By Audrey Spalding
Show-Me Institute

In areas of north Saint Louis, some of the buildings are in bad shape. At the intersection of 13th Street and North Market Street, although some offices and residences are occupied and kept clean, several houses have painted-on addresses, and some nearby structures are literally crumbling.

A large grey building sits on the northeast corner of the intersection, one of its doors marked with a “no trespassing” sign and kept closed with a large metal lock and chain. A pile of gravel lies on its lawn. Of course, the inside is another story. The ceiling has been refitted, wooden frames attached to the wall function as both bookcases and art, and there is a working kitchen in the rear.

There couldn’t be a more symbolic meeting place for the North Side Community Benefits Alliance (NSCBA), a group trying to convince Paul McKee, a developer who has proposed an $8 billion redevelopment of the area, to sign a binding contract to deliver the benefits he and his organization, NorthSide Regeneration, LLC, have promised verbally. Among other things, the redevelopment company has promised the creation of 22,000 jobs with its NorthSide project, and about 10,000 new residential units.

In exchange for this prospect of jobs, office buildings, and new homes, the redevelopment company has asked the city of Saint Louis for a tax increment finance (TIF) package. It would allow NorthSide Regeneration access to up to $410 million of future tax dollars that the developers expect to be newly generated as a result of their property improvements, transferring them from the public to the redevelopment company.

It is not clear that the redevelopment company would be legally obligated to fulfill its promises if it received TIF funds from the city.

“There is no accountability document,” NSCBA President Sheila Rendon said during the NSCBA’s Monday night meeting. “We need that document.”

During the meeting, which lasted more than two hours, about 20 attendees discussed not only their short-term goal of getting more area residents involved, but also how to become included in the redevelopment process.

“Redevelopment is coming, and we’re likely unable to stop it,” Barbara Manzara, NSCBA vice president and project manager, said.

Though NorthSide Regeneration has already acquired more than 800 properties in north Saint Louis, it still needs about 2,376 more for the project, according to the company’s TIF application with the city of Saint Louis.

While a large number of those properties, 1,337, are owned by city agencies, 140 properties have buildings that are occupied, and 11 of those buildings are owned and occupied by churches.

Furthermore, 308 individuals and families own property that the company is planning to acquire. Although NorthSide Regeneration plans to negotiate with those owners, if some of them refuse to sell, “the developer will work with the City to seek to acquire those properties through the use of eminent domain or condemnation proceedings,” according to the company’s TIF application.

Eminent domain, a process by which the government can take property from its owner for “public improvement,” is provided for in the Missouri Constitution. However, the threat of its use and a sense of disenfranchisement seemed to drive members’ voiced distrust and dissatisfaction with Saint Louis politicians, who are seen as either working with McKee or staying out of the way.

Robert Denlow, a Saint Louis attorney who specializes in eminent domain cases, said politicians were likely working with McKee. “Right now, the deal is being cut,” he said.

Rendon expressed her frustration with 5th Ward Alderman April Ford-Griffin. Though Griffin had met with Rendon and Manzara, she would not come to NSCBA meetings, Rendon said.

“It’s not as if she’s not aware,” Rendon said. “As long as she stays away, she can say she doesn’t know what we’re doing.”

Isaiah Hair Jr., a retiree, former Missouri state representative candidate and member of the Citizens Coalition to Fight Eminent Domain Abuse, said that if the group could get more visibility and membership, then perhaps politicians would listen.

“This is your constituent, this is your voting bloc right here,” he said.

By Audrey Spalding
Show-Me Institute

Tuesday morning, former Speaker of the House Newt Gingrich spoke to roughly 500 people about the future of health care science and the role that government and politicians should have in reforming the health care system.

Gingrich’s presentation was part of a four-hour-long event hosted by Delta Dental at the Ritz-Carlton in Saint Louis, beginning with an hour-long presentation about oral cancer by Dr. Jed Jacobson, the chief science officer and vice president for Delta Dental of Michigan.

Though Gingrich, founder of the Center for Health Transformation, did touch on oral care for a moment, he spent the majority of his hour on stage talking about widespread dissatisfaction with health care as a symptom of the U.S. government’s inefficiency and the current economic crisis.

For example, he said, most of the stimulus money approved by Congress has yet to be spent. “They just can’t get the bureaucracy to move,” Gingrich said.

“You can’t talk about health reform in isolation,” he said. “Health reform is a part of this whole problem.”

Gingrich, who has been a major proponent of electronic health records, also spoke at length about the risks of fraud in a paper-based system.

According to Gingrich, fraud is so prevalent that it accounts for nearly 10 percent of health care spending — or nearly $200 billion each year.

He said that moving from paper to electronic records could help government officials minimize spending on falsified claims.

“You can never have bureaucrats in a paper-based system operate at the speed of crooks,” Gingrich said. “Why would we raise taxes on any honest person before we quit paying the crooks?”

By Caitlin Hartsell
Show-Me Institute

Though the majority of people who attended the forum indicated their opposition to recently proposed health care legislation, at least 25 people showed up in support of it, as well as other causes.

