because of the perceived threat of eminent domain, and because it calls for nearly $400 million in tax increment financing (TIF) from the city.

Paul Puricelli, who works for the law firm Stoney, Leyton, & Gershman, is representing NorthSide as a defendant in a lawsuit that alleges, among other things, that the city’s TIF Commission and Board of Aldermen didn’t fully investigate the financial backing of the proposed NorthSide project before recommending and approving it.

Puricelli made an hour-long presentation at the Missouri Bar Association’s Committee on Eminent Domain on Nov. 20. Members of the committee include prominent eminent domain attorneys with private practices, and attorneys who work for state agencies that often use eminent domain, such as the Missouri Department of Transporation (MoDOT).

Dave Roland, a policy analyst at the Show-Me Institute, recorded the proceedings of the Nov. 20 committee meeting, from which all of the following quotes and statements are taken.

During the presentation, Puricelli stated that there are about 20 properties, which are not owner-occupied residences, that NorthSide needs but hasn’t been able to acquire, and that the company is hoping to utilize the power of eminent domain to obtain them.

“We have publicly stated that we anticipate that there will be 20 or fewer parcels subject to eminent domain for the redevelopment,” Puricelli said during the meeting. “Before you get too worried, Bob [an eminent domain attorney], there’s also going to be some infrastructure work by the city, also the possibility of eminent domain there.”

“For our purposes, we narrowed it down to 20 or fewer parcels,” he continued. “But eminent domain is viewed certainly by us as a critical component to getting those last 20 parcels acquired.”

McKee has stated in the past that he does not wish to use eminent domain, and a statement posted on NorthSide’s website states: “[Eminent domain] is lengthy, requires many hours of legal time, is a drain on government resources, and is not the method by which McEagle seeks to acquire any piece of ground within the redevelopment area.”

McKee, when reached by phone, refused to comment on Puricelli’s statements.

Currently, NorthSide does not have the power of eminent domain. However, the redevelopment agreement between the city and the company states that eminent domain can be used either for a public use, for things like roads, or “if the Developer has pursued and exhausted efforts to voluntarily acquire property the Board of Aldermen deems necessary to implement one or more portions of the Redevelopment Plan and deems critical to the Redevelopment Plan’s success.”

A number of attorneys for the Missouri Department of Transportation (MoDOT) attended the Nov. 20 meeting, and acknowledged the agency’s almost certain role in the redevelopment’s road projects. “The 800 pound gorilla in this thing is MoDOT,” said one of the department’s attorneys.

Puricelli, who said he has been on both sides of the eminent domain issue, said that critics often focus on eminent domain during development, but that its use is necessary for such projects, and is not the devil it’s made out to be. Alderman Freeman Bosly, Sr., has also publicly voiced a similar sentiment.

When read several of the statements that Puricelli made to the committee, north side activist Romona Taylor Williams said she hadn’t heard any statements regarding the 20 or so properties to which Puricelli had referred during the meeting.

“I’ve not heard anything to that affect,” she said. “The only thing that the alderpersons have been saying to the community is that there is no eminent domain. And we know that’s not true.”

Aldermen April Ford-Griffin and Marlene Davis did not return immediate calls for comment. Both have made presentations at many community meetings with McKee about the project and have clearly stated that eminent domain would not be used.

“We need to do a better job of educating people, the Board of Aldermen, and the public about eminent domain, and what it is and what it isn’t,” Puricelli said. “For these types of projects to move forward, we still have the possibility — the hope of getting this right. But it is not a guarantee. And it will be a serious, serious problem if we don’t get it. For other redevelopment projects, it could be a stake in the heart.”

“These are parcels we couldn’t acquire under the radar,” Puricelli said later during the meeting when asked why McEagle hadn’t been able to purchase them. “Properties we need to make this thing ultimately work.”

When reached by phone for comment on his statements at the meeting, Puricelli said that 20 properties was the maximum number of properties that had ever been discussed as potentially being subject to eminent domain. “The hope is to acquire all of these properties voluntarily,” he said.

“I suspect that accommodations would have to be made,” Puricelli said when asked what NorthSide would do if the Board of Aldermen refused to grant the power of eminent domain for the remaining properties. “They would have to develop without that power.”

Bob Denlow, a prominent eminent domain and condemnation attorney in Saint Louis who represents property owners and serves as chairman of the Missouri Bar Association’s Committee on Eminent Domain, said the area was largely vacant.

“For those of you who have never driven through this area — it looks like a series of football fields — it is vacant, vacant, vacant land,” he said during the meeting. “Some of the controversy is that McKee has accelerated the decline by having bought properties and leaving them vacant. That has been an accusation. But for those people who are really familiar with the area, it’s just grass field.”

Williams, the activist who has been critical of the NorthSide Regeneration redevelopment process, strongly disagreed when asked to comment on Denlow’s characterization.

“You have a massive area that no one is giving any attention to at all,” she said. “For instance, the homes that are in the 19th ward. These are stable communities, but no one puts any attention on the 19th ward.”

“Or,” she continued, “what about this church, Shining Light, that has been in this community since 1938 and now their property is slated for open space?”

To see a Google map of the redevelopment area buildings and boundary lines, click here.

By Audrey Spalding
Show-Me Institute

With revenues down by about $1 million, the Saint Charles County Council met to debate the merits of granting $80,000 to market an airport expansion project that doesn’t fall within the county. The project is a proposed expansion of the Lambert–Saint Louis International Airport that would create a China hub in the hopes of increased international trade.

Developer Paul McKee, who put forward and completed the Winghaven development in Saint Charles County, has been a strong backer of the China hub expansion. McKee has said publicly that his latest project, a 1,500-acre redevelopment of the city of Saint Louis’ north side, hinges on Chinese business for many of the project’s promised 22,000 new jobs.

