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What's the best way to create more jobs in Wichita? Come and find out on Friday at the WSU Metroplex. Free and open to the public. Yes Wichita Coalition For A Better Wichita Wichita Metro Chamber of Commerce http://kansaspolicy.org/events/119824.aspx?view=c


Fostering Economic Growth in Wichita
kansaspolicy.org
A discussion on the jobs fund portion of the proposed City of Wichita 1% sales tax. Agenda to be announced.
Mon, 15 Sep 2014 19:53:26 +0000
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A chance to truly understand the issues facing Wichita voters in November. What is the best way to give more Wichitans a chance to find a job? RSVP in first comment. Voice For Liberty Yes Wichita Coalition For A Better Wichita Wichita Metro Chamber of Commerce http://www.kansas.com/news/local/article2006841.html


Kansas Policy Institute to host public forum on proposed job development fund
www.kansas.com
The Kansas Policy Institute, a conservative Wichita nonprofit organization, is hosting a community forum on the proposed job development fund, which is part of the one-cent-on-the-dollar sales tax that will be on the November ballot.
Wed, 10 Sep 2014 17:19:04 +0000
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Would you pay a 1% sales tax to create a "jobs fund"? Wichitans will have to make that decision in November. 19 September at WSU Metroplex to learn about the facts of the proposal, Wichita's economic trends, how incentives have worked in Kansas before, and what it takes to make an economy truly grow. Free event, open to the public.
http://kansaspolicy.org/Events/119824.aspx?view=c


Fostering Economic Growth in Wichita
kansaspolicy.org
A discussion on the jobs fund portion of the proposed City of Wichita 1% sales tax. Agenda to be announced. Speaker line-up available at Full Description.
Mon, 08 Sep 2014 15:36:42 +0000
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Posted by James Franko on Monday, December 23, 2013
Many politicians prefer to avoid controversial issues in an election year, so with the Kansas House of Representatives, governor, and other state-wide officers facing voters next year, conventional wisdom would predict the 2014 legislative session to be a yawner.

But, that thinking flies in the face of results from a SurveyUSA poll conducted last week for KPI (cross-tabs included at the link). On issue after issue, Kansans seem unhappy with the status quo and may even welcome substantive debate on the biggest challenges facing our state. Far from an endorsement of a politician or political party, our reading suggests that Kansans want to be treated as responsible, intelligent adults. Adults who understand that our state faces challenges and what’s been done thus far hasn’t gotten the job done.

If the State Supreme Court orders another large school funding increase, 67% of Kansans want to re-allocate current state spending or spend existing education dollars more efficiently to comply with a ruling for more education cash. Just over 1 in 4 Kansans (27%) want to see that potential ruling be paid for with higher taxes. Those findings hold across self-identified liberals, Democrats, moderates, conservatives, etc.

Further on education, a majority of Kansans (53%) support allowing certain students (i.e., low income, special needs) the ability use public dollars to find the right educational fit outside of the traditional public school and only 30% are opposed. A plurality support (40% support v. 31% opposed) a full voucher system. Public charter schools (schools that trade fewer regulations for higher achievement standards) are popular with Kansans to the tune of 3 to 1.

That desire for more parental and student choice in K-12 is based on the fact that only 36% of those polled think student achievement in on the right track. So, despite being told that all is well by media and special interests, citizens seem to realize that things aren’t hunky-dory. Kansans seem to understand that despite countless dedicated teachers and a 32% increase in inflation-adjusted K-12 spending since 1998 , many kids are not being served and equipped to succeed.

Folks also want local and state officials to stay in charge of education standards and believe that locals are better able to determine who is suited to teach their children than someone in Washington.

        -   80% believe curriculum standards should be set by local districts or KSDE.
        -   90% want teacher certification decisions to be made by their local districts     or the legislature.

Lastly, Kansans apparently don’t like their tax dollars being used to sue them for more money or to lobby in Topeka.

        -    70% of Kansans believe cities, counties and school districts should not be allowed to use taxpayer money to lobby.
        -   71% of Kansans believe school districts should not be allowed to use taxpayer money to sue for more money.

Maybe voters don’t want to be pandered to and realize that our state faces real challenges. Politician hopes of a quite year may amount to little with Gannon’s potential $800 million price tag hanging over the citizens’ heads. “The Americans can always be trusted to do the right thing, once all other possibilities have been exhausted,” is most-often attributed to Winston Churchill and maybe, just maybe, our elected leaders in Topeka will be proactive and buck Sir Winston’s truism.
Posted by Dave Trabert on Thursday, December 19, 2013

Data provided by the Kansas Department of Education shows that school districts again allocated a much smaller percentage of their total spending to Instruction in the 2013 school year than called for by state policy.  Total Instruction spending (including capital outlay that districts consider part of Instruction) was $3.212 billion, or 54.9 percent of the $5.582 billion spent in total last year.  K.S.A. 72-64c says “It is the public policy goal of the state of Kansas that at least 65% of the moneys appropriated, distributed or otherwise provided by the state to school districts shall be expended in the classroom or for instruction.”

The Kansas Legislature put that policy into statute in 2005 following a court-ordered spending increase (Montoy).  Legislators agreed to increase funding by $775 million to avoid a court shutdown of schools, but wanted schools to put most of the money into classrooms.  (‘Instruction’ is the description used in the KSDE Accounting Handbook.)  The statute is a public policy rather than a mandate and schools are therefore not required to comply, but it’s still a rather cavalier attitude toward state policy with broad bi-partisan support.  After all, the policy was passed by a somewhat conservative House, a pretty moderate Senate and signed into law by Governor Kathleen Sebelius.   

To be clear, there is nothing magical about hitting the 65 percent target; the point is that local school boards and administrators blatantly ignored the Legislature.

As Kansas taxpayers wait to hear if the State Supreme Court will uphold Gannon and order a $434 million increase in state aid, it’s noteworthy that schools would have spent $592 million more in classrooms last year if they followed the Legislature’s public policy.

Posted by Dave Trabert on Wednesday, December 11, 2013

A recent story in the Lawrence Journal-World about results of PISA international student achievement is yet another example of local media ignoring facts in pursuit of a political agenda. 

“Those findings may be politically important in Kansas, where Florida is often cited by conservatives as a model for implementing vouchers, charter schools and other kinds of “school choice” reform programs.”   

The ‘findings’ were that Florida had lower scores than Massachusetts and Connecticut (the only three states that participated) and below average for industrialized nations.  That part is technically true, but the reporter doesn’t mention that the PISA scores are based on overall averages, not individual cohort scores (e.g., White, Hispanic, Low Income).  The reporter also doesn’t disclose that there are significant achievement gaps for low income students and minorities, and that disparate demographic student body compositions will therefore produce average scores that cannot be fairly compared. 

Full demographic breakouts of PISA scores are not available, but the National Assessment of Educational Progress (NAEP) shows the importance of disclosing the potential impact of this information.

Ten points on NAEP is considered a years’ worth of learning, so there is nearly a three-year learning gap (29 points) between low income and other 4th grade students in the U.S.  The gap is even wider in Massachusetts and Connecticut (32 points for each).  Florida 4th graders actually outperform the U.S. average, Massachusetts and Connecticut for Low Income; Florida students who are not low income perform at the same level as Connecticut and only trail Massachusetts by 3 points.  So why does Florida have a lower average score than both states?

The answer of course (which LJW and the education establishment know full well) is that Massachusetts and Connecticut are much more affluent than Florida, so their scores for Not Low Income count more toward their overall average than for Florida.   For example, here are income-based formulas to calculate the average scores of Florida and Connecticut.

Florida average (227) = (.60 low income percentage x 218 low income score) + (.40 not low income percentage x 242 not low income score)

Connecticut average (230) = (.38 low income percentage x 210 low income score) + (.62 not low income percentage x 242 not low income score)

Basic middle school math demonstrates the inequality of comparing averages comprised of disparate elements, yet media and the education establishment will falsely use average scores from PISA and NAEP to promote their ‘just spend more’ theory of raising student achievement.  Sure enough, the LJW reporter got his plug for higher spending into the story.

“Florida is often cited as a model for conservative school reform initiatives such as high-stakes testing, school choice policies and an A-F grading system for schools, many of which were begun under former Gov. Jeb Bush. Meanwhile, Massachusetts and Connecticut are examples of states that spend considerably more per pupil than the national average. Kansas ranks slightly below the national average.”

Again, the education establishment and LJW are well aware of the facts that dispute any relationship between higher spending and achievement, including Kansas’ own experience.  In fact, the PISA report directly contradicts the ‘just spend more’ theory.

“Trend data between PISA 2003 and PISA 2012 shed light on how changes in spending per student relate to changes in performance.12 As shown in Figure IV.1.9, the PISA data show no relationship between increases in expenditure and changes in performance, not even for the countries where cumulative expenditure per student was less than USD 50 000 in 2003. Mexico, for example, is among the countries and economies with the greatest improvement in average mathematics performance between 2003 and 2012, but its levels of expenditure remained relatively stable between 2001 and 2011”.   – PISA 2012 Results: What Makes Schools Successful, page 42

I wonder why that quote didn’t make the story.  Or this one from the same page:

“Whatever the reason for the lack of a relationship between spending per student and learning outcomes, at least in the countries and economies with larger education budgets, excellence in education requires more than money.  How resources are allocated is just as important as the amount of resources available to be allocated.”

Florida’s student-focused reforms are certainly making a difference for low income students.  Where Florida once had some of the worst scores in the nation, their low income students have shown tremendous progress (unlike Kansas) and now are typically above the national average.  

Florida 4th Grade students who are not low income are also above Kansas and the national average; 8th grade students who are not low income are above the national average and just one point behind Kansas (a significant improvement from 1998, when Florida trailed Kansas by ten points).

Kansas students who are not low income are generally doing quite well and probably are competitive on an international scale, but low income students (who comprise about half of the overall population) are several years behind.  Sadly, that won’t change as long as the education establishment stubbornly pursues their own monetary wants and opposes student-focused reforms….or until local media does a better job of giving citizens balanced information.

 

 

Posted by Steve Anderson on Monday, December 09, 2013
It is amazing to anyone who knows the facts that one of the state’s progressive groups, Kansas Center for Economic Growth (KCEG), is blaming the tax cuts for what they perceive as funding cuts to multiple services when comparing state funding between 2008 to 2013.  It appears that not only did KCEG play fast and loose with the facts but they choose to outright ignore facts that disprove their claims. 

KCEG chooses to use 2008 as a year to start their comparison.  That is not surprising as Governor Kathleen Sebelius’s budgets were noted for spending.   The 2008 budget spent not only every dollar that came in to the state’s coffers it also consumed nearly all the huge 2007 ending balance of $935 million. This resulted in every service that state provided being at risk during the recession and a spending binge that left the state with a NEGATIVE ending balance of $27 million in 2010.   KCEG apparently believes that if is OK to spend money you don’t have! Fortunately for Kansans, more responsible budgets were passed in subsequent years.   Kansans can breathe a bit easier knowing that the last budget year ended with a substantial ending balance ensuring continuity in their services.

KCEG makes the claim “Kansas has sharply reduced state support for schools, libraries and other community services in recent years, forcing towns and cities to cut programs that Kansans depend upon or raise more money locally to sustain them. While the cuts by the state were initially prompted by the Great Recession, the substantial income tax cuts Kansas lawmakers enacted in 2012 and 2013 are draining even more resources and making it nearly impossible to replace vital aid to Kansas communities.”  The inconvenient facts are that the tax cuts KCEG blames for these spending reduction were NOT in effect in 2012 and only for 6 months in 2013 with an estimated fiscal impact of approximately $260 million according to the Kansas Legislative Research Division. 

When you begin your claims with a questionable benchmark and an outright falsehood it is tempting to just stop there but KCEG wasn’t done with their lax adherence to the truth.   Here are a few more of their ‘claims’ and some inconvenient facts KCEG would like you to ignore.

They continue to alter the facts to fit their story when they go on to say, “Total state aid to school districts has been reduced by over $263 million since fiscal year 2008, an 8 percent cut.”  But, when you check their data you find they ‘conveniently’ left out $354 million in just FY-2012 going to the teacher’s pension system in KPERs; money used to secure the funding for current teacher’s benefits when they retire.  If KCEG believes funding teacher’s retirement is not fundamental to retaining teachers I would encourage them to ask teachers if they will continue teaching in Kansas if their retirement won’t be there when the time comes. 

But they weren’t done there.  KCEG attacked Kansas governmental state spending for what they asserted was a reduction in local health care funding of 12% by the state.  This conveniently ignores the fact that state spending on Medicaid - which is almost all spent in the local community for the local citizens in their hospitals and health care system - grew in just two years from $713 million in FY-2010 to $1 billion in FY-2012.  This state spending on Medicaid created another $1.8 billion in federal funds in FY-2012 alone that were spent within community’s hospitals and health care service providers.   You would think KCEG would be pleased that the state is increasing spending on the state’s most needy citizens.  However it seems KCEG believes in funding institutions, in this case local health departments, and not services (i.e. health care for citizens).  

I could continue to point out more cases of KCEG creating their own reality but it is probably more important to mention the reality they most conveniently ignored.  What decrease in services could they show which actually negatively affected citizens?  For example, KCEG claims that mentor programs for new teachers and professional development for current teachers damaged public education but what effect on actual student outcomes can they show to substantiate that claim? 