From the 1,018-page-long House version of the health care reform bill: Severability, pg. 53 If any provision of this Act, or any application of such provision to any person or circumstance, is held to be unconstitutional, the remainder of the provisions of this Act and the application of the provision to any other person or circumstance shall not be affected. Establishment, pg. 65 (1) IN GENERAL.—Not later than 90 days after the date of the enactment of this Act, the Secretary of Health and Human Services shall establish a temporary reinsurance program (in this section referred to as the ‘‘reinsurance program’’) to provide reimbursement to assist participating employment-based plans with the cost of providing health benefits to retirees and to eligible spouses, surviving spouses and dependents of such retirees. Advance Care Planning Consultation, pg. 425-426 (1) Subject to paragraphs (3) and (4), the term ‘advance care planning consultation’ means a consultation between the individual and a practitioner described in paragraph (2) regarding advance care planning, if, subject to paragraph (3), the individual involved has not had such a consultation within the last 5 years. Such consultation shall include the following: (A) An explanation by the practitioner of advance care planning, including key questions and considerations, important steps, and suggested people to talk to. (B) An explanation by the practitioner of advance directives, including living wills and durable powers of attorney, and their uses. (C) An explanation by the practitioner of the role and responsibilities of a health care proxy. (D) The provision by the practitioner of a list of national and State-specific resources to assist consumers and their families with advance care planning, including the national toll-free hotline, the advance care planning clearinghouses, and State legal service organizations (including those funded through the Older Americans Act of 1965). (E) An explanation by the practitioner of the continuum of end-of-life services and supports available, including palliative care and hospice, and benefits for such services and supports that are available under this title. (F)(i) Subject to clause (ii), an explanation of orders regarding life sustaining treatment or similar orders, which shall include— (I) the reasons why the development of such an order is beneficial to the individual and the individual’s family and the reasons why such an order should be updated periodically as the health of the individual changes;

Hundreds of people packed a health care forum moderated by Sen. Claire McCaskill’s Saint Louis regional director, Michelle Sherod, on Monday at Forest Park Community College. The crowd was so large that, minutes before the forum began, organizers moved the crowd into the student cafeteria from its original meeting place upstairs.

The forum had been requested by Americans for Prosperity, a group with a stated mission to promote and advocate limited government and free-market policy. The group led a protest of pending federal health care legislation at McCaskill’s Saint Louis office on July 17.

Though the vast majority of people attending the forum indicated their opposition to the proposed legislation, at least 25 people showed up holding signs that displayed slogans like, “Working people want quality, affordable, health care now!” and “Missouri health care for all.” Health care reform wasn’t the only issue on display, either; a number of attendees held signs that said, “Make our energy clean. Make it American.”

Sherod began the meeting by listing McCaskill’s opinions on the issue. She said McCaskill believes that health care is in “dire need of reform.” Furthermore, Sherod told the crowd, McCaskill thinks that a public option is needed to compete with private insurance — a statement that was met with loud booing from the audience, some of whom held “Where’s Claire?” signs.

A long line of people waited to ask questions and make comments, which they were told would be relayed to the senator. Within the first hour, 22 people presented a variety of reasons why they opposed the bill.

The first person to speak, John Bubb, asked, “Why the rush to push this through?” He said that the senator should give the people three months to properly critique the bill. He also claimed that the nation’s health care situation is not a failure of a competitive market — because so much of the health care system is already regulated by the government.

Others couched their observations within personal stories. One woman spoke of her “million dollar babies” — her twins, who were born prematurely and were not expected to survive. She credited her great private insurance for saving her daughters’ lives.

The man who followed her, an unidentified college student with a cochlear implant, asked whether people who are disabled would be denied treatment under a public option. He echoed the New York Post’s characterization of comments made in a 1996 Hastings Center Report by Ezekiel Emanuel, one of Obama’s top health care advisers, as advocating that health care should be reserved for the “non-disabled.”

Those at the forum who supported current government health care reform, voiced an objection to the increasing cost of health care in the current system. One man, who said he owns a small business, welcomed the idea of the public option, saying that his insurance premiums had risen 34 percent during the last two years and that he could not afford to cover his employees.

Many of the questioners took issue with the fact that few senators were actually reading the proposed legislation. Three of the questioners separately said that they had read the health care reform bill, and each had a different portion to critique.

Jim Durbin, a small business owner in Chesterfield and author of the blog 24th State, said that the bill is “designed to destroy the private health care industry.” He said that if the government began to regulate premiums and benefits with a heavy hand, there would be no real variety among options.

Joyce Cooper, the second person to announce that she had read the entire bill, pointed out that section 155 of the bill stipulates that even if a portion of the bill were ultimately found to be unconstitutional, all other provisions would continue to stand. A few others took issue with the constitutionality of the reform, including a former veteran who said he was looking for an apology from the senator because he claimed she had broken her oath to uphold the Constitution.

Fran Adams, who had also read the bill, pointed to a portion on page 425 that said there would be advanced care planning consultation and orders for end-of-life care, essentially deciding when people would die. She also alluded to political posturing within the bill, claiming that section 164 enumerates a retirement plan for families of labor unions and community organizers.

Some comments were more dramatic. One man, who identified himself as Jim Dale of Valley Park, posed the question, “At what point does the government say to me that it is your patriotic duty to die?”

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

Federal Reserve Chairman Ben Bernanke was in Kansas City on Sunday to take questions during an hour-long town hall forum.

One exchange, included in the article: When a small-business owner asked Mr. Bernanke why the Fed helped rescue big banks while “short-changing” small companies, Mr. Bernanke answered that he had decided to “hold my nose” because he was afraid the entire financial system would collapse.