But county council members were skeptical when they held a work session on Monday to review the proposed county’s 2010 budget. Council member Cheryl Hibbeler brought up the issue first.

During 2009, she said, the county council allocated $37,500 for marketing of the China hub expansion. In 2010, the amount increased to $80,000, a significant amount of money for the county, with what she saw as no guarantee of a return.

“It basically boils down to finding enough to pay this one guy … to attract enough China business to Lambert,” she said.

The $80,000 is part of a $931,000 bill for annual marketing costs that the county, along with others, such as Saint Louis County, is considering paying. According to County Executive Steve Ehlmann, the marketing costs include not just salary for one man, but work to be done by a number of individuals working for a single marketing firm.

Oversight of how that money will be spent was another concern for Hibbeler.

“Who’s going to be deciding whether this $931,000 is really working?” she asked.

And, even then, she wondered aloud, what were the chances of the China hub coming to fruition, and bringing new jobs and business to the county? At one point, Hibbeler characterized the project as a “crapshoot.”

County Council Chairman Joe Brazil also questioned why the county should spend money on marketing the project. Brazil, who is critical of tax incentives and subsidies, asked whether the county could expect competitive bid reports and cost documentation if it granted the $80,000.

“I don’t know that you’re required to bid this,” Ehlmann responded.

In 2008, stemming from concerns about bids being awarded as political favors, the county auditor conducted a review of a few tax development districts (TDD) in Saint Charles County, including Winghaven. Of the five TDDs surveyed, all failed to adhere to a complete competitive bidding process. The Winghaven TDD was cited in the review because two of the project’s codevelopers were connected to contractors hired to do work for the development.

Ehlmann was the most vocal supporter of the budgeted marketing expense. The project, he said, has the support of the governor, the chamber of commerce, and the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), and would bring spillover business to the county.

“If we don’t get this China trade, that’s where it will go, it will go to Chicago,” he said.

Other counties and municipalities weren’t asked to be a part of the project, Ehlmann said, but Saint Charles was invited to participate.

“I don’t think this is going to rise or fall [based on] whether we put our money in,” Ehlmann said. “The question is, do we want a seat at the table?”

After more debate about whether the county could spend the $80,000 elsewhere, council member Nancy Matheny suggested that the group reconsider the expenditure at a later date.

“As tight as we are, with no raises or anything else, it’s hard to allocate to something we don’t understand,” she said.

The council made no decision during its work session, and the $80,000 remained in the proposed 2010 budget. But, said Brazil after the work session, the council will likely vote on whether to strike the expenditure during the next few weeks.

By Audrey Spalding
Show-Me Institute

This year, the Saint Louis City Recorder of Deeds office, which oversees real estate licenses, has collected $20,729 in copy charges from people who printed documents from the privacy of their own home or business. The copies didn’t involve the use of any of the city’s paper or staff time, things for which governments usually charge copy costs.

For copies made by Recorder of Deeds staff, the office charges $3 for the first page and $2 per page for any additional pages.

Online access to the office’s database can be purchased, for a minimum of $75 per month. But if a person prints from that database after having purchased access, using a personal computer and printer, the same per-page charges apply.

At first glance, this pricing scheme appears to violate the state’s Sunshine Law, which outlines the types of records considered to be public documents and generally limits the copy fees that governmental bodies can charge.

According to state statute, copy costs “… shall not exceed ten cents per page for a paper copy not larger than nine by fourteen inches, with the hourly fee for duplicating time not to exceed the average hourly rate of pay for clerical staff of the public governmental body.”

But Daryl Hylton, assistant attorney general at the Missouri Attorney General’s office, said that after reviewing state statute, he concluded that the Recorder of Deeds Office can in fact charge for copies it didn’t make. The office has a special provision in state law that specifically states the fees the office can charge.

From the statute: “For copying or reproducing any recorded instrument, except surveys and plats: three dollars for the first page and two dollars for each page thereafter.”

That provision alone doesn’t necessarily allow the office to charge for copying done remotely, but the last line of the Recorder of Deeds’ statute does, which states, “for all other use of equipment, personnel services and office space the recorder of deeds shall set attendant fees.”

Hylton said that, “equipment” can be interpreted to include copies made on outside equipment, using the office’s database.

The copy fees that the office charges bring in a good amount of the office’s approximately $2.5 million in annual expenditures. For 2008, the office collected nearly $450,000 from in-office and out-of-office copy fees, according to Donna Michaels, the supervisor of the office’s Cashier Department.

This year, the total is down to about $200,000.

Jean Maneke, a prominent Missouri attorney who specializes in Sunshine Law cases, said she hasn’t received any complaints about the Recorder of Deeds’ copy charge practice.

“I sued over the cost of an assessor’s database a few years ago and after some discovery, we agreed on a reasonable fee,” she wrote in an email. “That, plus the huge litigation last year over the Dept of Revenue’s database, are the only cases I’m aware of which have some comparable issues.”

FULL DISCLOSURE: During the course of obtaining data for a Policy Pulse investigative article, the Show-Me Institute was billed $450 in copying charges by the Saint Louis City Recorder of Deeds office, for printing documents from a Show-Me Institute computer to a Show-Me Institute printer.

By Audrey Spalding
Show-Me Institute

According to data posted on the federal government’s stimulus tracking website, Recovery.gov, stimulus dollars have created or saved more than 15,000 jobs in Missouri. But some of those jobs seem to be located in state congressional districts that don’t exist.