KCEG makes statements such as “Local governments wrestling with how to stretch budgets” without showing the harm of having local governments being required to justify and allocate budget dollars with an eye to being efficient.  Let us not forget these are citizens’ tax dollars KCEG is talking about and those very citizens are having to do just that in their personal budgets every day.

Here is a question for KCEG:  Is it more important how much governments spend or how well they produce positive outcomes for citizens with the services they do provide?  I think most would agree with me it’s not about dollars but instead it should be about services that make a difference.  

KCEG doesn’t have to spend other people’s money to fund the institutions and/or programs they say are important. Here is something to consider for the supporters and members of KCEG who believe the state tax cut is creating harm - there is a provision in state tax law that allows them to pay as much in taxes as they wish.  They can choose to ignore the tax cuts and give more money to bureaucrats in Topeka.  Or, they could simply contribute to the local library, or health department directly if they believe there is a problem.   I, for one, will respect and praise any individual who voluntarily makes either or both of those two choices out of a commitment to their ideals.
Posted by Patrick Parkes on Monday, December 09, 2013
Kansans’ bold tax reforms over the past two years —which have cut taxes by more than $3.5 billion and provided Kansans with some much needed income tax relief—continue to lead the charge nationally as objects of intense interest and discussion in the tax policy spotlight. Each year, the American Legislative Exchange Council (ALEC) releases its State Tax Cut Roundup. The report highlights progress made in state legislatures across the country toward enacting pro-growth, job-creating tax measures that embody the “Principles of Sound Taxation” it outlines. Kansas’ efforts earned the follow laudatory statement in its recent 2013 edition:

"Last year Kansas made history with its tax cuts, especially for small businesses. This [2013] legislative session fine-tuned those previous changes to include a pathway to reduce the Kansas personal income tax rates even further. The legislature allowed a sales tax increase to partially expire, setting the overall rate at 6.15 percent, down from 6.3 percent. In addition, cuts to the personal income tax will phase in over several years to lower the rate to 2.3 percent on the first $30,000 of income and 3.9 percent on income over that. Overall, the extremely pro-growth reforms in Kansas will help the state become even more economically competitive.”

With the above praise in mind, let’s remember that no tax reform package is inherently perfect. Furthermore, all such packages need a few years in most cases until their impacts can be fully realized and evaluated. Nevertheless, even in their infancy, Kansas’ tax cuts are already proving ALEC’s point about increased economic competitiveness by making their presence felt both within and beyond state borders. In this vein, Oklahoma Governor Mary Fallin has alluded to being all but forced to further tweak her state’s tax code in a pro-growth direction simply by virtue of being “sandwiched” between the reform-minded tax climates of Kansas and Texas respectively.

In short, this “sandwiched” phenomenon is proof that Kansas and other individual states can play crucial roles in sparking a broader national conversation about the power of tax reform in revving the engine of private sector economic growth. Yet, the conversation is just getting started. Now is the time for liberty-loving Kansas to build on the reforms we’ve already enacted—rather than resting on the laurels of past successes—to ensure that all Kansans are able to keep more of their hard-earned money in their own pockets!

Posted by Dave Trabert on Wednesday, November 27, 2013

Many education leaders stubbornly pursue the ‘just spend more’ theory of raising achievement.  Some even deliberately mislead citizens and legislators to justify higher spending while pretending that student achievement is just fine.  Instead of focusing on the needs of individual students, they lobby for institutional wants.  It’s really not about the kids…it’s all about the money.

It’s never been popular in Kansas to go against the ‘just spend more’ mantra, and it’s especially dangerous for an elected official to say “we can’t spend our way to excellence.”  So here’s a tip of the hat to former Governor Kathleen Sebelius for daring to admit that money isn’t the path to excellence in education.

Governor Sebelius made that bold statement in her 2006 State of the State address.  Her declaration has since been proven in spades.

Inflation-adjusted per-pupil spending increased 29% over the last fifteen years without counting a dollar of KPERS money.  Yet test scores on independent national tests are stubbornly flat and achievement gaps are even wider.

Large and growing achievement gaps underscore Governor Sebelius’ point. Kansas' 4th grade students who are not low income did hit the Proficient mark on NAEP this year in Reading but low income students are nearly three years' worth of learning behind.  8th grade low income students have made no progress in Reading; they are more than two years behind their peers.  Nearly $3 billion was spent since 2006 in At Risk funding to improve low income scores to no avail.  

 It costs a lot of money to fund public education, but it’s how the money is spent that matters…not how much.  It will be interesting to see whether the 2014 legislative session is dominated by efforts to transform public education with student-focused ideas that are being implemented across the nation - or the 'just spend more' demands that want to shove student achievement problems under the rug.

Posted by Dave Trabert on Monday, November 25, 2013

“An enlightened citizenry is indispensable for the proper functioning of a republic.”  – Thomas Jefferson

I wonder what Mr. Jefferson would say about the state of today’s media.  Television, cable, print and internet media routinely ignore basic journalistic principles and openly choose sides, often ignoring the facts and perpetuating falsehoods to convince citizens that their view is the right one.  In some cases, it’s done in support of conservative causes; most often, it’s in support of ‘progressive’ ideals that strip citizens of their personal freedom.  It’s bad enough when facts are ignored in editorials but ignoring facts and choosing sides in news stories is tantamount to journalistic malpractice.

Local media gave us two examples of this behavior recently.  A November 22 Kansas City Star report said, “Kansas still had fewer jobs in October 2013 than it did in December 2012, the month before the Brownback tax cuts took effect.”  The reporter when on to say, “Put another way: Kansas has actually lost 3,311 jobs since the Brownback tax cuts took effect.”

This is a great example of media looking for ways to inject their support or opposition of policy into news stories while quite deliberately ignoring pertinent facts.  The clear purpose in that KC Star story was to show disdain for tax reform and the facts were not allowed to detract from that purpose.

The Bureau of Labor Statistics employment data quoted by the reporter (although certainly not disclosed) was Labor Force Employment, which comes from the Current Population Survey (CPS) and represents employed persons by place of residence.  The more commonly-used BLS report of non-farm employment is estimated based on the Current Employment Statistics (CES) survey of business establishments, and represents a count of jobs by place of work.   

The CPS data chosen by the KC Star is based on where people live, not where they work.  There is no way of knowing to what extent the job losses reported in the CPS data are attributable to people who live in Kansas but work in Missouri, Nebraska, Colorado or Oklahoma.  Data from the CES survey of businesses, however, avoids that issue because it is based on where people work.

And surprise! This data shows just the opposite of the story told by the KC Star.

Job growth is occurring in Kansas but that inconvenient truth gets in the way of the Star’s opposition to tax reform, so they spin a tale that suits their purpose and pass it off as ‘news’.

The Topeka-Capital Journal provided another example of journalistic malfeasance on November 24 in a one-sided recitation of school districts’ funding complaints.  Not unlike the piece in the Star, its political purpose comes through loud and clear.

“When Gov. Sam Brownback took office, schools like this one were already reeling. The recession had brought what were likely the largest cuts to their operating budgets in state history.  But once the recession faded, those funds didn’t rebound as some had hoped. Meanwhile, the governor cut income taxes — reductions meant to bolster the economy.”

That reads like an ad for a made-for-TV fictional movie, with the emphasis on fiction.  Not a shred of funding facts were provided, which would of course expose that the claims are crafted to meet the political purpose.

Let’s look at the facts (all of which are readily available from the Kansas Department of Education).   First of all, we’ll look at actual spending instead of the misleading reference to ‘budget.’  Individuals and businesses think of ‘budget cuts’ as spending reductions but when government says their budget was cut, it most often means that their plan to spend more was partly stymied.

I’ll make an assumption here that ‘operating’ means current operating costs and excludes capital outlay and debt service (it wasn’t defined in the CJ story). 

 

There was a 2.3 percent reduction in total operating expenditures in 2010, with per-pupil operating spending dipping by 3.5 percent.  Portraying reaction to this paltry decline as ‘reeling’ (or allowing school districts to do so) is hardly justifiable.  Those small declines in total and per-pupil spending came on the heels of very large spending increases between 2005 and 2009 of 35 percent and 32 percent, respectively.  (FYI, in case anyone tries to claim that schools suffered because state funding declined dramatically in 2010, remind them that nearly all of that money was replaced by legislators with federal stimulus money; the funding just temporarily shifted.)

Calling the 2010 minor spending dip the largest cut in state history makes it sound monumental and only feeds the political hype.  In reality, 2010 was the only spending reduction that occurred since 1990, which is as far back as KSDE can cite; they tell us that prior years’ data has been archived and isn’t readily available.  Details needed to identify operating spending in the KSDE online database only go back to 2004 (KPI has tracked it since 2005) but we do know that total spending did not decline between 1990 and 2010.

 

Allowing districts to claim they were ‘reeling’ and quoting a legislator as saying districts are in “survival mode” deliberately ignores well-known facts that counter the veracity of those claims.  For example, districts haven’t even spent all of the tax money received since 2005; about $420 million was used to increase operating cash reserves.  Districts are also wasting a lot of money with inefficient operations.  Every single Legislative Post Audit study on school efficiency has found that schools could operate much more efficiently.  If media is going to print ‘sky-is-falling’ claims by school districts and those who support their institutional desires, they have a journalistic obligation to also publish facts that call such claims into question.

The article also perpetuates the myth that Base State Aid Per Pupil (BSAPP) is all districts receive to operate schools.  The story allows two legislators and others to at least imply that BSAPP is the sole funding source and that the Legislature is deliberately underfunding schools despite a large body of evidence to the contrary. 

The story cites no other per-pupil amount and fails to disclose that BSAPP is only about 30 percent of total funding provided by taxpayers.  For the record, KSDE reports that per-pupil support of public education set a new record last year at $12,781 and is expected to hit $12,885 this year.  District administrators know (and we’ve certainly informed media quite often) that they receive a lot more money than BSAPP to fund general operations.  Local Option Budget (LOB) funds, which are provided through legislative authority, have increased 71% between 2005 and 2013, going from $341.7 million to $585.3 million.

Contrary to the claim made by one legislator quoted in the story, BSAPP was not put into statute as what the Legislature deemed to be “…the appropriate number to fund our schools.”  The Legislature made no such declaration.  The Legislature increased funding based on a court order and under threat of having the State Supreme Court close schools.  But the facts don’t fit the story that some people want to perpetuate, so rhetoric is substituted to fulfill a political purpose.

Kansas Policy Institute and other have published the facts surrounding school funding cases, including a full legal analysis of Montoy vs. State of Kansas.  We most recently published “Student-Focused Funding Solutions for Public Education,” which again cites many facts that explain why every court case on school funding is based on deliberately-inflated figures.  Despite all the rhetoric, supposition and claims to the contrary, the simple proven truth is that no one – not a single legislator, superintendent, reporter, policy analyst or judge – knows how much money schools need to achieve required outcomes while operating efficiently.  No such study or analysis has ever been conducted in Kansas.

Having spent more than twenty years managing news operations in several states, I have great respect for journalism and those who diligently work to honestly inform citizens.  I also know that reporters are sometimes forced to cover stories by editors and managers in ways they find objectionable and have misleading headlines slapped on their stories.  But to paraphrase Jefferson, our republic cannot properly function when citizens are deliberately deprived of information.  It is not the duty of media (or policy analysts) to make decisions for citizens, but to inform them so they can make their own decisions.

 

Posted by Dave Trabert on Thursday, November 21, 2013

A large body of research shows that nothing benefits students more than having effective teachers in the classroom.  With that in mind, we thought it would be interesting to see how Kansas school district employment has changed over the years – comparing changes in regular classroom teachers to enrollment and other employment trends.  All of the data was provided by the Kansas Department of Education (we appreciate their cooperation in helping to locate historical data) based on reports they receive from school districts. 

The results are actually quite surprising and prompt a number of questions that legislators and parents may want to pose to school districts.  But first, let’s look at the trends.

The first two tables show the changes in full time equivalent (FTE) employees over several time frames during the last twenty years.

1993 – 2005: These are the pre-Montoy years, during which time KPERS-adjusted school funding increased at a compound annual growth rate of 3.9 percent and FTE employment increased at a compound annual growth rate of 1.3 percent.  KPERS retirement money was not included in reported funding until 2005, so we’ve added the annual amounts for 1993 through 2004 as provided by KSDE.

 2005 – 2008: Large court-ordered funding increases began in 2006.  School funding increased at a compound annual growth rate of 7.9 percent (from the 2005 base year) and FTE employment increased at a compound annual growth rate of 2.9 percent. 

 2008 – 2013: While the economic impact of the Great Recession began in 2009, school funding actually increased 4.0 percent that year.  Total funding per KSDE dipped slightly in 2010 and 2011 (1.4 percent and 0.04%, respectively) and then increased in 2012 and 2013 (3.3 percent and 1.4 percent, respectively).   We examine this period in total in the first table and then break it out by year in the second table.