“I’m as disgusted by it as you are,” he told the audience of 190 people. “Nothing made me more angry than having to intervene, particularly in a few cases where companies took wild bets.”

Read the full article at The New York Times’ website.

By Audrey Spalding
Show-Me Institute

The difference between S.B. 711–mandated March property value estimates and July numbers amounted to a 9-percent decline. In the coming month, school district administrators may have to rework their budgets as a result.

Twenty-three of the 24 school districts in Saint Louis County had an unwelcome surprise on July 1. Their primary source of tax revenue — property values within district boundaries — had shrunk below the county Department of Revenue’s March estimates.

Of those 23 districts, 20 saw commercial property value decreases of more than 5 percent, according to county documents. Wellston School District was hardest hit, with a decrease of 33.3 percent. You can download a spreadsheet comparing estimates with July numbers here, and see county source documents here.

The current economic recession is likely to blame for the drastic fall in real estate prices. However, an earlier deadline required by recent legislation, Senate Bill 711, may be at fault for causing school district administrators to base budgets on stale information.

Before S.B. 711 was passed in 2008, assessors could give school districts property value estimates as late as May.

“All taxing authorities had to come up with an estimate by February or March,” Tim Lee, assistant collector for St. Louis County, said. “The problem is the assessor is not done with assessments at that time.”

“[S.B. 711] required all tax authorities to come up with a guess,” he said.

The earlier deadline has real consequences for school districts. If school district administrators finalized their budget using the March estimates, they will likely find themselves reaching into district reserves to make up the difference, or making budget cuts. Generally, teacher and other personnel costs make up about 80 percent of a school district’s budget.

At the Lindbergh School Board’s most recent meeting on Tuesday, Assistant Superintendent Patrick Lanane said the discrepancy would result in at least $1.3 million less in district revenues for the coming school year, which the district had counted on in its 2009–2010 budget. “The system set within 711 is broken,” he said.

Brentwood Superintendent Charles Penberthy said his district faces the same challenge. Brentwood administrators had set the coming school year’s budget based off of the March estimates, he said.

“Our assessed valuation went down significantly, especially from commercial property,” Penberthy said. “Overall, we went down about 9.5 percent.”

When asked whether school districts could trust the March estimates, Lee said, “It is what it is. If you talk to the assessor, clearly he knew for a fact that those wouldn’t be the numbers for July. Everybody knew that.”

Penberthy said that it would have been better and more accurate to use property value estimates made later in the year.

“It makes us look bad when we don’t give correct information, and it’s because we weren’t given correct information to make our projections,” he said.

While Lanane recommended to Lindbergh board members that the district consider a Proposition C rollback — a measure that would allow the district to keep a portion of state income tax revenues it usually gives back, Penberthy said Brentwood would “probably use our reserves to fund our programs this year.”

For now, Lee said, S.B. 711 affects only the city of Saint Louis, Jackson County, Saint Charles County, and Saint Louis County.

“We’re the guinea pigs, so to speak,” he said. “The rest of the state has until 2011.”

By Audrey Spalding
Show-Me Institute

Recently passed legislation may be hurting school districts, especially when combined with the economic recession’s impact on property values. Certainly, Assistant Superintendent Patrick Lanane laid partial blame on the schedule to report assessed valuation estimates, laid out in Senate Bill 711,  for the Lindbergh School District’s $1.3 million budget crunch.

During its Tuesday meeting, the Lindbergh Board of Education listened aghast as Lanane presented what he called a “financial alert.”

Missouri school districts rely on property tax levies for a large amount of their annual revenue. Districts watch that revenue carefully when making their budget for the next year.

“We absolutely live and die by those numbers,” Lanane said.

In the case of Lindbergh, commercial land value estimates given to the district in March totaled $45 million more than the revisions — given to Lanane July 1. That difference, he said, will result in a $1.33 million revenue loss.

“The timing couldn’t be worse,” Lanane said. “We’ve had our budget workshops. We’ve adopted our budget.” To make matters worse, the district has already made many budget cuts.

Before S.B. 711, Lanane said, property assessors could give school districts property value estimates as late as May. Given the current economic recession, falling property prices mean that the earlier assessors have to give school districts property value estimates, the more inaccurate they could be, he said.

“Are they telling us we can’t trust those numbers?” Lanane said.

School Board President Kenneth Fey told Lanane to prepare to cut more. “I know that it was agonizing,” he said. “But I want you to look at every line item. Again.”

Administrators and board members sunk into a discussion of just how much declining property values would hurt the district, which hasn’t received much federal aid.

“For all practical purposes, we received no stimulus money in Lindbergh,” Lanane said.

The one solution Lanane could come up with was to ask district voters in the near future to approve a Proposition C rollback — a measure that would allow the district to keep a portion of state income tax revenues it usually gives back.

At least two district affiliates of the Missouri National Education Association are suing their school districts. At issue is how strong unions should be — a question currently echoed in national politics. This article illustrates the Lindbergh School District’s negotiation process, resumed after it derailed in early spring.

By Audrey Spalding
Show-Me Institute

The Lindbergh Board of Education met Tuesday night to discuss, among other things, how to negotiate with its teacher union, the Lindbergh National Education Association (LNEA). During the hour-long public portion of the board’s meeting, board members did not discuss the issue.

For a few minutes, Assistant Superintendent Richard Francis presented the not-yet-contractual changes that LNEA representatives and district administrators had informally agreed upon.