Missouri has nine congressional districts, which have been awarded the bulk of federal stimulus dollars and jobs. But, according to the data, six fictional districts were awarded $928,566 to create 8.5 jobs. The districts, jobs, and stimulus dollars spent are as follows:

• Five jobs were created in the the 14th district, at a cost of $617,848.
• Zero jobs were created in the 00 district, at a cost of $136,833.
• Zero jobs were created in the 31st district, at a cost of $74,542.
• Finally, 0.5 jobs were created in the 16th district, at a cost $28,453.

To see these numbers yourself on the Recovery.gov website, click here

There appears to be a problem with the federal government’s reporting system for stimulus money spent — and it’s nationwide. According to the website WatchDog.org, a total of $6.4 billion has been spent in 440 fictitious congressional districts.

The phony districts have bloggers, news organizations, and even elected officials crying foul.

In fact, on Thursday, the House Oversight and Government Reform Committee will hold a hearing on “how recovery act recipients spend their stimulus dollars.” Committee chairman Darrell Issa (R-Calif.) has called the data on the Recovery.gov site incomplete and incorrect.

But Ed Pound, director of communications for the Recovery Board, says that the real problem is human error.

“The recipients put in the wrong congressional district when they filed the reports with the government,” he said. “You’re going to see errors because this is raw data.”

Fictional congressional districts aren’t the only errors in the Recovery.gov data. Many Missouri recipients of federal stimulus funds, such as the University of Missouri–Rolla, neglected to report a description for their project or its status. Others left question marks.

Pound said that the Recovery.gov data is generated from reports filed by grant and contract recipients. After a 20-day verification period, during which federal agency employees check the reports made by grant and contract recipients, the reported data is posted to Recovery.gov.

But, Pound said, a federal agency can only tell a grant or contract recipient that its report is incomplete or inaccurate. Recipients are responsible for making the actual corrections.

“Only recipients can correct this,” he said.

According to Recovery.gov data, available at the site’s “data download center”, the following governmental agencies listed fictional congressional districts: Newton County, Crawford County, the Saint Louis Development Corporation, the Housing Authority of Aurora, the City Utilities of Springfield, the Hannibal Housing Authority, and Missouri Valley College.

By Audrey Spalding
Show-Me Institute

Nearly 40 local and statewide pension systems for public employees are underfunded, according to a report submitted on Tuesday to the Missouri legislature’s  Joint Committee on Public Employee Retirement (JCPER). The report is a detailed “watch list” that focuses on pension programs that have less than 70 percent of outstanding obligations (payments to retired employees) available.

The number of public pensions that fall below the committee’s threshold more than doubled this year, from 19  in 2008 to 39 in 2009, said JCPER Executive Director Ronda Stegmann. Three statewide pension plans appeared for the first time on the committee’s watch list:

• The Missouri State Employee Retirement System (MOSERS), the pension fund for most state employees, including elected officials, is funded at 66 percent, with an investment loss of 19.32 percent
• The Public Education Employee Retirement System (PEERS), the pension fund for non-certificated public school employees, is funded at 61 percent, with an investment loss of 19.1 percent
• The Public School Retirement System of Missouri (PSRS), the pension fund for public school teachers and other certified school employees, is funded at 60 percent, with an investment loss of 19.55 percent

Despite the dire numbers, the committee’s watch list may just be that. While some critics have suggested in the past that public pensions are suffering because plans promise a defined set of benefits instead of taking in a defined set of contributions and doling out the earnings to retirees, the committee blamed the across-the-board losses to the current economic recession.

“Does inclusion on the watch list automatically mean that the benefit structure should be changed in some way?” asked Patricia Yaeger (D-Saint Louis).

“No,” Stegmann replied. “We certainly are not suggesting any impropriety.”

Some committee members even suggested that the funds may have bounced back a bit recently.

Committee Chairman Ward Franz (R-West Plains) said that his own retirement fund increased in value by about 18 percent during the last quarter, and asked whether that could be the case for some of the public pension plans.

“I believe that many of the plans have received double-digit investment growth,” Stegmann said.

The committee’s report, available for the first time online, can be read here.

By Audrey Spalding
Show-Me Institute

On Monday, a joint legislative committee tasked with planning out a 25-year-long, statewide strategy for Missouri’s electricity production and consumption met to consider the cost and availability of alternative forms of energy.

The committee, named the Joint Committee on Missouri’s Energy Future, was formed in 2009 under House Bill 734, legislation that also required appliances purchased with state money to comply with federal energy efficiency guidelines. By the end of the year, the joint committee must make a report to the General Assembly on state energy consumption, along with legislative recommendations.

A number of academics, state officials, and energy businessmen spoke on Monday about newer energy technologies such as geothermal heating, biomass, solar energy, natural gas, wind energy, and others. Many of those who testified mentioned ways the state government could use tax incentives or subsidies to encourage different forms of energy production.

Mark Templeton, director of the state department of natural resources, said that although Missouri has low electricity costs in comparison to other states, it has a low ranking in using energy efficiently. He said that not much is being done independently by private companies to improve that ranking, pointing out during the hearing that a small fraction, 0.05 percent, of Missouri electricity revenues are spent on improving energy efficiency.

Templeton’s suggestions for the committee were to introduce performance incentives in the natural gas sector, energy efficiency standards for new buildings, and other baseline requirements.

“We as a state may say we have a minimum standard for investing in energy efficiency,” Templeton said.

Rep. Ed Emery (R-Lamar), one of the more vocal committee members, quizzed Templeton, and others who recommended energy subsidies, at length about the role of government intervention. At one point, Emery abruptly asked Templeton to explain the role he thought central planners should have in energy production versus the one a competitive market should have.

“Whenever we do have something we want to put more central planning in, we label it a market failure,” Emery said.