Annual employment changes in the second table are compared to total school funding per-pupil as reported by KSDE and our own calculation per-pupil funding provided on state authority with all KPERS amounts removed.  The state-provision calculation uses all funding sources provided to school districts through the state legislature’s statutory provision (except for KPERS as noted).  This excludes all federal money and property taxes for bond levies that are approved by local voters.  We exclude KPERS in this calculation to demonstrate that, contrary to claims in some circles, school funding increases are not totally driven by retirement spending.

Regular teacher employment has generally kept pace with enrollment over the years. Twenty years ago, there were 17.8 students per teacher, compared to 17.7 students per teacher in 2013.  But the growth in non-teacher employment (40 percent since 1993) has significantly reduced the student-to-employee ratio from 8.0 to 6.7.  Regular classroom teachers comprised 45 percent of school district total employment in 1993 but only represent 38 percent of employment today.

 

School district employment trends raise a number of thought-provoking questions.

  • Do district hiring practices (aides vs. teachers) indicate that district administrators and local school boards believe aides are more beneficial to students than hiring more teachers – or perhaps using the money to pay teachers a better salary?
  • What do parents and teachers think about this development?
  • Upon what analytical basis are such staffing decisions made?
  • Staff increases in the early Montoy years followed significant increases between 1993 and 2005, which, other than classroom teachers, were much greater than enrollment changes.  Upon what analytical basis were decisions made to further increase staffing?
  • Do districts have any historical analysis that shows what necessary staffing levels should be?  I.e., have districts been moving toward specific targets or are they just adding staff? 

It's critical to understand how districts resources are being allocated so that student-focused decisions can be made, especially since student achievement is relative stagnant and large, persistent achievement gaps exist for low income kids and students of color.



Posted by Dave Trabert on Tuesday, November 19, 2013

There is no question that many students receive a fine public education and go on to success in college or career, but there is also no question that thousands of students are left behind every year.   Continuing to pour money into the current broken system– whether ordered to so by courts or by choice – will not close the large achievement gaps that exist for students of color and those from low-income families. 

Yet institutional demands for more money continue to drive the debate.  Many mission statements effectively say ‘it’s all about the kids’ but in reality, the wants of institutions and the adults in the system often prevail over student needs.

A recent blog post from Mark Tallman and the Kansas Association of School Boards (KASB) is loaded with more examples of institutions misrepresenting the facts of student achievement and school funding to justify the extraction of more money from taxpayers. 

Here’s the first example.  “KASB research has shown that the percentage scoring at Basic is a good indicator of the state’s graduation rate, i.e. the percentage of students who complete high school.  The percentage scoring at Proficient is a rough indicator of the percentage of students who will meet college readiness benchmarks on the ACT test.  In other words, the percent at Basic might be considered the percentage of student “on track” to graduate, and the percent at Proficient indicates those “on track” to be ready for college-level academics.”

First of all, a high school graduation rate says nothing about actual achievement.  In fact, the Kansas Board of Regents reports that 30 percent of 2011 Kansas high school graduates who attended a public college in Kansas actually signed up for remedial training – keep in mind that students voluntarily sign up for these courses and cannot be made to do so by the college. These students apparently know that they aren’t ready to take credit-bearing courses in college.  Also, only 30 percent of the 2013 class who took the ACT test scored high enough to be considered college-ready in English, Reading, Math and Science.  (Incredibly, KASB representative Tom Krebs testified earlier this year that the ACT college-readiness measure shows that local school districts are doing a good job – because only 30 percent of today’s jobs require a 4-year degree!!!)

Also, the KASB research that purports to find ‘good indications’ is called a bivariate analysis, meaning that only two variables are considered.  This reminds me of something the late Senator Daniel Patrick Moynihan (D-NY) once said with tongue firmly planted in cheek.  He noted that northern states tended to have the best student achievement, so we should move schools closer to the Canadian border to improve achievement.  His point was that simple bivariate analyses and non sequiturs are no substitution for honest analysis.  A bivariate analysis doesn’t control for other factors that may (and frequently do) make a difference.

Note also that KASB continues to lower the bar and now often speaks of the percentage of students at Basic+ instead of Proficient+ on the National Assessment of Educational Progress (NAEP).  They referenced high rankings on Proficient+ until people became aware that Kansas’ proficiency levels are in the 30 percent and 40 percent range.  Now they talk about Basic+ so they can use higher percentages and make the institutions look better.

Example #2

On October 7, Mr. Tallman wrote, “KASB absolutely agrees that differences in student characteristics must be considered in evaluating educational performance…the most important factor…is socio-economic status.”

But that ‘belief’ is largely ignored on October 11 when he writes, “To measure overall state performance, we calculate the average of the percentage of students scoring at both Basic and Proficient on the four tests (Grade 4 reading and math; Grade 8 reading and math).  We then rank the average percent for each state.” Two of the four percentages he averaged are based on All Students, which brings the mostly-White states to the top of his list.  You see, students of color are two to three years’ worth of learning behind White students, so the states with highest overall average performance are those with the lowest levels of minorities.  (This is the essence of Senator Moynihan’s observation.)

Similar achievement gaps exist between low income students and others.  And since Census data shows that minorities are twice as likely to live in poverty as Whites, KASB’s deliberate decision to not control for race and income produces very predictable results that are favorable to their overall point (it's all about the money).  Every state in the KASB calculation of the Top Ten states in Reading and Math has Free & Reduced Lunch Eligibility levels below the national average of 48.1 percent.  Most of them are well below.  The point of KASB's exercise is of course about money.  The states chosen to appear in their top ten all spend more than Kansas.

Example #3

“The State Board of Education has continued to set higher standards.”  That’s a real whopper.  Our research shows how and when the Kansas Board of Education chose to reduce performance standards, to the point where the U.S. Department of Education reports that Kansas has some of the lowest performance standards in the nation.  Before publishing our findings, we asked KSDE and KBOE to let us know if there was anything factually incorrect in our work.  They didn’t respond.

Example #4

“Economic data indicates Kansas must increase the percentage of high school graduates and college-ready students to meet future employment needs and provide “middle class” incomes.” It’s true that people with more education are able to earn more money but that speaks to the important of getting an education.  It has nothing to do with the amount taxpayers are expected to spend on public education.

Example #5

“New national reports have indicated Kansas has further reduced spending compared to most states.”  This is a reference to a bogus claim made by the Center on Budget and Policy Priorities, which we completely de-bunked in a separate blog post.  CBPP does not publish their data; they only share their ‘conclusions.’  Our request to see their data has gone unanswered.  Meanwhile, KSDE data shows that new records for school funding were set in 2012 and 2013 and are predicted to be broken again in 2014.

Example #6

This final example represents the culmination of all the previous misrepresentations.  “The totality of the evidence indicates that funding does play an important role in state student achievement and that it will be extremely difficult - and, in fact, unprecedented - for Kansas to improve achievement on NAEP results without additional revenues.”  The data, however, tells a much different story.

No change on NAEP scores despite a 32 percent inflation-adjusted increase in per-pupil spending since 1998 (even with all KPERS spending removed, it’s still a 29 percent increase).

 

ACT scores are flat overall, although White scores slightly increased over the last ten years while scores for Hispanic and African American students are flat or down a bit.  ACT doesn’t publish income-based scores.

 

 And after nearly $3 billion in targeted At Risk (low income) spending, there’s virtually no improvement in those students’ achievement. 

 

Yep…it’s all about the money.  It’s all about demands to put more money into a system despite voluminous evidence that large funding increases have not closed student achievement gaps and roughly half of all Kansas students are clearly not leaving high school ready for college or careers. 

These large achievement gaps do not exist because those students cannot learn, but because they do not have equal access to educational opportunities.  Kansas has tried ‘throwing money at the problem’ and it has not worked.  Until elected officials and citizens support implementation of student-focused funding and other policy initiatives, they are tacitly choosing to place a higher priority on institutional wants than on student needs.

  P.S.  We’re working with legislators and school districts to show how a lot more money can be made available to classrooms by improving district efficiency.  It costs a lot of money to fund public education, but it’s how the money is spent that matters…not how much. 

 

 

Posted by Patrick Parkes on Monday, November 18, 2013

The combined balance of all school district carryover cash (also known as unencumbered cash) accounts in the state grew by 64% from 2005-2013. The 30 taxpayer-funded accounts work much like the average Kansan’s checking account in the sense that they can only grow when more money is put into them than is spent out of them. In short then, the positive balances reported over the past eight years indicate that school districts in Kansas are spending less than they are taking in. Click here to explore the statewide and individual school district data on our state spending transparency portal, KansasOpenGov.Org. 

The sheer magnitude of the aforementioned upward trend in carryover cash balances may be enough in itself to spark the intrigue of some Kansans. Others are probably still wondering why the increase matters and why they should care about it.

School officials across the state have offered what at first glance seem like reasonable explanations for the trend. One of the most prominent hinges on the idea that these carryover cash reserves will be needed as “back-up” funds to maintain current school funding levels if state aid to schools declines in the future. Yet, Dave Trabert points out in his recent paper on student-focused school funding solutions that this explanation—along with many of the others offered frequently—doesn’t necessarily tell the whole story surrounding the reserves. For example, if the reserves are indeed intended to make up for potential declines in funding, why did the 2010 and 2011 non-earmarked reserves in the “All Other Funds” account increase even as overall aid to schools declined slightly?

The above instance is just one of the many undergirding the fundamental question of how school districts can be underfunded if they continue to meet their students’ needs while simultaneously making a habit of not spending all of the yearly funding they receive. This consideration should illustrate the importance of carryover cash balances as signals of a broken school funding system.  What’s more, it should also signal the importance of starting a conversation about how we can all work together to craft a new, more efficient, and student-focused school funding system for Kansas.

Posted by Dave Trabert on Thursday, November 14, 2013

The Kansas National Education Association’s slogan is “Making public schools great for every child.”  It may be a coincidence that their slogan seems to emphasize institutions over students, but many of their actions quite deliberately put institutional interests first.  My belief has nothing to do with individual teachers.  Kansas is blessed with thousands of dedicated teachers who get up every morning thinking of ways to help students and they deserve citizens’ gratitude and support for everything they do.  My comments are not directed at teachers, but at the institution of the KNEA.

The most recent example of this teacher union (the organization) putting institutional interests ahead of student needs was in an email blast they sent last week about hearings held by the Special Committee on Education.  It began with their usual vitriolic put-downs of people with whom they disagree and concluded by saying, “…that everything we know from student assessment – … Kansas continues to improve and that Kansas continues to perform in the top tier of states….”

KNEA knows that that is a deliberately misleading statement.  In fact, they wrote it following a detailed presentation for the Committee showing that, while many Kansas students do quite well and likely are very competitive internationally, roughly half of Kansas students (those who qualify for Free & Reduced Lunch) are two to three years’ worth of learning behind.  Even more disheartening is the fact that those achievement gaps are getting wider.

The National Center for Education Statistics says that 10 points on NAEP is the equivalent of a year’s worth of learning.  The gap was 24 points (roughly 2.4 years) in 1998 when Kansas first participated in NAEP.  It was 22 points in 2005 before funding was dramatically increased.  But now, after nearly $3 billion in targeted At Risk spending, the gap is wider than ever at 28 points.  The gap for 8th grade students in Reading is 24 points…three points wider than it was in 2005.  The gaps for 4th grade and 8th grade Math are 18 points and 24 points, respectively.  FYI, the Kansas Department of Education (KSDE) is on record saying that NAEP is the “gold standard.”

Similar patterns exist on the state assessment.  the gaps between 2006 and 2012 for Reading and Math both grew slightly.  Unfortunately, performance for low income students declined in 2013.  (We've submitted a request for the 2013 data on students who are not eligible for Free & Reduced Lunch.)

 

These performance statistics reflect students who are at Exceeds Standard and above.  You see, KSDE doesn’t require students to be able to read grade-appropriate material with full comprehension (as defined by KSDE) to Meet the Kansas Reading standard.  Students are not required to usually be accurate on all grade-level Math tasks to be Proficient and Meet the Kansas Math standard.  KSDE and the State Board of Education reduced performance standards to the point where the U.S. Department of Education says Kansas has some of the lowest performance standards in the nation. 

By the way, if you’re disturbed by the alarmingly low achievement levels of All Students who are low income, you’ll be appalled by the results for 11th grade students.  One year away from entering the workforce or going on the post-secondary work, only 37 percent of low income 11th grade students can read grade appropriate material with full comprehension.  Math drops off to 29 percent.

As is often the case with institutional interests, it’s all about the money.  This little gem was included in the KNEA email. 

“Spalding's [Friedman Foundation] conclusion to his presentation comparing school finance formulas from our regional states is that there is no way to compare effectiveness of the various formulas except by looking at their results. So that begs the question, since Kansas' results are among the highest in the nation, doesn't that mean we have an effective school finance formula? What would happen if we actually funded our system?!”

Yep…it’s all about the money with this teacher union. 

As for the claim that “…Kansas' results are among the highest in the nation,” KNEA also knows that to be falsely driven by demographics.  Simply put, there are two-to-three-year achievement gaps between White students and those of color...and Kansas is Whiter than many states.  Here are the actual 2013 national rankings and scores showing that Kansas is actually just slightly above average overall (although White and Black students are slightly below average).

 

Pretending to have high achievement based on low performance standards and demographic skews is harmful to students, and ignoring that tens of thousands of students are falling farther behind is downright shameful.  But that’s what happens when institutional interests prevail over student needs.