“Negotiations were extremely cordial, and yielded many good handbook revisions,” Francis said.

Beth Siegfried, a co-president of the LNEA, attended the board meeting, though she did not speak during the public comment session.

“I’m fine with what they discussed,” she said.

The real board discussion likely happened either during the two-hour-long closed executive session held by the board before the public meeting, or during the other executive session held after the public meeting, which was described in the board’s agenda as: “concerning legal matters; hiring, firing, promotion, discipline of personnel; lease, purchase, sale of real estate; scholastic probation, expulsion, graduation of student personnel; or preparations for negotiations with employee groups.”

“I’m sure there was discussion in the executive session,” Siegfried said.

Though the school board’s discussion of teacher union negotiations may be held privately, actual negotiations between administrators and LNEA members during the first and second weeks of July were open for observation. Generally, negotiations went well, though they hadn’t earlier in the year.

As the only outside observer, general responses to the presence of a writer covering these negotiations became a standard line: “You should have been here earlier.”

Earlier, of course, the LNEA and district administrators met 16 times for negotiations and could not come to an agreement. At the time, reports about Lindbergh from The Call, South County Times, and St. Louis Suburban Journal featured accounts of protesting teachers and packed school board meetings.

March 1, the deadline for the groups to reach a bargaining agreement, passed, as did April, May, and June.  On June 30, the 2006–09 contract expired, and Lindbergh teachers are now working without a binding agreement — until the LNEA and administrators can reach a consensus.

The LNEA-board disagreement hinged on a recent Missouri Supreme Court ruling that public school teachers have a right to bargain collectively. The Missouri National Education Association (MNEA) and many of its district affiliates have interpreted that ruling to mean that only one union ought to represent teachers, and that teachers’ collective bargaining agreements can be expanded to include policies previously left to school board discretion.

The second half of that interpretation is what stalled the Lindbergh negotiations — the LNEA said that the teachers’ bargaining contract should now include details of how teachers are evaluated, teaching schedules, and how the school district conducts layoffs in fiscal grievance resolution, among other practices.

District administrators didn’t budge. According to the LNEA’s website postings, and accounts from Francis and board Vice President and Missouri School Boards Association Vice President Vic Lenz, administrators would not add what had previously been board policy into binding contract language.

Finally, the president and vice president of the school board, along with the superintendent and co-presidents of the LNEA, met to stop the adversarial negotiations and simply have a discussion, Lenz said.

As a result, the LNEA and district administrators agreed to put the disagreement behind them, and meet again in July. The group met over the course of four days, for nine hours total.

The first and second days went well, but negotiations stalled on the third day. Within the first few minutes of the July 8 negotiations, Diane O’Leary, one of LNEA’s two co-presidents, and Francis found themselves at an impasse concerning the earlier debated issue — whether district administrators would consider expanding the teachers’ contract.

The room fell silent. “We have done great work,” Francis said. “But it’s handbook.”

“Which can be changed if [school board members] want to … That’s the concern,” O’Leary said.

The groups parted for an hour to figure out separately whether to continue negotiations, and how unyielding of a stance to take.

Ultimately, both sides agreed to return to the table if there was a possibility that the informal negotiations could lead to binding contract language later, with mutual consent.

Tuesday, the school board had its “first reading” of the changes discussed, but they were not presented as binding. Those changes are open to comment from board members and district employees, Francis said, until the next board meeting on Aug. 18.

It is likely that LNEA members won’t be satisfied until a binding agreement is reached. During negotiations, Francis suggested that because the groups were cooperating, union representatives and administrators should make a public statement about how well the process had gone at the Tuesday board meeting.

“We can put forth a collaborative message to the community,” Francis said.
O’Leary immediately rejected the idea.

“Do you think we can go to the press and public and say this is all great if we don’t have an agreement?” she asked.

Pres. Barack Obama spoke with the Today Show’s Meredith Vieira about health care, and how to pay for the additional costs of insuring more Americans.

Locally, U.S. Rep. Russ Carnahan took questions from  Missourians at Forest Park Community College yesterday about their health care concerns. Read the full article at the St. Louis Beacon’s website.

Of course, the House of Representatives’ 1018-page health care bill is available online — if you have some time.

By Audrey Spalding
Show-Me Institute

It really wasn’t just about health care. Though the approximately 50 protesters gathered outside of Sen. Claire McCaskill’s office Friday had signs proclaiming “Gov’t health care is making us sick,” individuals there seemed most concerned with the increasing size of government.

The protest was organized by the Missouri chapter of Americans for Prosperity, an organization that advocates reducing the amount of government spending — an idea echoed by many of the protesters in attendance.

“Government spending is out of control,” said Carol Bloomberg, a homemaker and former civil engineer who receives health insurance from her husband’s employer. She said she has been feeling this sense of dissatisfaction for more than 10 years, but today was the first time she had protested publicly.

Kate Martin, a retired office worker who currently relies on Medicare payments, which she supplements with private health insurance, had a similar view.

“I think the government legislation is going to kill this country financially,” she said “We’re so removed from our medical bill; no one asks what something costs.”

Neither Miller nor Bloomberg said they were against all forms of publicly provided care. When considering the poor and elderly, both said they supported some form of government health assistance.

“I’m not against Medicaid and Medicare,” Bloomberg said. “I totally support Medicaid and Medicare, and Social Security if done properly.”