Rep. Jerry Nolte (R-Kansas City), co-chairman of the committee, also tended to focus his questions on additional costs.

Indeed, arguments for different forms of alternative energies were made in financial terms, and the phrase “global warming” was rarely mentioned. Instead, many presenters spoke of the impending federal cap-and-trade legislation that is projected to increase traditional energy costs.

“Fossil fuels will cost more … we just know it’s inevitable,” said Dan Eberle, interim director of the Missouri Alternative and Renewable Energy Technology Center at Crowder College. The federal legislation would just hasten the increase in energy prices, he said.

“Currently, it is very difficult to locate an alternative form of energy that is more economically competitive than traditional forms of energy,” said Alan Marble, president of Crowder College. A better approach, Marble and others suggested, is to get more bang for every energy buck by supplementing traditional forms of energy with forms tailored to a specific purpose.

Shawn Xu, a research associate professor at the University of Missouri–Columbia, illustrated that method with his explanation of geothermal heating, a process by which pipes dug deep into the earth heat buildings in the winter and cool buildings in the summer. Geothermal heating doesn’t replace the need for traditional energy. However, Xu said, constructing buildings with the capacity for geothermal heating is a highly efficient way to heat and cool them, thus reducing overall energy costs.

By Dain Fitzgerald

The state Department of Elementary and Secondary Education (DESE) is proposing new regulations for Missouri’s 40 charter schools. The proposal tweaks and makes some additions to the existing state statute that governs charter schools. Specifically, it would allow the State Board of Education (SBE) to intervene if a charter school is failing, would require a school to submit an accountability plan along with the initial charter school proposal it presents to a sponsor, and would also require charter schools to establish baseline student performance during a charter’s first year, using test scores to monitor student academic performance.

The bills outlining these changes will be pre-filed by the Missouri General Assembly on Dec. 1.

Mark Van Zandt, general counsel for DESE, said the proposal will “give charter sponsors the tools they need for effective operations.”

He said that the SBE currently lacks the ability to intervene when a charter school is failing. The proposed legislation, he said, redresses this by granting the SBE authorization to outline charter school standards, and, if necessary, to withhold a portion of a charter school’s funding.

The full legislation, which includes additional proposals for non-charter public schools, can be viewed here.

Cheri Shannon, executive director of the Missouri Charter Public School Association (MCPSA), said she didn’t see any problem with the proposed legislation, and that it seemed it would only increase standards for charter schools.

“I’m OK with it,” she said. “I believe the state board should be active and take whatever statutory action that they need to take for failing traditional schools and failing charter schools. The goal is quality.”

The SBE already has the power to override the operations of failing public schools not given independent status. This power would be extended to charter schools should the legislation be approved, with the goal of improving schools that are “failing academically” or becoming “financially insolvent.” Although Van Zandt said he believes intervention by the SBE is not an option of first choice, he said it is necessary to help guarantee efficacy in the improvement of charter school operations.

So far, five charter schools in Missouri have been closed down because of academic, financial, or operation issues, Shannon said. This spring, two more in Saint Louis will close, as well, bringing the total to seven charter school closings during the past decade.

According to Van Zandt, the inspiration for allowing the SBE the ability to close failing charter schools stems from a U.S. Department of Education (USDOE) report released in 2007, titled “Supporting Charter School Excellence Through Quality Authorizing.”

The report is a comprehensive study of what were considered to be the best examples of high-quality charter school authorizers from across the United States, including those in California, Minnesota, New York, and Massachusetts. Van Zandt said that DESE hopes to reproduce the success of those charter school authorizers in Missouri. The USDOE report is available here.

The National Association of Charter School Authorizers has given its support to the proposal, as have multiple in-state charter sponsors, Van Zandt said.

As outlined in the proposal, state and local funding may be withheld from charter school sponsors that fail to spend at least 90 percent of their sponsorship funds on sponsorship programs or as a direct investment in schools, that neglect to adhere to best practices in the hiring process, or that are lax in contract oversight, performance evaluations, and the monitoring of compliance.

Such withholding of funds will not take place in the case of sponsorship by a school board or by the SBE itself.

According to the proposal, potential opponents of the legislation’s implementation may include charter school operators themselves, because of the way in which the bill seeks to modify deadlines for evidence of school performance.

By Andrew Guevara
For the Show-Me Institute

State tax revenue collections continue to fall short. For October 2009, collections were down 14 percent compared with October 2008, falling from $514.8 million to $442.7 million, according to State Budget Director Linda Luebbering. A spreadsheet detailing the most recent tax collections is available here.

State revenues collected from corporate income and franchise taxes, sales and use taxes, and individual income taxes were all down, by 26.2 percent, 24.4 percent, and 8.6 percent, respectively.

The declines are in addition to the already waning numbers that were seen in September, when the state made its first-quarter report for the fiscal year, and announced that total collections were down nearly 10 percent in comparison to the first quarter of the previous fiscal year. With the additional shortfall in October, total collections are now down 10.8 percent. The decline seen so far is much less rosy than the revenue projects used in the state budget, which anticipated a 1-percent growth in tax collections.

In response to the continued decline in state tax revenues, Gov. Jay Nixon made $200 million in budget cuts during late October, an amount that comes to about 1 percent of the state’s total budget.

Contrary to the decreasing trend, tax collections from liquor sales were up 6.5 percent for October, and 7.6 percent for the year so far.

Andrew Guevara is a student at the University of Missouri-Columbia.

By Caitlin Hartsell and Audrey Spalding
The Show-Me Institute

An earlier published version of this story inadvertently misstated the Board of Aldermen’s final vote on the project. That error has been corrected below, and we apologize for the oversight.