 

P.S. I shared this information and our school staffing data with KNEA leadership and offered to get together in a public or private setting to discuss the facts.  I thought they would at least be interested to explore the fact that regular classroom teachers have only increased 7 percent over the last twenty years, while students increased 6 percent and non-teachers increased 40 percent.   So far…crickets.

 

Posted by Dave Trabert on Tuesday, November 12, 2013

Kansas taxpayers will again set records for support of public education in 2014, according to data provided to KPI by the Kansas Department of Education.

 

Total expenditures are estimated at $5.911 billion for the current school year, which will be the fourth consecutive year that total taxpayer support has increased, with 2014 being the third consecutive year in which new records have been set.  Per-pupil expenditures are predicted to hit $12,885 and eclipse the previous record set last year.  

 As explained in "Student Focused Funding Solutions for Public Education", the Legislature’s provision for finance is much greater than the amount shown as State Aid.  In 2013, nearly $1.9 billion of the $2.2 billion listed as Local Aid was made available through state legislative authority; that money isn’t counted as State Aid simply because it doesn’t run through the state budget. 

Posted by Dave Trabert on Monday, November 11, 2013
Kansas Association of School Boards Executive Director John Heim recently made a pretty provocative claim about taxpayer support of public education at an event sponsored by the University of Kansas.  He said, “We are spending less than our parents spent on educating us and our grandparents spent on educating them.”  

That made for a great media sound bite but his claim is not true.  I wrote and asked Mr. Heim to substantiate his bold claim.  He never responded.  KASB Associate Executive Director Mark Tallman did confirm that their data on total funding only goes back to 1990.  I can’t speak for Mr. Heim, but my grandparents were supporting my parents’ public education in the 1940s and 1950s…not the 1990s.

Not that personal income has anything to do whatsoever with what schools need to function, but we ran the numbers from 1990 forward and found that taxpayer support of public education has grown faster than personal income. 


Taxpayer support of public education increased 179% between 1990 and 2012, going from $2.070 billion (adjusted upward to include KPERS between 1990 and 2004, which wasn't included in total support until 2005) to $5.771 billion, according to KSDE spending reports.  Personal income, according to the Bureau of Economic Analysis, increased 177%.

The real gap, however, is a bit wider.  You see, personal income includes money that is never available to pay taxes, such as the money employers spend on your health care insurance and retirement.  Personal Current Transfer Receipts are also included in the calculation of Personal Income.  PCTR includes “…income payments to persons for which no current services are performed and net insurance settlements. It is the sum of government social benefits and net current transfer receipts from business.”[i]  Current transfer receipts of individuals from businesses “...consist primarily of personal-injury liability payments to individuals other than employees.”[ii]



Here’s the comparison of taxpayers’ support of public education with their income available to pay taxes.

 

The gap between per-pupil support of public education and per-capita personal income available to pay taxes is even greater.


The case made by KASB certainly underscores an entitlement mentality but it has no relationship to funding needed to successfully operate schools in a cost-effective manner.  KASB is just trying to justify more spending.  It’s not really about the kids; it’s about the money.

Spending more money hasn’t improved student achievement on independent national exams.  Just look at the Kansas history on the National Assessment of Educational Progress (NAEP). 



Stay tuned for more episodes of “It’s all about the money.”

______________________________


Posted by James Franko on Thursday, November 07, 2013
This piece originally appeared on Cato Institute's @Liberty blog and is authored by Andrew J. Coulson, the director of the Center for Educational Freedom at Cato.

A new public opinion survey commissioned in Rhode Island by the Friedman Foundation reveals that people want to know the honest-to-goodness total per-pupil cost of public schooling.

Unfortunately, the full cost is regularly omitted from state education department websites, as revealed in a recent Cato study by Jason Bedrick. What’s more, the full figure is seldom reported by the media. Instead, newspapers and local TV news outfits usually report just a portion of the cost that excludes things like construction spending, interest on debt, and pensions. Education officials obviously have an incentive to make their operations look as frugal as possible, so it’s no surprise that they would offer reporters these partial spending figures (known as “operating” or “current” spending).

But most journalists feel some obligation to be honest with their readers—to tell them what they want and need to know. Until now, reporters might have assumed that the public didn’t really want to know the full, total per-pupil-spending numbers. We now know that’s not true. The public opinion survey data show that people want to be told the total cost of public schooling, not some fraction of that cost—by a margin of 57 percent to 34 percent. Nor is this a partisan issue. Republicans and Democrats were of like mind on this question. So were conservatives and liberals.

The people want to know. Will the media now step up and tell them?
Posted by Dave Trabert on Tuesday, October 29, 2013
Researchers at Kansas Policy Institute recently found that the Kansas Department of Education (KSDE) reported nearly $1 billion in administrative spending as ‘Other’ over the last eight years.  The KSDE Accounting Handbook identifies three categories of administrative costs: General Administration, School Administration and Central Services.  District budget reports only list General and School Administration; Central Services, which includes fiscal services, human resources, IT, purchasing and other ‘back office’ functions has historically been reported as “Other.”


District budget reports for 2012 reported actual spending of $391.6 million on Administration but total spending on Administration was really $525.4 million.

The following screen grab is from the Budget at a Glance for USD 500 Kansas City.  KSDE Deputy Commission Dale Dennis confirmed that the amounts listed as Other Costs on KSDE budget forms are actually Central Services and should be counted as Administrative spending.  Mr. Dennis says these forms will be revised next year to clearly identify spending on Central Services; hopefully, they will also specify that Central Services are Administrative costs. 


The KSDE Accounting Handbook defines Other services (Function 2900) as “All other support services not classified elsewhere in the 2000 series.”  Central Services costs are clearly identified in Function 2500.  Interestingly, the KSDE public database did properly reflect Central Services spending through 2008 (and zero spending in Function 2900 Other).  Beginning in 2009, the database showed no spending in Central Services and reflected those costs as ‘Other.’  KSDE corrected their internal records following our inquiry. 

Regardless of intention, the KSDE budget forms have historically given citizens false impressions.  As shown in the example above, a reader would logically believe that USD 500 reduced total administrative spending in 2013 by 9.4%, when in reality spending increased by 8.2%.  

Posted by Dave Trabert on Monday, October 28, 2013

Against a backdrop of a school lawsuit claiming taxpayer support of public education is insufficient, the Kansas Department of Education announced last week that taxpayers set new records for total dollar support and for per-pupil support.

 Adjusted for inflation and enrollment, funding increased by 35 percent over the last fifteen years, while student achievement on independent national tests is generally unchanged. 

Posted by James Franko on Friday, October 25, 2013
This post originally appeared at The Heritage Foundation by Drew Gonshorowski and references premium growth in Kansas for young adults of 129.0%.
 
There are literally no comparisons to current rates. That is, [the Department of Health and Human Services] has chosen to dodge the question of whose rates are going up, and how much. Instead they try to distract with a comparison to a hypothetical number that has nothing to do with the actual experience of real people.
    —Douglas Holtz-Eakin, President, American Action Forum

Enrollment in Obamacare’s health insurance exchanges has proven to be a somewhat difficult process amidst technical glitches and delays. Aside from the issues associated with actually purchasing health care, once an individual gets a quote for health insurance on an exchange, is the premium higher or lower than before?

Our research finds that for many states, the insurance on health exchanges will cost more than existing insurance. This study illustrates that the general experience for individuals shopping on the exchange is that of increasing premiums from what was available to them prior to implementation of the exchanges. Many families and individuals will face this reality as they apply for coverage, and the implications of experiencing sticker shock are important to consider if enough people choose not to sign up for coverage for various reasons.

Results
Individuals in most states will end up spending more on the exchanges. It is true that in some states, the experience could be the opposite. This is because those states had already over-regulated insurance markets that led to sharply higher premiums through adverse selection, as is the case of New York. Many states, however, double or nearly triple premiums for young adults. Arizona, Arkansas, Georgia, Kansas, and Vermont see some of the largest increases in premiums.

Read the full post here.
Posted by Dave Trabert on Sunday, October 20, 2013

The Wichita Eagle reported today that the City of Wichita doubled property tax abatements between 2008 and 2012, purportedly to create jobs.  The Eagle also reported that city officials could not say how many jobs had been created by property tax abatements. 

Wichita city government – and in fact, probably all local and state government officials – contend that tax abatements and other forms of subsidies create jobs.  They may in some cases be able to show that the recipients of taxpayer money added jobs, but they deliberately ignore the unseen consequences of their actions.  Government has no money of its own; it simply collects money from taxpayers and redistributes it.  Taxes not paid by some are simply shifted onto other taxpayers, and the money they would have spent on goods and services is instead spent on taxes.

Of course, government never reduces spending in order to fund their corporate handouts.  They just raise taxes. 

This is the picture of a large increase in the property tax burden.  Property taxes levied by the City of Wichita increased 116%, nearly three times inflation, while the population increased by only 17%.

I couldn’t locate private and public sector employment data for the City of Wichita but the Bureau of Economic Analysis has some fascinating data on Sedgwick County, which should provide a fairly close approximation.  

 

Private sector full time and part time jobs increased a mere 0.5% between 1997 and 2011 (most recent available) but Local Government jobs jumped by 18.4%. 

The takeaway is pretty obvious.  Regardless of intention, government insistence on giving away taxpayer money in the name of economic development simply hasn’t worked.  This isn’t new information.  Kansas Policy Institute and many others have reported variations of this information for years, but government officials continue to do the same thing over and over again.

 

Posted by James Franko on Wednesday, October 16, 2013
Below is the Executive Summary to KPI's newest policy brief, "Student-Focused Funding Solutions." Written by KPI president Dave Trabert this paper will be formally released later this week.

Executive Summary
A fair portion of aid to public schools may be distributed on a per-pupil basis and there are many mission statements that effectively say ‘it’s all about the kids.’ In reality, the wants of institutions and the adults in the system often prevail over student needs. That’s not to say that educators and legislators aren’t concerned about students – they absolutely do care. However, a close examination of funding and other education policy decisions (and especially the legislative debates over these issues) reveals that the current system is focused more on institutions than on students. The purpose of raising this issue is not to convince readers to agree with our reading of the facts, but to explain why we put so much emphasis on student-focused solutions. If recent Kansas history is any guide, it simply cannot be assumed that education decisions will be student-centric.

School funding has been the subject of multiple lawsuits, including one that is currently under appeal in the State Supreme Court. It’s an extremely volatile subject, both in the general public and the Legislature. Yet no one knows what is suitable funding for Kansas school districts to achieve required outcomes while also making efficient use of taxpayer funds. Not a single legislator, superintendent, policy analyst or judge knows what it should cost to efficiently achieve required outcomes because no such study or analysis has ever been conducted in Kansas.

As shown herein, Legislative Post Audit studies and other data clearly show that school districts are not organized and operating efficiently. School districts are not even using all of the tax money they receive, but still claim to be under-funded. It might be possible to take corrective action if these were the only problems with the current funding system, but there are many other serious problems with the current system. As such, we believe the current system is irreparably broken.

Kansas needs a new student-focused school funding system but not a single number can be put on paper until two foundational questions are answered:
1. What are the educational interests of the State? We cannot fund something until we define what it is we intend to fund.
2. Is it our priority to fund students or institutions? ‘Both’ is not an option; unless one is given clear priority, the other will most definitely suffer.

We attempt to provide some guidance on these fundamental questions and other important elements of a new funding system but generally speaking, there are no ‘right or wrong’ answers in funding decisions. Rather, they are subjective decisions that require great deliberation and citizen input so that legislators can write the laws – and be held to account.
Posted by James Franko on Wednesday, October 02, 2013
As the first public pieces of ObamaCare took effect yesterday, a troubled rollout was almost gleefully greeted by the law’s opponents. I was struck by the realization that the new law and user experience is almost guaranteed to continually have problems, short comings, and ultimately offer little of value to most Americans.

However, it has NOTHING to do with whether the law in question is good or bad…although it is a bad law. Simply put, the world is evolving too fast for a 1,000+ page bill or the 10,000 pages of regulations it spawned to truly affect behavior (a number open to debate but we’ll use the Washington Post’s estimate). It is a cliché, but as the pace of innovation increases an attempt to regulate 1/5 of the U.S. economy simply cannot work.

Think to yourself, the Affordable Care Act was signed into law on 23 March 2010, over 3.5 years ago, and the now-ubiquitous iPad wouldn’t be released for another two weeks (3 April 2010).

The same can be said for another new policy being implemented around the country – Common Core education standards. Again, while the efficacy of CC is very much open to debate, a system by which 40-some states (a couple of states recently pulled out of the testing regime) have to meet and agree as a group cannot keep pace with technological, pedagogical, or other advances in education.

Ask a public school teacher if they like having to wait for the “ok” from their principal or superintendent to try out a new teaching method. What is that going to look like when Kansas adheres to standards that are not set in Topeka, let alone the local USD? Sure, Kansas may have helped write the standards initially but that is already years in the past.

What are the odds of getting a simple answer from your doctor, or insurance company, about the validity of a new procedure to treat diabetes or hypertension? Not good. It would be hard enough to navigate pre-ObamaCare regulations on these sorts of questions while also seeing patients, staying abreast of medical advances, etc. but will only get more cumbersome.