After about 45 minutes of protest, people began to leave, and organizers were soon complaining about lunchtime traffic delays on Twitter.

As one woman left the rally, wearing a “Don’t tread on me” shirt, she stopped to talk to Scott Miller, who had stepped out of the Taylor-Made barbershop for a cigarette. As she explained her opposition to the public health care option now under consideration by Congress, he disagreed. “If there’s a need, then it’s going to come to be,” he said.

Miller, who works as a machinist at John J. Steuby Co., said he thinks the government could get health care right. His own health care is pricey — Miller said he pays a little more than $1,000 each month for his family’s health insurance. “My son’s 19, and he doesn’t even use it,” he said.

“There should be a minimum level of health care,” he said. “And if you want more, you should be able to buy extra.”

By Abhi Sivasailam
Policy Pulse Contest Winner

While Missouri’s economy struggled through the worst recession in recent memory, legislators in the General Assembly attempted to revamp the tax structure by abolishing the state income tax in favor of a sales tax. House Joint Resolution 36, introduced by Rep. Ed Emery (R-Lamar) called for submitting to voters a referendum to choose between amending the state Constitution and maintaining current tax structure.

The referendum entailed replacing state revenue that would be lost by eliminating personal and corporate income taxes, estate taxes, and other state and local “sales and use” taxes, by establishing instead a revenue-neutral, universal sales tax rate of 5.11 percent. Additionally, provisions in the resolution granted legislators the power to enact a one-time adjustment of this rate, should it fail to produce the desired revenue-neutral condition.

Further, to ensure that this new system of taxation would not impose a regressive burden on the poor, the resolution called for a sales-tax rebate, up to the poverty level of consumption, to be determined annually and disbursed to legal residents of the state on the first business day of each month.

Proponents of the legislation, such as Rep. Chris Kelly (D-Columbia), have championed it as the best kind of panacea, capable not only of alleviating Missouri’s economic ills, but also of strengthening the state, leaving it more competitive and more attractive for employers, investors, and residents.

Sales tax systems in and of themselves have several immediate benefits. For one, they would more evenly distribute the existing burden borne by taxpaying residents by expanding the tax base to illegal residents, temporary visitors to the state, tax evaders, and residents who earn their income in the black market. The benefits of such legislation stem not only from the implicit advantages of a sales tax that empowers personal freedom, but also from the gains associated with removing the harmful effects of an income tax.

If passed, this legislation could have served as a crucial ingredient in an invigorated Missouri economy. Abolishing the corporate income tax would create powerful incentives for establishing and operating businesses in Missouri, transforming the state into a lightning rod for investment from all over the country.

This influx of funds would be a vital component in compensating for the lack of economic progress that has been caused by income taxes displacing ordinary market investment. Income taxes have long been considered to be a drag on the economy, distorting incentives while imposing downward pressures on growth. Joseph Haslag, professor of economics at the University of Missouri–Columbia and executive vice president of the Show-Me Institute, wrote in a late 2008 commentary that when income taxes are established, they ensure that “Either businesses must pay higher wages to compensate, or employees will work fewer hours, cutting into productivity.”

Haslag observes that there is a clear, positive, and empirical correlation between freedom from an income tax and employment growth, noting that states without income taxes have, on average, more than doubled the national job growth rate since the start of the decade. Further, empirical evidence linking income taxes to variables such as growth rate of real personal income show a striking negative correlation between the two.

A study conducted by American Enterprise Institute scholar Richard Vedder and financial journalist Stephen Moore shows that from 1957 to 1997, real personal income growth rates in the 10 states with the lowest state tax burdens were nearly double the growth rate of the 10 states with the highest average tax burdens.

“I’ve never seen such a powerful economic tool in my time in the legislature,” Rep. Ed Emery said.

Not only could such a policy play an important role in increasing individual welfare, but it could also help smooth the state’s turbulent revenue streams. Later in the same commentary, Haslag wrote, “The income tax is highly sensitive to the overall economy … [thus] income tax revenues are subject to great volatility … the greater revenue volatility associated with income taxes makes it harder for state and local lawmakers to govern.”

Inferring a correlation from four decades of economic data, Haslag concludes that income tax revenue can range up to a 50 percent greater volatility than sales tax revenue. The explanation for this is intuitive: Consumers’ spending patterns tend to be relatively stable and predictable in the long run, especially in contrast to consumer wealth, which can be destroyed easily and swiftly by macroeconomic forces.

Implementation of such a policy would not be devoid of problems, be they economic, administrative, or legal. Critics — particularly Bruce Bartlett, former executive director of the congressional Joint Economic Committee — argue that a universal sales tax will itself produce market distortions. These might range from consumer preference shifting toward used goods, thereby harming businesses that sell new goods, to economy-wide price hikes that could rise by a factor of the tax rate.  These criticisms, like others, are almost entirely short-run concerns.

The economy’s incredible adaptability ensures that, in the long run, not only will such price wedges equalize, but real average economic conditions will also improve. Other critics, such as journalist Pat Regnier, argue that such systems are more regressive than income tax systems for the poor and middle classes.

This is true, to some extent, but these concerns can be largely remedied through what R.W. Hafer, chairman of Southern Illinois University-Edwardsville’s department of economics and finance, calls “means-testing [of] the sales tax [and] … exclud[ing] certain items or services — such as food, medicine, or medical services — from the sales tax.”