The Saint Louis Board of Aldermen voted to perfect and approve an $8.1 billion development of the city’s north side, along with $198.6 million in tax increment financing (TIF) for the first half of project, for the next 23 years. The second portion of TIF money, $192 million, will be considered by the city at a later date, in order to conform to the development company’s project schedule. Only a dozen people were in the viewing balcony to hear the vote.

Alderwoman April Ford-Griffin of the 5th ward delivered the perfection motion for adoption of the redevelopment project and general development for the TIF. In her statement, she addressed previous community concerns about the project and reaffirmed her belief that the proposal was in the best interest of the city and its residents.

“There is no eminent domain. There is no city guarantee [of the TIF monies] and there are no exclusive rights [to redevelopment].”

Alderman Ford-Griffin emphasized the importance of multiple developers throughout her statement. Northside Regeneration LLC, represented by developer Paul McKee and his development company, McEagle, would be prohibited from developing more than 75 percent of the area.

Alderman Antonio French of the 21st ward raised the only opposition opinion at the meeting. He voted against  final passage of the bills.  At an earlier committee hearing of the project, Alderman Terry Kennedy of the 18th ward voted against the project.  At the Friday meeting, French brought up concerns about the message the vote would send to other developers aggressively buying land, specifically noting Urban Assets LLC.

“I think we should send a message to future developers buying in my ward and others that this is not the proper way to go about this,” he said. “The way it has been done is not the way it will be done in the 21st ward.”

McKee and McEagle began considering the north side project in earnest in 1998, said McEagle Chief Development Officer William Laskowsky in an earlier interview.

“We’re projecting 15-year build-outs in our models. We wouldn’t want to start C and D and lose 10 years due to inactivity. So that was an effort to preserve the timeline on the TIF.”

At the Board of Aldermen’s meeting, Alderwoman Ford-Griffin said she believed that the redevelopment would take longer than the 15-year projection, and acknowledged that it would be difficult to complete all that is included in the proposal.

“I think if we were to get half of what is in this plan, we will get a lot for Saint Louis.”

For projects undertaken with TIF monies, the bidding process would be public, Laskowsky said. However, the remainder of the project would involve private business contracts.

Laskowsky said McEagle had conducted its land acquisition business in the north side under different company names, so as not to attract attention.

Had property owners known that one company was conducting a large-scale buy up, property owners would likely have raised their asking prices. If a project is announced early, it often becomes subject to uproar from community members and city officials, Laskowsky said. In that case, a project “becomes not feasible.”

Announcing a large-scale project before buying properties, Laskowsky said, is “just backwards.”

There is not yet a definitive list of which properties are needed for the development, Laskowsky said, because as business deals are made, locations and space requirements may change. The list is “very fluid,” he said. “It gets you in the ballpark for what’s possible.”

Laskowsky said that legacy properties — properties that McEagle is intent on preserving — account for 50 percent of the project, or more than 2,000 properties. “The fact that they’re in the boundary only means good for their property values,” he said.

McEagle is only interested in about one third of the remaining properties, Laskowsky said.

“Already half of the land is stuff we love,” he said.

Laskowsky said the company is reticent to publish an existing property list, because it could spur vandalism, brick thieves, and fires. “It’s like putting a bull’s eye on them,” he said.

If the project goes ahead as planned, then in about six months, Laskowsky said, there will be an evaluation of properties. Specifically, he said, about 60 properties with buildings are being considered for possible rehabilitation.

If any properties are deemed unsalvageable at that time, Laskowsky said, they would be put on a demolition list. According to the TIF application, the development company has committed to demolishing all properties by the end of 2010.

Caitlin Hartsell, a student at Washington University, is an intern at the Show-Me Institute.

By Audrey Spalding
Show-Me Institute

A not-yet-approved $8.1 billion development of the city of Saint Louis’ north side is already facing legal action. Critics of the development have been very vocal regarding their concerns about blighting, the use of eminent domain, and whether the project has any financial backers. The development company, NorthSide Regeneration LLC, has asked the city for $390.6 million in tax increment financing (TIF).

On Oct. 8, some of those concerns were put into writing and submitted as a lawsuit filed on the behalf of a north side resident, Bonzella Smith. The attorney behind the case, D.B. Amon, is a known critic of the development project put forward by Paul Mckee, and of the development company.

The lawsuit, available here, includes a litany of claims. Of the largest, it alleges that NorthSide doesn’t have evidence of financial backing for the project, that the Saint Louis TIF Commission didn’t properly investigate the proposal before recommending it unanimously to the city’s Board of Aldermen, and that blighting will reduce property values, if not eventually leading to the use of eminent domain. The lawsuit’s wide range of allegations impact aldermen, the TIF commission, the mayor, and the development company. Aldermen Marlene Davis and April Ford-Griffin, who represent wards that lie mostly within the bounds of the proposed development’s 1,100-acre footprint, have claimed repeatedly that blighting has no negative consequence, and that eminent domain will not be used.

At a short Thursday hearing, 22nd circuit court judge Robert Dierker ruled that he has jurisdiction to hear the case. Dierker, known for writing the book The Tyranny of Tolerance, joked during the hearing about a recent Supreme Court verdict. “For all practical purposes, there is no substantial limitation to the jurisdiction of this court.” He also made another wry off-the-cuff remark about how agencies and commissions are created in order to take on roles not allocated to government within the Constitution.

The development company’s lawyer, Paul Puricelli, has already filed a motion to dismiss the case, on the grounds that the development has yet to be approved.

“Why are we worrying about this now?” he asked during the hearing. The case could be pursued, he said, if the Board of Aldermen voted to approve the development.