In fact, people around the state, and the country, are actively saying “no thanks” to these and other laws from both Topeka and Washington. A group of Wichita doctors has been featured around the country (here and here) for offering affordable primary care without the hassle of insurance. Not only are they getting press coverage but offering 'round the clock access to your specific doctor for $50/month to someone in their 20s.*

While private school enrollment has declined from a high of 6.3 million students in 1965 to 4.1 million in 2011, the number of families deciding to home school continues to skyrocket - growing by 75 percent between 1999 and May 2012. (Interesting side note, the government shutdown has hit home. Government data websites (i.e., the Census Bureau) that are otherwise current have been closed down b/c of the impasse in Washington. Alas, I was able to find good information elsewhere.)

Heck, The Freeman, a publication of the Foundation for Economic Education, released “Fifty Ways to Leave Leviathan” earlier today. You may not agree with some of what The Freeman has to offer by way of illustrating this point, but people aren’t even using government-sanctioned money anymore! Check out more on BitCoin here.

Continued innovation in the private sector will render big regulatory schemes increasingly meaningless. Entrepreneurs, whether for good or for ill, will always work around dictates from the political process.

Simply stated, governments cannot keep up with food trucks that exist outside of brick and mortar restaurants, doctors that offer care without insurance, Enrons or MF Globals avoiding financial regulation, someone saving East African farmers $200 per year and increasing crop yields, or parents taking control of their child’s education by homeschooling. Some ill and some good, but more complex and expansive regulations will increasingly be met with a collective yawn in the years to come.

This trend should warm the heart of those supporting liberty and freedom and keep awake at night those who offer little more than government solutions to problems, regardless of party registration.

*(P.S. KPI’s reference should not be construed as an endorsement of any product or service.)
Posted by Dave Trabert on Monday, September 30, 2013

If you think school finance in Kansas couldn’t possibly be more obtuse (or absurd, depending upon one’s perspective), consider this new wrinkle: the 20 mill property tax levied for the support of public education isn’t considered part of state aid.

[UPDATE: After further discussions with KLRD, it was clarified that while the 20 mill levy IS NOT considered part of state aid it is included in calculations of BSAPP.]

Every school district is required by statute to levy a 20 mill property tax, which according to K.S.A. 72-6431(b)(2), is “…for the purpose of paying a portion of the costs of operating and maintaining public schools in partial fulfillment of the constitutional obligation of the legislature to finance the educational interests of the state….”  It’s right there in black and white, but the $563 million generated in the 2013 school year by that 20 mill property levy isn’t counted as part of the legislature’s constitutional obligation to make suitable provision for the finance of the state’s educational interests.

The exact amounts levied by district are available at KansasOpenGov.org.

According to Deputy Commissioner of Education Dale Dennis, all property taxes (including the state-mandated 20 mills) levied by school districts are “…collected by the county treasure[r] and distributed directly to local districts.”  Since property taxes aren’t sent to the State for distribution, all of that revenue is considered part of Local aid.  The amounts identified as state aid come from revenues collected by state government, and since those property tax dollars never hit state coffers, they aren’t part of Base State Aid or any other form of state aid.

We also spoke with Kansas Legislative Research and Kansas Division of the Budget.  Both offices confirmed that local property taxes, including the 20 mills, are sent directly to school districts, are not collected or distributed by the state and are not counted as local aid rather than state aid.

The constitution does not say that ‘suitable provision for finance’ of schools shall be provided solely through the State General Fund or any other state fund.  The constitution also does not reference Base State Aid Per Pupil (BSAPP) as the determinant of whether the Legislature has made suitable provision for school funding…yet BSAPP is often portrayed as though it is the entirety of all aid for what school districts refer to as “regular education.”

The Legislature makes provision for the financing of public schools in several ways. A complicated formula, which includes BSAPP as one element, determines how funding is dispersed from the state budget. But in addition to the statewide 20 mill property tax, the Legislature also makes provision for districts to receive other funding that is recorded as Local aid.  

Total property taxes levied for the operation and maintenance of public schools last year was $1.65 billion, of which $300 million was voter-approved special levies.  The remaining $1.35 billion (which does not require affirmative citizen approval) should be considered part of the Legislature’s provision for financing public education. 

The exact amounts levied by district are available at KansasOpenGov.org.

It will be very interesting to see how this new discovery impacts the State Supreme Court’s review of the school finance decision next week.  Earlier this year, the Shawnee County District Court ruled the schools were underfunded to the tune of $443 million based on the amount of money in Base State Aid Per Pupil.  No one really knows what it costs for schools to achieve required outcomes while also making efficient use of taxpayer money.  But that aside, if the Shawnee District Court did not consider the $563 million in property taxes that are statutorily “…a portion of the costs of operating and maintaining public schools in partial fulfillment of the constitutional obligation of the legislature to finance the educational interests of the state…,” the State Supreme Court may well have justification to set the lower court’s ruling aside.

Posted by Patrick Parkes on Friday, September 20, 2013
Kansas  legislators' decision  to reduce state spending on public higher education, which amounts to a paltry 0.7% annual reduction in General Use operating resources, will take place over the next two years. Unfortunately, the university administrators’ narrative on this subject has centered on the potential tuition hikes, program closures, and service stoppages to which their universities may resort. Given the mounting debts Kansas’ university students continue to face in financing their higher education programs, it is imperative that students do not suffer the potential hardships mentioned above when universities have other options at their disposal. Our April 2013 study of state aid in higher education identified five cost-saving measures Kansas’ public universities could employ in order to operate more efficiently while shielding their students from the potential impacts of the aforementioned reductions in state aid. These recommendations suggested that the universities:

1). Tap into their cash reserve surpluses to cover potential cost shortfalls.

2). Pursue deregulation of earmarked “restricted use funds” to create the financial flexibility they need to meet their most pressing cost obligations.  

3). Free themselves up to focus on their core academic missions by outsourcing non-academic services (e.g. dining services, landscaping, campus bookstores, etc.) to private contractors.

4). Designate a portion of athletic profits, research project royalties, and other non-academic revenues to fund academic programs.

5). Revisit the state’s Legislative Post Audit Efficiency Study from 2009 to identify additional opportunities for cost savings.

 In addition to the five recommendations above, our study also pointed out that vaguely defined “institutional support costs” at Kansas’ public universities had risen to more than three times the rate of inflation from 2002-2012. This escalating cost trend was most recently the subject of an August 2013 article from KansasWatchdog.Org, which defined institutional support costs as [costs encompassing] “general administrative services costs, legal and financial operations costs, personnel record keeping costs, logistical services costs, and other miscellaneous costs.” The additional exposure of this alarming trend is encouraging. At the very least, the trend deserves further examination going forward as yet another opportunity for cost savings. Overall, well-planned and well-executed cost savings will ensure that Kansas students receive a high-quality education that is decoupled from artificially high tuition rates. Furthermore, such cost savings will also help ensure that taxpayer dollars in Kansas are used in the most efficient way possible with regard to public higher education.

Posted by Dave Trabert on Friday, September 13, 2013

The Center on Budget and Policy Priorities – an organization that is a big fan of government spending – released a report yesterday claiming that inflation-adjusted spending per-student in Kansas declined by 16.5 percent between 2008 and 2014.  Predictably, their claims are deliberately misleading.

For starters, they only look at what is recorded as state funding, not what is actually funded through state authority.  In Kansas, that’s a huge difference.  The Legislature makes provision for the financing of public schools in several ways. A complicated formula determines how funding is dispersed from the state budget. But the State also makes provision for districts to receive other funding.  For the 2011-12 school year, $3.2 billion dollars was sent to school districts out of the State budget. Another $2.1 billion was considered Local Revenue but $1.546 billion of that total was property tax money provided through State authority.

By focusing only on one piece of funding, CBPP conveniently ignores that many states, including Kansas, used ARRA stimulus money to backfill recession-driven declines in other funding.  The funding sources may have temporarily shifted but schools were nearly held harmless.  CBPP just wants to pretend otherwise.

State and local funding in Kansas is arbitrarily determined by which government writes the last check, but taxpayers write the first check… so it’s only appropriate to consider total taxpayer support when the impact on schools.  

The above chart compares actual per-pupil funding of Kansas schools (blue line, including the KSDE estimate for 2013), the inflation-adjusted funding beginning in 1998 (red line) and the restated actual spending in constant 2013 dollars.  Inflation is based on the fiscal year change in the Consumer Price Index for Midwest Urban Cities, not seasonally adjusted.

Total taxpayer support of public education clearly has remained well above the levels adjusted for inflation and enrollment changes (blue line and red line).  Districts have enjoyed a real (inflation-adjusted) increase of 33% in per-pupil funding from taxpayers since 1998 ($9,549 to $12,738).

Inflation-adjusted funding appears to have declined by 3.7% since 2008 (green line) but that is also misleading.  Total funding as reported by the Kansas Department of Education is actually district-reported total expenditures. KSDE calculates local expenditures by subtracting the amounts they funnel to school districts from state and federal sources from district-reported total expenditures.  However, local expenditures are not the same as local funding because districts often do not spend all of the state and local tax dollars they receive.  The portion not spent is used to increase their cash reserves (and not reported as funding). 

In constant 2013 dollars, total taxpayer support was $13,220 in 2008 and KSDE estimates it to be $12,738 in 2013.  With full time equivalent enrollment of 457,887, districts would have had to spend $221 million more in 2013 to have kept up with inflation in 2013…and they could have done so if they had spent all of the state and local tax dollars they received between 2008 and 2012!

Kansas school districts increased cash reserves in their current operating funds (All Other Funds above) by $301.6 million between 2008 and 2012 (data for 2013 won’t be released for a few months).  These funds function just like a personal checkbook; the only way they can increase their ending cash balances is to spend less than they take in each year.

While this analysis hopefully de-bunks the Kansas funding claims made by CBPP, I’d still like to address their Keynesian position on government spending.  Their report takes the position that reduced levels of government spending “…have slowed the pace of economic recovery by reducing overall economic activity.”  Government has no money of its own; it merely extracts money from taxpayers and redistributes it. This is a great example of CBPP’s big-government focus.  Economic activity is not increased by removing water from one end of the pool and pouring it into the opposite end.  
Posted by Dave Trabert on Thursday, September 05, 2013

Parents who want more teachers in Kansas classrooms might be surprised to learn that school districts have different priorities as measured by their hiring practices.  We collected data from the Kansas Department of Education to provide a 20-year comparison of the growth in enrollment, teachers and other school personnel – updating a model created by Dr. Benjamin Scafidi in studies he authored for The Friedman Foundation for Educational Choice.

Full time equivalent (FTE) enrollment didn’t change much between 1993 and 2013, growing just 6 percent.  Kansas school districts increased the number of teachers employed by 16 percent but employment of administrators and other non-teaching staff jumped by 40 percent.

Kansas school districts added more than one employee for every two new students over the last twenty years, based on an actual ratio is 1.8 to 1.  The student/teacher ratio in Kansas fell from 14.5 to 13.3 (one teacher for every 13.3 students) and there is now one employee for every 6.7 students.  Annual changes by district going back to 2005 are available at KansasOpenGov.org.

   

Dr. Scafidi says that every Kansas teacher could be paid $10,125 more per year if non-teaching staff had just kept pace with the growth in enrollment between 1992 and 2006 (when students increased by 5 percent and non-teaching staff increased by 43 percent).   Given the similarity in these updated numbers, it’s likely that teachers might still be eligible for a five-figure pay increase if districts were operating more efficiently. 

Posted by Dave Trabert on Thursday, August 29, 2013

School districts and their lawyers stand to collect a tremendous windfall if the Kansas Supreme Court rules in favor of the plaintiffs in their upcoming review of Gannon vs. State of Kansas.  Everyone else will pay a tremendous price; the only question is the magnitude of the impact.

The Shawnee County District Court initially ruled that Base State Aid Per Pupil should be $640 higher than current, which would cost about $434 million and would also generate an automatic increase of $152 million in the Local Option Budget.  The Kansas Department of Education says even that is not enough; Deputy Superintendent Dale Dennis says the total state portion should be $657 million instead of $443 million.  And school district lawyers say the court should have awarded $1.3 billion annually (plus $450 million more in LOB) instead of $443 million. 

Regardless of the amount, it’s safe to say that there will be little, if any, impact on student achievement.  That’s not a prediction; it’s history.  Billions more in funding, even adjusted for inflation, has had no real impact on independent measures of student achievement.


A ten-year history of ACT scores shows the same thing – spending up significantly but ACT scores are flat.

The impact on taxpayers and state services, however, will be potentially devastating.  To explain, we’ll use the KSDE version of how much more should be spent on public education, which totals $809 million.

Legislators would be faced with raising taxes or cutting other spending by $657 million.  Local property taxes would automatically increase by $152 million if BSAPP is increased to $4,492.  (Local school boards could opt to reduce their mill rates to avoid this but they didn’t do so when the last court-ordered windfall took place.) 

 The following three tax increase options show the impact of funding the entire amount by property tax, sales tax or income tax. 