Still other critics question the practicality of collecting a consumption tax, and argue that those seeking to evade taxes will create a plethora of black markets to do so. Granted, such illicit markets would likely emerge, but those potential revenue leaks pale in comparison with the costs of more widespread evasion under the current system, as well as the costs of maintaining and collecting current revenue.

While H.J.R. 36 does entail some challenges and shortcomings, a thoughtful cost-benefit analysis will show that, in the long run, such policies would promote prosperity, economic growth, and a strengthening of our institutions. Looking beyond mere economic welfare, replacing the income tax would empower individual freedom, allowing Missourians to vote with their dollars, and indirectly reduce support to the state if officials fail to soundly uphold their economic and social values.

NOTE: Although Sivasailam is currently a Show-Me Institute intern, he was not affiliated with the Show-Me Institute when he entered and won this contest. He submitted both his contest entry and internship application at roughly the same time. Each contest entry was stripped of personally identifying information before being submitted to the board of Policy Pulse contest judges, who were also unaware of Sivasailam’s pending intern application.

By Andrew Guevara
Show-Me Institute

The federal climate change legislation currently being debated in the U.S. Senate would not only have a substantial impact on the economy of the United States, but would also have economic implications for the state of Missouri.

The American Clean Energy and Security Act of 2009 (ACES), H.R. 2454, introduced by Rep. Henry Waxman (D-Calif.), chairman of the House Energy and Commerce Committee, and Rep. Edward Markey (D-Mass.), chairman of the Subcommittee on Energy and the Environment, passed the House of Representatives late last month, and now will be considered by the Senate.

“The legislation will create millions of new clean energy jobs, save consumers hundreds of billions of dollars in energy costs, promote America’s energy independence and security, and cut global warming pollution,” Waxman said during the opening days of House committee hearings in May.

The bill aims to reduce greenhouse gases economy-wide, 3 percent below 2005 levels by 2012, 17 percent by 2020, 42 percent by 2030, and 83 percent by 2050, through a national cap-and-trade system.

The purpose of cap and trade is to limit overall emissions in an economy. Permits for carbon emissions are distributed through an allowance distribution system or a general auction. Afterward, these allowances can be traded on the open market to whichever company or entity wants to produce more emissions than their allocated permits will allow. The idea is that firms would consequently have a financial incentive to reduce their own emissions, in order to sell permits to others.

Markets in emissions permits already exist. In 2005, the European Union created the largest emissions trading market in the world, the EU Emission Trading System (EU ETS), in order to comply with the Kyoto Protocol, an international emissions reduction treaty.

However, the EU ETS may not be effective at reducing emissions. According to data posted by The Guardian, U.S. carbon emissions decreased 2 percent from 2005 to 2006, while European carbon emissions increased slightly during the same time period.

Furthermore, U.S. job growth may be slowed by a cap and trade system. Analysis by the Heritage Foundation, a Washington, D.C.–based think tank, finds that the Waxman-Markey bill would reduce gross domestic product by $7.4 trillion and result in the loss of 844,000 jobs on average, with a high-end forecast of 1.9 million jobs nationwide.

The American Council for Capital Formation (ACCF) and the National Association of Manufacturers (NAM) found similar results when they undertook analysis on a state-by-state basis for an older piece of legislation that never passed, the Lieberman-Warner Climate Security Act of 2007. That bill would have implemented a similar cap-and-trade program.

The AACF /NAM study estimated that Missouri’s gross state product would have been reduced by between $2.7 and $3.7 billion per year by 2020 and $10 billion and $11.8 billion by 2030, and that employment would have been reduced by between 23,000 and 34,000 jobs in 2020, and 57,000 to 76,000 by 2030.

Some organizations, however, interpret the same AACF/NAM data differently. The Political Economy Research Institute at the University of Massachusetts–Amherst reports that the Missouri economy still would experience economic growth after the decrease in greenhouse gases that is expected to occur as a result of cap and trade.

The report further claims that, by 2030, Missouri’s gross state product would grow 69 percent higher than 2007 levels, to $388 billion, and in that same time frame employment would grow 11.7 percent higher, to 3.21 million jobs.

Some of the bill’s critics point out that Missouri receives 84 percent of its electric power from coal-fired plants, according to the Missouri Department of Natural Resources, so the state may experience disproportionately high economic effects from a national cap-and-trade program.

“We’re a coal dependent state,” U.S. Sen. Claire McCaskill (D-Mo.) said in late May at a town hall meeting in Sedalia. “And I don’t want the people that I represent unfairly being left with the price tag for this bill because we’re a coal dependent state.”

Sean Schukar, vice president for strategic services at AmerenUE, a utility company that provides gas and electricity to many Missouri residents, predicts that if the legislation were to take effect, rates could increase as much as approximately 10 percent 2015 and then spike to as much as 40 percent by 2030.

Industry groups also have expressed concerns for the Waxman-Markey bill and how it would affect the citizens of Missouri.

“The research shows the proposals increase the cost of manufacturing goods in Missouri and the nation, making it even more difficult to compete with manufacturers in other countries,” Associated Industries of Missouri President Ray McCarty wrote in an email message.

“At a time when we are expanding our federal resources to stimulate the economy, these proposals will cause additional job losses and business closures, leading to even greater challenges.”