Regardless of its merits, Puricelli’s point may soon be moot. On Friday, the Board of Aldermen will meet and is scheduled to perfect two board bills that would approve the redevelopment and the first half of TIF monies for the project. If the development continues to move quickly through city government, it could be approved as early as Nov. 6.

The next hearing for the north side suit has not yet been scheduled. In the next 25 days, Amon must file a response to Puricelli’s motion for dismissal. If Dierker does not dismiss the case, another hearing will be scheduled.

By Audrey Spalding
Show-Me Institute

On Wednesday, Gov. Jay Nixon announced an additional $200 million in state budget cuts. The cuts come in the wake of low state revenue numbers for the first quarter of the fiscal year. In early October, the director of revenue’s office announced that the state had taken in nearly 10 percent less in revenues than it had during the previous year.

The largest cuts came from Medicaid ($32.45 million for “cost containment”), the Department of Public Safety ($33 million for employee cuts and shifting costs to other agencies), making fewer building repairs ($20 million), K–12 transportation ($15.8 million), and nearly all of the funds allotted to the Life Sciences Research Board ($13 million).

A full  spreadsheet of the budget cuts can be downloaded here.

The governor’s announced cuts today amount to a small fraction of the $23 billion budget for the year, totaling less than 1 percent. If the current trend in decreased tax revenues continues, the state will likely have to make more cuts in the future.

By Audrey Spalding
Show-Me Institute

A district affiliate of the majority state teacher union, the Missouri National Education Association (MNEA), has appealed a state judge’s ruling that public school teachers can choose whether to be represented by one union, several, or none. Most public school districts in the state negotiate with only one teachers’ union, but a select few, such as the Springfield, Brentwood, and Bayless school districts, allow non-exclusive teacher–school district negotiations.

The issue of teacher union representation came to a head at the Springfield School District when the Springfield National Education Association (SNEA) filed suit on June 2.

The SNEA argued against a district policy that allowed teachers to vote first for either single, multiple, or no representation, and then later to vote on which union (or unions) would represent them in negotiations with the school district. In court, Sally Barker, an attorney for the SNEA, argued that such a voting system represented a “false choice,” and that collective representation was traditionally understood to be done by a single union.

The Greene County Circuit Court allowed the district policy. In his ruling, Judge Michael Cordonnier wrote that the Article I, Section 29, of the Missouri Constitution provides for multiple representation with the following language: “That employees shall have the right to organize and to bargain collectively through representatives of their own choosing.”

“The word ‘representatives’ in Section 29 is unambiguous, plural, and must be read to include the possibility of more than one representative,” Cordonnier wrote.

On Oct. 20, the SNEA filed a notice of appeal with the Southern District Court of Appeals. The appeal itself hasn’t been filed with the court, said Sandra Skinner, the court clerk. The filing could come as late as the end of January, she said.

BAYLESS

Another teacher union lawsuit, this one on the behalf of the Bayless National Education Association (BNEA), has been scheduled for trial on Dec. 11 at the Saint Louis County circuit court. According to court documents, Barker will be representing the BNEA.

The BNEA’s suit alleges that the school district has violated Article 1, section 29, of the Missouri Constitution by refusing to recognize the BNEA as the exclusive bargaining representative of the district’s teachers, or agreeing to let teachers vote on the matter.

Under the district’s policy adopted in Feb. 2009, “Bayless Working Together,” teachers in each school building nominate and vote for two representatives and one alternate, regardless of union affiliation. In its response to the lawsuit, the district wrote that it prefers to keep the current collective bargaining arrangement in place.

At trial, Barker will likely argue that the district’s bargaining policy isn’t a legitimate form of collective bargaining and violates the state constitution.

In the lawsuit filed on behalf of the BNEA, Barker wrote that the district’s collective bargaining policies “violate Plantiff’s right to engage in collective bargaining within the meaning of Article I, Section 29.”

By Audrey Spalding
Show-Me Institute

In about a week, Saint Louis County voters can decide whether to prohibit smoking in most public areas, with exceptions for a number of places, including casinos and bars that take in little to no revenues from food sales. With the vote impending, County Councilman Barbara Fraser, who sponsored the bill, and Bill Hannegan, the area’s most active critic of proposed smoking bans, met to debate its merits at the Center of Clayton on Monday. A small crowd of about 20 people showed up.

If voters pass the countywide ban on Nov. 3, a similar ban will take effect in Saint Louis city and other parts of the state may follow suit. Fraser, when asked by an audience member what the implications would be for the state if the legislation were passed, said the county legislation could be a stepping-off point for state and local governments.

“So goes Saint Louis County, so goes the state,” she said. And later: “Let’s be not only the economic engine of the state, but the public policy engine of the state.”

Fraser argued that the health benefits of banning smoking from many public places far outweighed concerns about property rights, and that concerns about the negative impact on businesses was unfounded. She said that if a person looked at the unbiased, peer-reviewed research, the evidence said that smoking bans did not harm private businesses, and helped reduce diseases associated with smoking.

“Smoking bans save more than a half million lives each year,” she said.

Hannegan disagreed, stating unequivocally that the ban would have large, negative consequences for area businesses. An estimated one of every five jobs at city bars would be gone if the city and county ban were in place, he said. And, on top of that, Hannegan said, the ban isn’t an equitable one.

“It does not create a level playing field,” Hannegan said. “You can still smoke on the casino floor.”

He called the legislation “hastily crafted for political reasons,” alluding to Fraser’s campaign for state senator for the 24th district.

Hannegan, who also attended meetings concerning a city smoking ban, said politicians in general were more interested in social engineering than in what was best for their constituents.

“It was really chilling to listen to restaurant and bar owners plea for their economic lives and watching politicians basically go on a power trip,” he said, referring to the city smoking ban hearings. “It was about themselves, it wasn’t about the good of Saint Louis.”