Funding the entire $809 million through property taxes would result in a 20% increase in the typical property tax bill.  Using sales tax to fund the $657 million state portion would take the state sales tax rate from 6.15% to 7.79% and there would also be a 4% property tax increase to fund the $152 million increase in Local Option Budget.  Funding $657 million with income tax would require a 26% increase in the amount budgeted for Fiscal Year 2014 and there would also be a 4% property tax increase to fund the $152 million increase in Local Option Budget.

If Legislators chose to reduce other General Fund spending instead of raising taxes, the following table shows the impact of a pro rata reduction.

Legislators could also choose various combinations of tax increases and spending reductions, but there would still be a 4% property tax increase to fund the higher Local Option Budget.

Hopefully, the State Supreme Court will overturn the lower court ruling or at least tell the Legislature to do some homework to determine what it might cost for schools to achieve the required outcomes while organized and operating in a cost-effective manner.  Believe it or not – no such attempt has even been made in Kansas.  But that’s another story.

 

 

Posted by Dave Trabert on Thursday, August 22, 2013

Yesterday’s blog post explained how demographic differences can give a false impression about ACT composite scores.  Kansas, for example, has a higher state average only because its student body mix has a greater proportion of White students…and Texas has greater proportions of other races.  A superficial comparison might seem like Kansas has the better performance, but Texas students actually have slightly higher scores with all but one demographic comparison.  But you can count on the education lobby proclaiming that Kansas outperforms Texas. (It’s a money thing…Texas generally outperforms Kansas in ACT and NAEP but spends nearly $1,000 per-pupil less, which undermines the notion that money drives achievement.)   Today we’re going to expose some more ACT facts that you won’t get elsewhere.

Real Change vs. Demographic Shift

Kansas’ composite (average) score dipped from 21.9 last year to 21.8.  There were slight declines for four student cohorts but two cohorts increased and two more held steady, including the largest cohort - White.   Most of the composite score decline, however, is due to shifts in the weighting of several cohorts.  While the White score held steady, it didn’t count as much as in 2012 because a smaller percentage of those taking the test were White.  Scores for Hispanic and African American declined a little but they also counted more toward the overall average.

We can determine the impact of the demographic shift by applying the 2013 weighting to scores for prior years.  As shown in the data table beneath the next chart, the normalized composite score only declined from 21.87 to 21.84.  Note also that the 2013 normalized score of 21.84 is actually higher than in 2009 and 2010.  

 

Comparison to the National Average

The Kansas composite score is above the national average, but again, demographics account for more than half of the difference.  If the Kansas scores were weighted the same as the national average, Kansas would have a composite score of 21.3. 

Kansas isn’t the only state whose composite score gets an artificial boost due to demographics.  Iowa, for example, has lower student cohort scores than Kansas but has a higher composite because Iowa is 83% White, 5% Hispanic and 3% African American.


Can District Administrators and Legislators Play Moneyball?

Tip of the hat here to a great article in The Atlantic by Peter Orzag and John Bridgeland entitled “Can Government Play Moneyball?”  The authors said, “The moneyball formula in baseball—replacing scouts’ traditional beliefs and biases about players with data-intensive studies of what skills actually contribute most to winning—is just as applicable to the battle against out-of-control health-care costs.”

Replacing traditional beliefs and biases with data-intensive studies of student achievement and efficient use of taxpayer money is also applicable to the battle to improve student achievement.  Focusing on student cohort scores instead of state and district averages would be a step in the right direction.    

 

Posted by Dave Trabert on Wednesday, August 21, 2013

Most people understand that one cannot fairly compare average student achievement scores of a poor, inner-city school district with a suburban school district because of dramatic achievement gaps for students of color and those from low income families.  (It’s not that those students can’t learn; it’s that they haven’t had equal access to education opportunities.)  Yet the same folks – including educators who should know better – compare state average scores as though every state has identical demographic composition.

The just-released 2013 ACT Composite Scores are a good example.   The composite (average) scores for Kansas and Texas are 21.8 and 20.9, respectively, on a scale of zero to 36.  A superficial comparison might seem like Kansas has the better performance, but Texas students actually have slightly higher scores with all but one demographic comparison.

 Kansas has a higher state average only because its student body mix has a greater proportion of White students…and Texas has greater proportions of other races who have lower scores that White students (in both states).  Texas’ White score of 23.3 only counts for 39.4% of their composite score, whereas Kansas is credited for 72.2% of its White score.   Composite scores are simply weighted averages of each component.

Comparing averages of disproportionate components is mathematically invalid.  And not just across states.  One must also be aware of demographic fluctuations within a state.  That’s the subject of tomorrow’s blog post.

Posted by James Franko on Tuesday, August 20, 2013
This is a guest post that originally appeared at the Oklahoma Council of Public Affairs' blog and is written by Dave Bond.

Recently, OCPA released a new memo (a short read, with visuals) detailing the success of Oklahoma’s income tax cuts since 2005.

Couple this with Oklahoma’s data from the “How Money Walks” project (click here for the map, click on Oklahoma, then notice how the trajectory of adjusted growth income – AGI – moving in and out of the state swings upward for Oklahoma starting in 2005). Then the correlation becomes very strong, indeed: as income tax cuts have helped propel Oklahoma’s private-sector economy, overall state tax revenues have risen to record highs. (See more in the latest issue of Perspective.)

This also matches up with data from the American Legislative Exchange Council’s Rich States, Poor States, which shows no-income-tax states with higher rates of tax revenue growth than high-tax states.

In the recently ended fiscal year, Oklahoma set new record highs for total tax collections, including record highs for both income tax and sales tax collections. This, despite a total reduction of 20 percent in the state’s personal income tax rate since 2005, and despite natural gas prices – and natural gas revenues – currently far below past highs.
- See more at: http://www.ocpathink.org/articles/2442#sthash.4XnNAaeJ.dpuf
Posted by James Franko on Friday, August 16, 2013
When a United States senator's home state newspaper opens an editorial by quoting the same senator you know a controversy is likely in the offing.

Case in point, the Chicago Tribune quoted Sen. Dick Durbin in their "Durbin's Enemies List" editorial with;

"It is absolutely unacceptable to single out any political group — right, left or center — and say we're going to target them. That is unthinkable. That goes back to some of the worst days of the Richard Nixon administration."

—U.S. Sen. Dick Durbin, D-Ill., on IRS targeting of conservative groups for special scrutiny, May 13, 2013.


Funny then because the "the distinguished senior senator from Illinois" is engaging in much the same kind of targeting in a letter Kansas Policy Institute recently received. In short, Durbin wants to know if KPI has any affiliation with the American Legislative Exchange Council. He is using his position to demand information which he is constitutionally prohibited from collecting - the right for groups and individuals to freely associate and speak.

This controversy appears to have generated the response Durbin was certainly looking for - media mentions about his attempt to demand information from non-profit organizations, legislators, and corporations. Use your preferred search engine and type "Durbin ALEC" to read the fallout.

Kansas Policy Institute wrote back to Senator Durbin and let him know that we wouldn't back down from his bullying. Instead, we'll stand for the freedoms our Constitution enshrines. The same freedoms upheld by a 1950's case in which the NAACP's freedom of association and speech were protected.* You can read the full letter from KPI to Durbin here.

* Historical reminder: it was Alabama segregationists looking to intimidate NAACP donors that led to the U.S. Supreme Court decision in NAACP v. State of Alabama. The line of absurdity is well in the rear view mirror when a member of "World's Greatest Deliberative Body" is engaging in tactics used by opponents of the Civil Rights movement.
Posted by James Franko on Thursday, August 08, 2013
This post originally appeared at the Cato Institute's @Liberty blog and is written by Andrew Coulson, the director of the Center for Educational Freedom at Cato.

The Wall Street Journal
reports today that according to the latest Bureau of the Census figures there was a 0.4% drop in nominal U.S. public school operating spending from 2010 to 2011. The story then makes this unobjectionable factual observation:

Education officials say decreased spending will make it more difficult to prepare U.S. students for an increasingly competitive global marketplace. Some critics argue that public education costs are skyrocketing while academic achievement has not kept pace. They want the system overhauled before more money is spent.

What the story does not provide readers is any measure of student achievement that would allow them to determine who is right. Let’s see if we can help out. Below is an updated version of a chart some of you will already be familiar with. It shows the performance over time of U.S. 17-year-olds on the “Long Term Trends” testing program of the National Assessment of Educational Progress. The spending line corresponds to the trend in the total cost of a complete K-through-12 public school education (i.e., what it cost to send a high-school graduate all the way through public school). For good measure, it shows how the number of public school employees has roughly doubled since 1970–from about 3.3 to about 6.4 million people.

So, who seems to be right: “Education officials” or “some critics”?



Incidentally, the WSJ only gives the partial “operating” figures for per-pupil spending. Actual total per pupil spending in 2010, adjusted to today’s dollars, was $13,871. That was down from the all-time inflation-adjusted high of $14,090 in the previous year. Still, $346,767 per class of 25 kids doesn’t seem too shabby.
Posted by Dave Trabert on Tuesday, July 30, 2013

A recent story in the Topeka Capital-Journal said some districts are considering raising local property taxes because equalization aid to school districts has remained steady for several years.  Districts may want more taxpayer money, whether in equalization aid or elsewhere, but that has no bearing on what schools need.

Equalization is a sound policy - no child's education should be dependent upon the property values of a given district - but equalization should sit on top of a funding plan that gives schools what they need. That's not the case in Kansas; no study has ever been conducted that determines what schools need to attain required outcomes and operate efficiently.  The cost study cited in Montoy and Gannon was supposed to take efficiency into account but the authors chose to ignore efficiency and deliberately gave the courts inflated numbers. 

We need a funding mechanism that is student-focused, not institution-focused.  Legislators should dig deep into the spending and achievement data, determine what it costs to have schools operating efficiently and effectively and design an appropriate funding system.

But speaking of student-focused – how’s this for irony?  Districts support equalization of funding but they oppose equalization of education opportunity for students. Many low income students are forced to attend the school district their parents can afford, yet the education lobby is vehemently opposed to charter schools and tax credit scholarships for low income kids.  

Equalization should be a two-way street.



Posted by Dave Trabert on Monday, July 22, 2013

CNBC had a great interview recently with Travis Brown, the author of How Money Walks, showing which states had gained and lost Adjusted Gross Income due to domestic migration – U.S. residents moving in and out of states – between 1992 and 2010.

Travis Brown used IRS and Census data to build some great interactive graphics to show which states and counties were winners and losers. 

Unfortunately (but not surprisingly), Kansas and most counties are various shades of red on the maps…indicating losses of AGI.  The State of Kansas lost $3.15 billion in a stead outflow.  Predictably, most of Kansas’ gains come from high-tax states and most of the money lost went to low-tax states.


 (graphics from HowMoneyWalks.com)

It's worth noting that California, New York and Illinois have extremely high tax burdens.  Texas, Florida and Nevada do not have a state income tax.  

Posted by Dave Trabert on Wednesday, July 17, 2013

Remember how Pinocchio’s nose would get longer when he didn’t tell the truth?  I’m reminded of that story whenever someone in local government says they are “holding the line” on property taxes while the Honesty Gap continues to grow.

The annual increase in your property tax comes from the compounding effect of changes in your property value and the mill (tax) rate.  For example, if the county increases the assessed value of your property by 4% and the mill rate is increased by 2%, your property tax will increase by 6.08%.   But if you ask someone in government how much your property tax is going up in this scenario, you’ll likely be told, “Oh, we’re holding the line on property taxes.”  Or maybe, “We only raised the rate by half a mill.”  The best you could probably count on is “The mill rate is going up 2%.”  It would be extremely rare to be told that your property taxes were going up by 6.08%.

The difference between the truth (the actual property tax increase) and the change in the mill rate is the Honesty Gap.  Statewide, the Honesty Gap has grown to 82% between 1997 and 2012.  The average county mill rate (combined for all jurisdictions such as cities and school districts) may only have increased by 21% but property taxes jumped 103%.

Some of the larger counties in Kansas have an Honesty Gap well above the state average.  You can see the Honesty Gap for all Kansas counties here.  More detailed property tax data on each county is available at KansasOpenGov.org.

 There is a very easy way to wipe out the Honesty Gap – require elected officials to take a public vote on the amount by which they are increasing your property tax.  In fact, a piece of legislation was introduced this year to that effect.  But cities, counties and school districts fought hard to avoid having to be honest about the tax increases they’ve been imposing.  HB 2047 barely passed the House on a 68-53 vote after being watered down with exceptions and was referred to the Senate Taxation Committee, where it still sits.  (A full explanation of HB 2047 and the names of Representatives who voted for and against this simple transparency measure are included in our Kansas Freedom Index.)

What do you think?  Should elected officials be honest with you about property tax increases?  If you’d like to share how elected officials describe your property tax increase, send me a note at dave.trabert@kansaspolicy.org.  

 

Posted by Dave Trabert on Sunday, July 14, 2013

 

Here’s an interesting fact that’s missing from recent discussions on higher education funding in Kansas: we spend a bigger portion of our budget on higher education than the national average. Data from the National Association of State Budget Officers shows that Kansas allocated 12.1% of the General Fund to higher education in 2012 as compared to the national average of 10%. Kansas also has a much greater portion of total expenditures devoted to higher education, at 16.7% versus the national average of 9.9%.