Despite these industry concerns, proponents of the Waxman-Markey legislation include national electric and energy companies, such as Duke Energy and British Petroleum, as well as community and environmental groups, such as the Environmental Defense Fund and the Natural Resources Defense Council.

In a letter to Waxman and Markey, Fred Krupp, president of the Environmental Defense Fund wrote, “No single bill can fully address the energy and climate challenges we face, but the American Clean Energy and Security Act is a strong step forward.”

Andrew Guevara is a graduate student at the Truman School of Public Affairs at the University of Missouri–Columbia, and a recent Show-Me Institute intern. This summer, he is interning in Washington, D.C.

Show-Me Institute intern Caitlin Hartsell contributed to this report.

By Audrey Spalding
Show-Me Institute

SAINT LOUIS — Though Congress has not yet passed the Employee Free Choice Act (EFCA), a bill that would strengthen labor unions’ bargaining power, some Missouri politicians opposed to that bill have already given up fighting it directly. A majority of U.S. senators, including Democratic Sen. Claire McCaskill, have voiced support for the EFCA.

The bill’s opponents have moved in part to plan B, arguing that the EFCA will take away workers’ right to vote anonymously. A national movement called “Save Our Secret Ballot” (SOSB) is a strategic effort to stop the federal legislation through state-level initiatives.

In the case of Missouri, that would be a 47-word amendment to the state Constitution requiring that union representation be established with a secret ballot election. SOSB proponents argue that the right to vote for representation anonymously should include the workplace.

The alternative, which the EFCA would allow if passed, would be for employees to choose their representation by openly signing a petition, or through a union card check. If more than 50 percent of employees sign up, the union would become the employees’ representative — no election required. This would enable unions to organize quickly, and perhaps more aggressively.

On Tuesday, about 30 Missouri business representatives, lobbyists and politicians — most, if not all, needed no convincing — gathered at the Holiday Inn in Crestwood and paid $20 each to have lunch and hear Lt. Gov. Peter Kinder, former Missouri state senator John Loudon, and others speak in favor of SOSB.

Ray McCarty, president of the Associated Industries of Missouri, summarized the two main talking points of the lunch when he spoke briefly. “This is a threat to your business and threat to employees who want to choose by secret ballot what union they want,” he said.

Kinder, who received only $1,250 from labor organizations for his 2008 campaign, according to the National Institute on Money in State Politics, called EFCA “awful and Orwellian-named” twice during his speech.

Kinder stressed that he wasn’t anti-union, but said that the EFCA would give too much power to union organizers and drive up domestic business costs. “This is going to be a huge incentive for businesses to send jobs overseas,” he said.

Loudon, who will be speaking with Kinder in favor of SOSB elsewhere in Missouri throughout the week, said simply, “We’re all scared.”

Though the SOSB speakers included general statements about workers’ right to vote, no one explained specifically why businesses are so apprehensive about stronger unions. The general theme, however, seemed to be that unions would raise business costs. Tim Mooney, a SOSB director and Arizona political consultant, said that the cost for a business to switch from an unaffiliated workforce to union membership is about $9,700 per employee.

Hearing that, one attendee told the group he had spent $100,000 fighting union organization at his 40-person company.

“It was very, very expensive, and they do not stop,” he said. “We outspent them and put road blocks in front of them every time.”

Whether the EFCA becomes federal law depends on the votes of Washington politicians and, perhaps, the influence of lobbyists. But if Missouri SOSB supporters can obtain 180,000 legitimate petition signatures, the amendment will be put to state voters for approval.

It will cost SOSB about $2.25 per signature, Mooney said, for a total between $500,000 and $600,000. Citing SOSB polling numbers, he said there’s strong support for the amendment.

“If we can raise the money, we’ll make the ballot,” Mooney said. “If we can make the ballot, we’ll win the vote.” He said that if voters pass the amendment, it would send a strong message to elected officials.

“Lobbyists in D.C. can delay bills, they can kill bills, but only voters can kill issues,” Mooney said.

Republican strategist Karl Rove will talk about the Employee Free Choice Act on Wednesday at the St. Louis Club in Clayton. Hosted by the Missouri Chamber of Commerce and Industry with the Economic Freedom Alliance, the event is closed to the media. Attendees must pay $1,000 to gain entrance.

Other coverage of the event is posted at the Beacon’s website.

The Employee Free Choice Act, pending legislation that would make it easier for labor unions to organize, is causing quite the political divide.

According to the Post-Dispatch’s Political Fix blog, Karl Rove and the Missouri Chamber of Commerce will be holding a fundraiser to fight the bill July 15 in Clayton.

This Wednesday, a week before the upcoming fundraiser, Sen. Claire McCaskill said she would support the bill, according to Missourinet’s blog.

Two big issues are whether the EFCA would “kill” the secret ballot, a process in which employees vote anonymously for union representation, and a mandatory arbitration process if unions and employers can’t reach an agreement.

Harpar’s magazine also has a lengthy article about the EFCA (generally in favor of it), with a good look at the historic lobbying efforts against labor-strengthening laws.

For the least opinionated source of information about the bill, you can read the 2009 version at OpenCongress.org and find a good summary of its history at Wikipedia.

From the article: Gov. Jay Nixon announced Tuesday the creation of a program that aims to establish statewide broadband Internet access by 2014.

The program, MoBroadbandNow, will consist of businesses and organizations that will partner with the state to compete for funding from the American Recovery and Reinvestment Act. Interested businesses must submit an application by 2 p.m. on July 13 at the Office of Administration in Jefferson City.