By Andrew Guevara

For the Show-Me Institute

On Oct. 25, hundreds of people gathered underneath the Arch to urge President Barack Obama to take action against climate change in December at the United Nations Climate Control Conference in Denmark.

The event was organized by 350.org and other environmental groups, such as Greenpeace, 1 Sky, and Power Shift as part of an international day of simultaneous climate action rallies across the world to advocate that world leaders draft a strong climate treaty.

Many people brought signs printed with the word, “350,” a number that is significant to climate change activists.

According to Linsey Berger, the Master of Ceremonies for the eventand a student teacher at Missouri State University, 350 is the absolute safe maximum amount of carbon dioxide in parts per million that can be in the earth’s atmosphere. But unfortunately, she said, the planet is currently at 387 parts per million.

Mark Templeton, director of the Missouri Department of Natural Resources, and Saint Louis Mayor Francis Slay both spoke at the event, along with five others, including environmental experts and religious leaders.

“Our climate could become like that of South Texas or Northern Mexico,” said Templeton. “We need good economics in addition to science.”

Mayor Slay spoke briefly about his concern for climate change near the start of the rally.

“The problem is international, the fight is national and the solution is local,” he said. Slay was one of 60 U. S. mayors that signed the U.S. Conference of Mayors Climate Protection Agreement earlier this month in Seattle. The agreement is a pledge that has since been signed by more than 1,000 mayors across the country to take action to reduce carbon emissions in their respective cities.

“Here in Missouri, the voters voted last fall. We won every single county in the state with an overwhelming majority, two-thirds of the voters in the state of MO voted for clean energy,” said Kat Logan-Smith, executive director for the Missouri Coalition for the Environment.

“They voted for clean energy because we don’t want to be left behind,” she said.

The clean energy initiative Logan-Smith referred to is Proposition C, passed in 2008, which requires investor-owned utilities to buy or purchase 15 percent of their energy from clean energy resources.

Although the state has taken initiatives to incorporate clean energy into the state’s power generation, the issue of Missouri’s coal-based economy has caused some to express concerns about what comprehensive climate legislation would do to the state’s economy, such as Sen. Claire McCaskill and state industry leaders.

“We’re [Missouri] going to have a different transition period,” said Berger, the student teacher and MC. “It’s not where we are, it’s where we need to be.”

Dan Cohn, a student at Washington University, and part of the campus-based group Green Action, also said he felt the long-term benefits would outweigh the short-term costs.

“Not passing legislation and allowing the production of coal will have much higher costs for Missouri and the world, economies everywhere,” Cohn said. “Instead of coal companies receiving subsidies, use those for clean energy to reduce the chance of catastrophic climate change and reinvigorate Missouri’s economy in a way coal won’t be able to.”

By Audrey Spalding
Show-Me Institute

An $8.1 billion development of the city of Saint Louis’ north side moved closer to final approval on Thursday when the Housing, Urban Development, and Zoning (HUDZ) committee voted 13-1 to pass the project forward to the Board of Aldermen.

The project, put forward by developer Paul McKee and NorthSide Regeneration LLC, needs city approval because it calls for $390.6 million in tax increment financing (TIF). The two bills passed by the HUDZ committee establish a redevelopment agreement with the city (available online as an attachment to this PDF document), and approve up to $200 million in TIF monies for the first half of the development.

McKee spoke briefly for the project and stressed the number of construction and permanent jobs it could bring. “We’re excited to put a sign on the north side that says ‘open for business,’” he said.

Only Alderman Terry Kennedy voted against the bills. Prior to voting, Kennedy spoke at length about how he disapproved of the secretive way in which the development company had gone about purchasing land. He was referring to how the company had purchased more than 900 properties in the north side with 12 shell companies designed to hide the fact that a large-scale buy-up was taking place.

“I personally cannot support that approach,” Kennedy said.

The committee hearing, which took about three hours, included a long explanation of the project by Deputy Mayor for Development Barbara Geisman, questions from committee members, and public comment.

Two controversial parts of the proposed development were discussed at length but still left somewhat unresolved. The first, whether the city would back any of the bonds generated from loans taken against the future promise of TIF monies, was not considered at the committee hearing, nor is city backing included in the proposed development agreement.

“There is no city guarantee,” Geisman said. “But again, this issue may be revised at a later date.”

The other point of controversy, the use of eminent domain, was argued back and forth by members of the public and city officials during the public comment portion of the meeting, with Alderman April Ford-Griffin calling fear of eminent domain based on misinformation and myths.

“It’s still in this bill,” said Keith Marquard, an active critic of the proposed development. “It’s a lie to say that it is not.”

Geisman said repeatedly during her presentation that eminent domain was not allowed in the redevelopment agreement, but that if it came down to it, situations could arise in the future “where individual aldermen believe eminent domain is necessary.”

If the project continues to move quickly through the city government approval process, McKee said that the development company will apply for $20 million in state tax credits this year.

Those tax credits, established with the Distressed Areas Land Assemblage (DALA) Tax Credit Act, allow a developer of a large-scale development to collect up to $20 million each year in reimbursement for 50 percent of land acquisition costs (which can include real estate brokerage fees, demolition of vacant buildings, and maintenance costs) and 100 percent of maintenance costs. No other developer has yet applied for the DALA tax credits.

Alderman Antonio French, who was present at the hearing but not a committee member, questioned Paul McKee about how those tax credits would be used.

“Will you use Distressed Area Land Assemblage Tax Credits to redevelop the area or just pay down your debt?” he asked.