Being above the national average might not rise to the level of an ‘ah-ha’ moment but it’s an important piece of the overall discussion on higher education funding, especially since the Legislature is being accused of underfunding universities. Legislative budget decisions must consider all relevant information – not just the ‘wants’ of each agency.


Posted by James Franko on Thursday, July 11, 2013
The closest NBA franchise to Kansas is in Oklahoma City so some can be forgiven for possibly missing the big story of the NBA off-season. Superstar center Dwight Howard leaving one of the league’s most historic franchises, the Los Angeles Lakers, for the second tier Houston Rockets (apologies to Rudy Tomjanovich and Hakeem Olajuwon).
 
Howard, nicknamed "Superman", at NBA Slam Dunk Contest

 
There may be very legitimate basketball reasons for a superstar like Howard to leave one of the most storied franchises in all of sports (highest all-time winning % in NBA, 11 league titles while in Los Angeles) with an equally impressive history of men playing the same position (Wilt Chamberlain, Kareem Abdul-Jabar, Shaquille O’Neal). However, as sports are defined by legacies and history it is easy to speculate that something else may have factored into Howard’s decision.

If Kansans did pay attention to the NBA it was probably limited to KU standout Ben McLemore being drafted by the Sacramento Kings…the Kings formerly of Kansas City…in high-tax California. Which brings us back to Howard leaving SoCal for Houston.

ESPN commentators on sports radio in Wichita were only a few of the folks I heard say it would make more financial sense for Howard to sign with a team in an income-tax free state compared to staying in high-tax California, even though the Lakers were able to offer Howard a contract worth more than other suitors because of league rules incentivizing players to resign with their team. Now that he’s made the decision official, Americans for Tax Reform has run the numbers on why taking a contract worth $31 million less to play in Texas actually puts more money, after taxes, into Howard’s pocket:

Had Howard decided to remain with the Lakers, he could have received a max contract of $119 million over five years. Houston, on the other hand, can only offer a max contract of $88 million over four years under the new rules of the Collective Bargaining Agreement. While the difference in pay is one year and $31 million, Howard will actually earn $2.1 million more after taxes by signing with Houston:

Team
Total Tax Burden
Total Tax Liability
Annual After-Tax Earnings
 Houston Rockets
43.4% $9.6 million
$12.4 million
Los Angeles Lakers
56.7% $13.5 million
$10.3 million

For illustrative purposes, the total tax burden is comprised of the top marginal federal income tax rate of 39.6 percent plus the 3.8 percent Medicare surtax plus the top marginal income tax rate of California (13.3%) and Texas (0%). Additionally, figures based on estimated annual pay from Lakers ($23.8 million per year) and Rockets ($22 million per year).

Forbes weighed in as well and talked about other athletes benefiting from no-income tax states (Golfers Tiger Woods and Phil Mickelson, NFL quarterback Tony Romo). While two accounting blogs looked at it to determined his annual pay would be higher in Texas than in CA (here and here).

What does this mean to us working stiffs in Kansas?

Taxes matter! A lot!

Howard has such a unique skill set that he can set his price, under league rules, and has complete mobility of labor. He’ll act rationally, just as you or I would, and maximize his earning potential. The difference is that most people don’t have complete flexibility in where they live and are “stuck” with the taxes as they find them…and where we can find a job.

Just as Howard moved to a no-income tax state, businesses are doing the same and job growth is booming along with it, see adjacent chart with data from the Bureau of Labor Statistics.

Taxes matter and while Kansas has taken some positive steps in recent years The Sunflower State has a long way to go. In short, if more businesses are started in Kansas we’ll employ more people in the private sector and a rising tide will lift all boats. Conversely, higher taxes will scare away entrepreneurs and it will be harder than it ought to find a job for work-a-day Kansans.

What’s more, for already-employed Kansans, higher taxes take money out of our pocket and send it to government bureaucrats. A machinist at Spirit AeroSystems in Wichita, a line worker at National Beef in Liberal, an accountant with John Doe Financial in Overland Park, a public school teacher in Smallville. Each will have more taken from their paycheck because of higher taxes supporting high government spending.

Taxes matter and not just for high-dollar earners like an NBA superstar. They matter for everyday folks from every corner of the Sunflower State. Lower taxes mean more money to save for college or catch an OKC Thunder game when Howard’s Rockets visit our southern neighbor. Lower taxes mean more businesses employ more people via more start-ups and expansion.

Taxes influence the decisions of the average Kansans as much, or more, than they do for the highest paid people on the planet. Our tax burden just doesn’t make front page news.
Posted by James Franko on Wednesday, July 10, 2013
This column first appeared at EducationNext and is authored by Paul E. Peterson and Peter Kaplan.

A new piece at EducationNext shows that Kansas has the 44th weakest standard of proficiency in the country; they include 51 ratings to include Washington, D.C. Click on the adjacent chart to review the full list. 

EducationNext is a joint project of Harvard University's Kennedy School of Government, the Thomas B. Fordham Institute, and Standford University's Hoover Institution.

Only 35 percent of U.S. 8th graders were identified as proficient in math by the 2011 National Assessment of Educational Progress (NAEP). According to the most recent calculations available, the United States stands at the 32nd rank in math among nations in the industrialized world. In reading, the U.S. ranks 17th in the world (see “Are U.S. Students Ready to Compete?” features, Fall 2011).

The low performance of U.S. students has been attributed to low expectations set by states under the 2002 federal law, No Child Left Behind (NCLB), which expects all students to reach full proficiency by 2014. In this, the fifth in a series of Education Next reports, we compare the proficiency standards set by each state to those set by NAEP, which has established its proficiency bar at levels comparable to those of international student assessments.

Most states have set their proficiency bars at much lower levels, perhaps because it causes less embarrassment when more students can make it across the proficiency bar, or because it was the easiest way for states to comply with the NCLB requirement to bring all students up to full proficiency.

Read the full column at EducationNext here.
Posted by Dave Trabert on Tuesday, July 02, 2013
Wichita residents recently expressed outrage at a public hearing on a proposal from Westar Energy that would allow them to selectively award rate reductions to industrial customers in the name of economic development. In typical subsidy fashion, the unfair advantage given to a few will be passed on to other customers under the proposal.

Allowing Westar to pick winners and losers is bad policy but it may well be another bad policy idea that's prompting their request: the Kansas Renewable Portfolio Standard enacted in 2009 under Governor Parkinson. The 'deal' that allowed a new coal plant to be built in western Kansas (which has still not been allowed) created a government mandate that requires Westar and other electricity providers to purchase up to 20% of their energy from renewable sources. Put simply, the Kansas RPS is a huge subsidy to the wind industry.

Our mid-range dynamic analysis of the RPS shows that rates will be 45% higher by 2020 when the last phase of the mandate goes into effect. There will be a significant negative impact on jobs, business investment and disposable income...and industrial customers who use large of amounts of electricity will be especially harmed. So now the RPS bailout of the wind industry spawns another subsidy program that allows electricity companies to shift the costs of hand-picked large companies onto other users. This type of bad policy will continue to harm regular customers until the RPS is repealed.
Posted by Dave Trabert on Wednesday, June 26, 2013

Yes, that’s right.  Local school districts added 709 employees in the just-ended 2013 school year.  

Data obtained from the Kansas Department of Education shows that school districts added 324 teachers and 385 other employees.  Listings by school district going back to 2005 can be found at KansasOpenGov.org

Hiring more non-teachers than teachers is a continuation of a long term trend in Kansas, although both employee groups are growing faster than student gains.  Enrollment grew 3.6% between 2005 and 2013, while teacher employment increased by 4.8% and all other employment jumped 9.6%.  Total employment grew 7.1% over the period.

 

  FY 2005      FY 2013       % Change 
Students  441,868     457,887       +3.6%
       
Teachers  32,825 34,399    +4.8%
Other staff  31,182 34,170   +9.6%
   Total employees  64,007  68,569 +7.1%

Earlier this year we wrote about a report from The Friedman Foundation for Educational Choice that put this trend in perspective for teachers and taxpayers. While Kansas enrollment grew 5% between 1992 and 2009, administrators and other non-teaching positions increased 43%. The author calculated that taxpayers would save $340.3 million annually if administrators and other non-teaching personnel had increased at the same rate as enrollment.

Alternatively, they found that the savings could be used to increase average teacher pay by $10,125!

It costs a lot of money to operate public schools but it’s how the money is spent that matters…not how much.

FYI, the Department of Education estimates that 2013 set a new record for taxpayer support of public education in Kansas at $5.816 billion or roughly $12,738 per student.  A history of school funding back to 1994 using data provided by the Kansas Dept. of Education can be found here.

Posted by James Franko on Wednesday, June 26, 2013
This post is courtesy of William Ruger and Jason Sorens of the Mercatus Center at George Mason University. It originally appeared on the Mercatus Center blog here.

The turbulent end to Kansas’ legislative session is only the most recent example of how budgetary politics has become a bareknuckle battle in the state. In 2012, Governor Brownback reluctantly signed a bill that significantly cut income tax rates without offsetting spending cuts. Naturally, this opened up a hole in the new budget, which kept policymakers in Topeka as they hammered out an agreement during the extended session. Some argued that tax and spending cuts will attract investment and create jobs. Others say they compromise necessary services. Kansans can better evaluate these claims when they consider the long-term fiscal trend and compare their political and economic situation to those of comparable states.

In our study, Kansas ranked 26th on overall freedom, or about average. But from 2001 to year-end 2010 (the latest date for which full data is available) it had the fifth-largest decline in the country.

So, to paraphrase Kansas’ famous newspaper editor and political figure William Allen White, “What’s been the matter with Kansas?”

Why the decline in overall freedom?
  • Fiscal Policy: The biggest problem has been its worsening fiscal policy, especially since the Sunflower State does pretty well on regulatory and personal freedom. State and local debt exploded from 13.6 percent of the economy in fiscal year (FY) 2000 to 26.2 percent in FY 2010. Government spending, employment, and taxes also went up.
  • Crony capitalism: Three-quarters of this new debt came from local governments, often in the form of crony capitalism. “Public debt for private purposes,” including taxpayer-funded debt incurred for commercial development, malls, convention centers, stadiums, and the like, more than tripled. Kansas’ total state and local tax burden now stands at 9.7 percent of income, slightly higher than the national average.
  • Outmigration: Meanwhile, more residents left Kansas than moved in during each year between 2000 and 2012. Over those 12 years, 3.1 percent of the state’s 2000 population, on net, moved to another state. These sorts of migration numbers worried White in 1896 and should worry Kansans today. Is the decline in freedom related to the outmigration? It’s certainly possible.
Migration to Neighboring States

States with more freedom in 2001 attracted more residents than their less free counterparts over the next 10 years. True, Americans have been moving from colder to warmer states for decades, and Kansas isn’t exactly Phoenix. But South Dakota has a harsher climate (and hasn’t had the shale-oil boom of its northern neighbor) and it has still enjoyed net in-migration over the last decade. Not coincidentally, South Dakota also ranked as the second-freest state.

States also attract fewer residents when their neighbors are especially free. So part of Kansas’ problem is that neighboring states like Missouri and Oklahoma are relatively free places.

Oklahoma was the most improved state in the nation between 2001 and 2011, and is currently our fifth-freest. It attracted new residents from other states amounting to 1.6 percent of its 2000 population. Meanwhile, Missouri ranks seventh overall and also benefited from positive in-migration over the last decade.

Room for Savings

It is too early to tell what the last two years’ reforms will mean for Kansas. The legislature will need to make sure that changes to the tax code don’t add to the already-high debt. But government in Kansas is bigger and more expensive than it is in many other states, suggesting there is room for savings.

In short, Kansas’ relative slide in freedom may be the modern answer to Mr. White’s famous question. Reversing it will go a long way towards making the state a more attractive option for its current residents, and a place where outsiders might decide to settle – just as so many have done in the past.
Posted by Todd Davidson on Monday, June 24, 2013
The venerable Tax Foundation recently released an analysis of Kansas' 2012 and 2013 tax reforms concluding that the reforms have been a mixed bag but a net positive.

Kansas Governor Sam Brownback has signed a new tax reform bill, addressing some drawbacks of last year’s legislative efforts and resulting in an improved tax code for the state...  Last year’s reform plans ultimately fell short of expectations due to flawed exemptions for so-called “pass-through” businesses as well as a lack of base-broadening which created an approximate $800 million revenue gap. 

Although the bill is actually revenue-positive, the combined effect of both bills remains a net tax cut. After incorporating the 2012 and 2013 changes, as well as changes in state spending, the state now faces a budget gap of between $95 million and $182 million per year, a significant reduction from last year.

While we would have preferred the budget gap be addressed via a more efficient delivery of services, we do agree with the Tax Foundation that the combined 2012 and 2013 reforms result in a tax cut and that is a positive step for the Sunflower State. The analysis, by Joe Henchman and Scott Drenkard, points to the overwhelming evidence that taxes stunt economic growth:

We recently reviewed 26 peer-reviewed studies that have been written on the topic, and 23 of those studies find that increasing taxes hurts economic growth. The other three studies are inconclusive. What is more, all of these studies that were published in the last fifteen years conclude that higher taxes are associated with lower growth.