Read the full article on the Columbia Missourian’s website.

Read the broadband press release at the governor’s website.

By Audrey Spalding

All is not well in Missouri public schools. Teachers are filing lawsuits, protesting school board meetings (or attending en masse), and letting their contracts lapse. Though the details are different at the Bayless, Springfield, and Lindbergh school districts, the theme is the same: Many educators seem to be driven by a sense of distrust stemming from disagreements with their administrators and school boards over the powers and appropriate role of teacher unions.

Teacher unions are like any other labor union: Union representatives negotiate salary and working conditions with employers. Theoretically, by banding together, teachers have more clout in the negotiation process than they would as individuals.

But Missouri has a unique wrinkle in its education system — some of its school districts allow multiple groups to act as teacher bargaining representatives.

“As far as I know, all other states pair collective bargaining with exclusivity,” Mike Antonnuci, director of the Education Intelligence Agency, wrote in an email.

The strength of multiple representation is that it could allow even teachers with minority viewpoints a seat at their district’s negotiation table. However, some school districts with multiple representation agreements allow only two teacher unions bargaining rights.

Missouri’s two main teacher unions are the Missouri National Educators Association and the Missouri State Teachers Association. While the MSTA is only a statewide organization, the MNEA is the Missouri branch of a politically involved national union. In 2007, the Independence School District’s MNEA branch won a court case at the state Supreme Court that reaffirmed teachers’ right to collectively bargain with their employers.

The Missouri Supreme Court’s ruling appears to have inspired other branches of the MNEA to attempt to become their district’s sole bargaining representative. This year, the Bayless and Springfield branches of MNEA have filed lawsuits against their districts, citing the 2007 court ruling. Both Springfield and Bayless have multiple representation bargaining agreements (download the Bayless lawsuit here, and the Springfield lawsuit here).

Bayless Superintendent Maureen Clancy-May said she hadn’t heard complaints about her district’s bargaining process until after the court ruling.

“It was smooth sailing up until the time the lawsuit was filed,” she said. Clancy-May, who has been Bayless’ superintendent for six years, said she suspects more school districts will face court action. “I understood that MNEA was searching throughout the state for viable test cases,” she said. “I understand they’re not done. More lawsuits will be filed.”

Brentwood MNEA President Ed Wright acknowledged that the MNEA is looking for cases, but is doing so because lawmakers weren’t stepping in to make policy.

“Like the [Missouri School Board Association], we’re looking at places where policy can be determined by court,” he said. Wright also acknowledged that the MNEA had discussed suing the Brentwood district.

“We talked very seriously about it,” he said. “But in a small district, people don’t want to raise a fuss.”
Even districts with a single representation agreement in place have been affected by the 2007 court ruling. At the Lindbergh School District, teachers and administrators continue to negotiate contract terms, though they usually finish negotiations by March 1, Lindbergh Assistant Superintendent Richard Francis said.

After what Lindbergh Vice President Vic Lenz called “adversarial” contract negotiations, teachers and administrators gathered again on July 1 and spent two hours painstakingly going through 20 pages of their contract. The more contentious contract issues were set aside that day, and the negotiating team has at least eight more hours of negotiations to wade through.

The July 1 negotiations were much more congenial than previous negotiations, Lenz said. At one point during the earlier contentious negotiation process, about 200 people showed up at a school board meeting, he said, as a show of support for the Lindbergh NEA. Some were from other school districts, such as Parkway and Wentzville, said Francis.

At Lindbergh, the issue was not the type of representation — Lindbergh teachers have not requested multiple representation, said Francis — but whether the teachers’ contract should be expanded to include layoff procedures, the redistricting process, and grievance procedures, among other issues. Currently, the Lindbergh School Board can change those policies at its discretion. If included in the contract, the Lindbergh NEA branch and administrators would have to reach consensus in order to make changes.

Lindbergh, Bayless, and Springfield are likely not the only districts where the 2007 case has raised concerns about whether teacher unions are strong enough, or whether multiple representation is a legitimate form of collective bargaining. But unless the state legislature steps in, it looks as if Missouri’s courts will be the arbiter.

AP reporter David Lieb writes that pending state legislation could result in Missourians paying an additional charge to use less electricity. However, if government estimates are correct, the net cost of electricity could actually decrease.

From the article: “The U.S. Environmental Protection Agency estimates that energy-saving programs offered by utilities will add about 3 percent to the average electricity rates. But it says customers who participate in the programs could save 10 percent to 20 percent on their energy bills, and even those who don’t participate might save if utilities don’t have to buy more energy or build new power plants.”

Read the full article at KMOX’s website.

From the article: “Spending by lawmakers on taxpayer-financed trips abroad has risen sharply in recent years, a Wall Street Journal analysis of travel records shows, involving everything from war-zone visits to trips to exotic spots such as the Galápagos Islands.”

Read the full article at the Wall Street Journal’s website.

From the article: “The state will ultimately be more than $9 billion in the red for the fiscal year that starts today, Gov. Pat Quinn’s administration says, unless the Legislature provides new revenue. He has warned of potential deep cuts in human services such as day care subsidies and elder care, as well as interruptions in other state functions, if the budget gap isn’t closed.”

Read the full article on the Post-Dispatch’s website.

In related news, Reuters reported that California may begin issuing IOUs for payment.