Geisman answered the question, first clarifying that DALA tax credits could be used toward redevelopment, according to the state statute. She added that the tax credits could also be used to pay down debt “so that the developer can free up debt capacity to purchase new property.”

On Friday the bills will be read a second time at the Board of Aldermen’s weekly meeting. After a third reading the following week, aldermen could vote to perfect and pass the bills.

By Andrew Guevara
For the Show-Me Institute

In September, the Missouri Department of Insurance reported the lowest number of new medical malpractice claims in 10 years and the lowest number of claims open in almost 30 years. According to the 2008 Medical Malpractice Annual Report, 1,215 new malpractice claims were filed and 3,017 cases were pending.

Meanwhile, the state insurance industry continued to earn a profit, which the report attributes to fewer claims filed and smaller payouts paid by malpractice insurers. The average claim for 2008 was $202,612, approximately $50,000 less than its “period high” peak in 2005.
Tort reform proponents claim that the new figures, coming less than five years after state legislation was passed to restrict medical malpractice claims, are evidence of success.

“The whole tort system had gone completely out of control,” said former Senate President Pro Tem Michael Gibbons.

Gibbons,  who backed the reforms, said the decline in the number of malpractice claims and payout size is tied to medical tort reforms that former Gov. Matt Blunt and a Republican majority General Assembly voted into law during 2005.

The reforms placed a cap on non-economic damages, restricted suits to be filed only in the same county where the accused negligence occurred, required defendants to pay full judgment only if they are found to be responsible for more than 50 percent of the negligence, and implemented other  limitations.
The purpose of the state’s tort reforms, Gibbons said, was “to create an environment that was more consumer friendly, with better quality health care, and to reduce costs.”

After the 2008 malpractice report was released, Blunt wrote in a Wall Street Journal op-ed that the 2005 legislation had helped to reduce the number of “junk lawsuits” in Missouri, lower health care costs, and provide better access to health care.According to the 2008 malpractice report, payouts have also declined. Providers issued $31.7 million less in written premiums to health care providers from 2006 to 2008, compared to the $5.8 million increase in written premiums from 2003 to 2005.

“It was important for Missouri to rebound from 2003 to 2004,” Gibbons said, and claimed that “2005 to 2008 have been buzz times for the state.”

Even though Blunt and Gibbons interpret the decreased number of claims filed as a positive change, trial lawyers see this as a defeat for patients.

Wally Bley, an attorney at the Columbia-based Bley & Pfeiffer law firm, said that the decline in claims is a “false victory.”

“This alleged reform has taken away patients’ rights to collect for negligence,” Bley said.

“There are as many phone calls from people as ever, but we can only take many of them when their cases are economically worth pursing,” he said.

THE REST OF THE COUNTRY
The decreasing cost of malpractice premiums in Missouri also reflects a national trend.

The Medical Liability Monitor 2008 Rate Survey, a study that examines medical malpractice premiums nationally, shows that 43 percent of medical malpractice insurers surveyed reported a decrease in premiums, 50 percent reported no change, and 7 percent saw an increase.

Geographic location, including state and metropolitan region, plays a large role in premiums, according to the survey.

For example, a general surgeon in the Kansas City area saw no percentage change in medical malpractice premiums from 2007 to 2008, and continued to pay $132,314. A general surgeon in the Miami-Dade County, Fla., region saw a 22-percent decrease in premiums but still paid $214,893. The lowest rates reported for general surgeons during 2008 were in North Dakota, with premiums of $18,063.

The study cited four possible reasons for a decrease in claim frequency, and thus a trend in reduced premiums nationwide: better risk management practices for patient care; state-level tort reforms; an increase in legal costs for plaintiffs, which could result in claims with a low chance of success not to be pursued; and the success of an “access-to-care” crisis campaign, which claimed that higher malpractice costs could lead to lower-quality health care.

Missouri seems to be following the trend predicted by the “access-to-care” campaign. Since the passage of the 2005 tort reforms, more practicing doctors have stayed in Missouri, according to reports from the Board of Healing Arts, the agency responsible for licensing and regulating physicians. According to the board’s calculations, Missouri lost 447 physicians between 2003 and 2005; however, between 2006 and 2009, Missouri gained 487 practicing physicians.

THE IMPLICATIONS
Missouri’s tort reforms could be freeing doctors from conducting medically unnecessary procedures and tests in order to prevent potential medical liability suits, known as “defensive medicine.”

Jeffrey Howell, director of legal affairs for the Missouri State Medical Association, said, “Tort reform keeps doctors from practicing defensive medicine and lets doctors do what they do best.”

But, despite the recent decrease in medical malpractice premiums, the savings don’t seem to be reflected in health insurance premiums. According to a Families USA report, family health insurance premiums in Missouri grew 3.6 times faster than  Missouri workers’ incomes from 2000 to 2009.

Federal estimates illustrate the disconnect between medical malpractice premium costs and family health insurance premium costs. According to a 2004 Congressional Budget Office (CBO) report, a 20–30 percent decrease in malpractice premiums would decrease health care costs by only 0.4–0.5 percent.

In an Oct. 9, 2009, letter from the CBO to Sen. Orrin Hatch addressing tort reform in the United States, CBO Director Douglas Elmendorf wrote that national tort reforms could reduce U.S. health care spending by 0.5 percent — a small percentage, but a figure that would amount to approximately 11 billion in 2009 alone.

“That figure is the sum of a direct reduction in spending of 0.2 percent from lower medical liability premiums and an additional indirect reduction of 0.3 percent from slightly less utilization of health care services,” Elmendorf wrote.

Gibbons said that tort reform backers thought limiting defensive medicine costs would lower family health care costs, but acknowledged that this has not appeared to be the case.

Andrew Guevara is a student at the University of Missouri-Columbia