A study by the International Monetary Fund analyzed 170 instances of fiscal consolidation across the developed world and found that spending cuts are much less damaging to economic growth than tax increases. They found that a 1 percent cut in spending had an insignificant effect on growth, while a 1 percent increase in taxes reduced GDP by 1.3 percent after two years. The Kansas reforms over the last two years will result in hundreds of millions of dollars in tax cuts, and returning that money to the private sector will certainly produce long-term growth gains. 

Tax Foundation economist Scott Drenkard concluded: “While legislation ultimately passed in Kansas has been a mixed bag over the past two years, and the end result is still a code that has a large carve out for pass-through income, the positive elements outweigh the negative elements,”


Posted by Dave Trabert on Monday, June 17, 2013

A 20% decline in private sector jobs for downtown Kansas City (MO) is just the latest example of failed central planning efforts.  According to The Kansas City Star, "U.S. Census data shows that from 2001 to 2011, the latest data available, greater downtown lost 19.6% of its private employees.  That's 16,237 fewer private jobs.  That 10-year stretch covers the period from shortly before the downtown redevelopment boom began to just after the major redevelopment projects were completed."

Local governments and their economic development 'partners' (chambers of commerce, downtown development groups, etc.) believe they can outsmart the marketplace by pouring millions of taxpayer dollars into targeted areas to create jobs.  Instead of asking employers what they need to succeed (lower taxes and less onerous regulation, according to many business surveys) government doles out taxpayer subsidies to preferred developers and employers.

The Star reports that housing and entertainment are booming in downtown Kansas City but most of that likely represents redistribution of existing economic activity within the region.  The city's population only grew 4.1% between 2000 and 2010 - less than a half percent per year.  A new entertainment center in one part of a city grows at the expense of other parts of the region.  The same applies to housing in a city that is barely growing.

 

Posted by Dave Trabert on Monday, June 10, 2013
Concern about the state’s ability to function if tax reform was “paid for” with spending reductions was a driving concern of the 2013 legislative session.  It’s a valid concern that has even been expressed by many people who favor tax reform.   Fortunately, the facts show those concerns are easily addressed.

Kansas Policy Institute heard those concerns over a year ago and did extensive research on the subject.  We discovered that States that Spend Less, Tax Less…and Grow More.  In fact, that was the title of an article in the Wall Street Journal that Todd and I co-authored.  As we explained, “Every state has public schools, social-service programs, prisons, etc. Some just find ways to provide essentially the same basket of services at lower prices.”

The WSJ article was based on 2011 state spending.  We’ve since updated the research with 2012 budgeted amounts for each state, which shows stunning differences in state spending levels.  

It’s well established that keeping taxes low is the secret to having strong economic growth but some people believe that low taxes are a fluke of geography.  Conventional thinking (at least within government) says that low state taxes are dependent upon having access to unusual revenue sources, but that's not it. A state could be awash in oil and gas severance taxes and still have a high tax burden if the government will not exercise restraint.   Sure enough, those opposed to tax reform tried to make the case that states without an income tax could do so because they had extensive oil & gas revenue (Texas) or booming tourism (Florida).  But we disproved that theory with facts.  Texas and Florida have low tax burdens because they keep spending under control; Kansas has higher taxes than those states because Kansas spends 57% and 62% more, respectively, on a per-capita basis.

Many legislators were encouraged by our research but there was still uncertainty about making the transition to responsible spending levels.  Once again, KPI showed how it can be done.  We published A Legislator's Guide to Delivering Better Service at a Better Price and showed how existing carryover cash balances and other cash options could be used to ‘buy time’ to do thoughtful spending analysis and a review of all the taxpayer subsidies that are given to select businesses in the name of economic development.  We also shared how state and local governments across the nation are using privatization to provide more affordable services in Better Service, Better Price: How privatization can streamline government, improve services, and reduce costs for Kansas taxpayers.  Our privatization study was done in partnership with Reason Foundation; both Reason and KPI have offered our services to Governor Brownback free of charge to help guide the privatization review.

Unfortunately, the budget was largely balanced with a sales tax increase, smaller income tax deductions and wiping out the state’s cash reserves.  There were some spending adjustments but there were also increases; in fact, if not for $107 million in K-12 spending being transferred to the All Funds Budget and some FY 2014 spending being pushed into FY 2013, FY 2014 General Fund spending was only reduced by less than one percent.  SGF spending is scheduled to increase another $439 million by FY 2018 but it will likely be much higher.  

The real KPERS deficit of at least $15 billion will require much higher funding if legislators don’t move away from the defined benefit plan.  There’s also a strong likelihood of higher Medicaid spending due to Obamacare.  Thank goodness Medicaid hasn't been expanded in Kansas…well, at least not yet.  Indecision will hopefully soon become a firm “No, thanks.”

It’s not that spending can’t be reduced…it’s that too many legislators don’t want to deal with the backlash from special interest groups.  I recently sat in on a joint House / Senate public meeting where it was openly acknowledged that spending had been reduced by “as much as the members of both chambers could bear”.  It wasn't that more couldn't be done; there just wasn't the will to do it.

States that spend less, tax less…and grow more.  States that overspend (like Kansas), overtax…and suffer economic stagnation.  

Posted by James Franko on Tuesday, May 28, 2013
Many are familiar with the military version of that acronym - Keep It Simple Stupid. But, it is apt as it relates to an update in methodology on the 2013 Kansas Freedom Index as well. All bills included in the 2013 KFI will only be considered for their fiscal impact in the current budget cycle.

Washington, Topeka, you name the legislative body and you can bet that promises of future benefits are made as often as politicians kiss babies. Unfortunately, there is little guarantee that those promises are kept. New people are elected, a fiscal crisis hits, or special interests impose their will on the legislative process. The promises are made with the best of intentions but history suggests that too often the benefits are not found or delivered.

Case in point, recent legislative efforts to phase in income tax reform over multiple years. Friends of economic freedom applauded the largest tax cut  in state history at the end of the 2012 legislative session - when fully implemented it is slated to reduce taxes by more than $800 million per year.  Fast forward one year and the 2013 legislature is considering proposals that would 'pay for' tax reform by increasing the sales tax, reduce or eliminate income tax deductions but also reduce income tax rates in the future.  The net effect over five or more years is a tax reduction but there would be tax increases in earlier years.

Economic freedom results from reducing a tax burden, which requires a reduction in spending.  The 2013 Legislature is using various tax increases and some small spending reductions to ‘pay for’ the 2012 tax reform.  Given that action and the fact that the current legislature cannot bind future legislatures, it cannot be said with absolute certainty that a net tax reduction planned for future years will actually take place.  Accordingly, we will only consider the fiscal impact of multi-year phase-ins within the current budget cycle.  Legislation that increases tax or fee revenue outside the current budget cycle, however, will be counted to avoid attempts to ‘game’ the system, via never having tax increases scored because they fall outside the current budget cycle.  This refinement is retroactive to the beginning of the 2013 Legislative session. 

Practically speaking, this means that the score for House Substitute for SB 84 has been re-rated to a -3 from a +3.

While this is a change from how the 2013 KFI was originally released, we feel it is a more accurate and transparent way of scoring legislation for the long-term.
Posted by Todd Davidson on Tuesday, May 28, 2013

It’s been repeated so many times we don’t even need to think to believe it. “Low taxes at the state level will lead to higher taxation at the local level.” Conspicuously absent from this conjecture is evidence. Fortunately, the U.S. Census Bureau annually publishes State and Local Government Finances data, allowing a test of this theory.

Local taxes in the states without-an-income tax were $83 per resident lower than in the states with an income tax in 2010 (most recent data available). That bears repeating, states without an income tax, on average, have lower local taxes than states with an income tax. 

According to the Census data, Kansas local governments taxed $1,725 per person in 2010. Residents in states that do not have an income tax were, on average, taxed $1,763. The mere $38 in higher local taxes per capita is enormously overshadowed by the $479 overall lower state taxes. 

Local governments eager to capture more revenue and opponents of tax reform have propagated the assertion that local taxes will be forced to rise as state spending is lowered. While the argument may be effective in teeing up a scapegoat for higher local taxes, it is not backed by the Census data.

The key to low taxes has never been alternative revenue, the key is low spending. KPI recently released a Legislator’s Budget Guide, detailing how Kansas can buy time and operate more efficiently in the long run.
Posted by Todd Davidson on Friday, May 24, 2013
For years, Kansas has muddled in mediocrity in nearly every economic competitiveness index. This time is different. Due to the largest tax cut in state history being signed into law at the end of the 2012 legislative session Kansas jumped a remarkable 15 spots, to number 11 in Rich States Poor States, the premier  state economic competitiveness index. The outstanding improvement is in jeopardy as policy makers fail to address long term pension liabilities and debate raising the states’ sales tax.

Rich States Poor States is an annual publication written by Dr. Art Laffer, Stephen Moore of the Wall Street Journal (who will be speaking at KPI’s annual dinner on June 18th in Overland Park) and American Legislative Exchange Council's Jonathan Williams. The publication ranks each of the 50 states on 15 policy variables and economic performance.

Publications like this one help educate legislators and governors with the tools to understand which policies work and which policies waste taxpayer dollars. ~ Senator Rand Paul

While the 2012 session led to a great leap in Kansas’ competitiveness, next year much of that leap forward could be lost if we give in to calls for higher taxes. The legislature is currently debating a sales tax hike; without any change in the law sales taxes will be 5.7% on 1 July 2013 when the current 6.3% sales tax ends. The sales tax is estimated to take an additional $300 million from Kansas families each year.

Just as sound tax policy is based on a long-term vision the spending side of the ledger should also be structured with an eye to the future. Knowing this, Rich States Poor States highlights those states that are taking steps toward protecting promised benefits to retirees and reducing taxpayer future liabilities by transitioning to a 401(k) style plan. Kansas policy makers, unfortunately, failed to move the needle on public sector pensions. Instead of meaningful reform house members passed $1.5 billion in pension obligation bonds, a term most commonly associated with Illinois and California. Thankfully, the idea of adding more debt to get rid of state pension debt seems to be dead for the current session.

The result was a double loss for pension reform advocates in Kansas. There would be no structural reform, and the Kansas retirement system and taxpayers would take on $1.5 billion in additional debt. While the proposal for fundamental pension reform failed this session, fiscally conservative legislators and Gov. Brownback are optimistic that real reform will have a good chance of passing in the future. ~Rich States Poor States    

There’s good and bad in this year’s Rich States Poor States for Kansas. We’ve made great strides in the income tax debate however the calls for more spending threaten to impose higher taxes on Kansans. While an inability to reach meaningful reform on growing pension obligations looms over our fiscal future.

Posted by Dave Trabert on Thursday, May 23, 2013
The data could not be clearer.  Kansas has higher state taxes than many states because Kansas spends a lot more than those states.  Every state has public schools, highways, social services, safety net programs, etc.  But some states find ways to provide those services at a much better price.  They spend less and therefore tax less (and grow more).

 

Kansas spends 34 percent more than the states with no income tax, in both the General Fund and All State Spending.  As a result, Kansas has to tax residents at much higher levels than most states.

 

 

 

Opponents of tax reform have tried to claim that oil and gas severance taxes in Texas make up for their lack on income tax, but that clearly isn’t true.  Texas only has a $94 per-capita advantage over Kansas on severance taxes.  Texas’ real advantage is that it simply doesn’t spend as much as Kansas.

Our dynamic analysis of Kansas’ 2012 tax reform showed that only a one-time reduction of $186 in General Fund per-capita spending was needed to balance the budget.  Kansas could do that and still be the high-spender in the region.  Instead, many legislators and the administration are trying to make up most of the budget gap by raising the sales tax and other revenue increases.

The argument is that consumption taxes are less damaging to the economy than income taxes.  That’s true, but using a sales tax increase to avoid dealing with the real problem of excess spending is foisting an unnecessary tax on citizens that will damage the economy.

The House and Senate budget proposals do have some small spending reductions, and it is certainly a daunting task for legislators to lead real spending reform; they have to face unending requests for more spending and an entrenched bureaucracy that often makes it difficult for reform-minded legislators to get the information they need.  And the prospect of re-election is ever-present for most.

But even this late in the session, solutions exist that would avoid a sales tax increase without arbitrary spending reductions.  Our Legislator’s Guide to Delivering Better Service at a Better Price (published in February) shows how to use existing cash balances to close the budget gap and ‘buy time’ to implement thoughtful spending reforms.

Even if the current budget is balanced with a tax increase this year (which, at this writing, seems likely), the spending problem isn’t going away.  There are some small spending reductions in the current plans but every plan allows overall spending to continue to increase…while further reducing income taxes in future years.  Simply put, the problem only gets worse the longer it is ignored.


Posted by Todd Davidson on Wednesday, May 01, 2013

This post is courtesy of Cato Health Policy Director Michael Cannon and the Cato Institute's @ Liberty Blog

Today, the nation’s top health economists released a study that throws a huge “STOP” sign in front of ObamaCare’s Medicaid expansion.

The Oregon Health Insurance Experiment, or OHIE, may be the most important study ever conducted on health insurance. Oregon officials randomly assigned thousands of low-income Medicaid applicants – basically, the most vulnerable portion of the group that would receive coverage under ObamaCare’s Medicaid expansion – either to receive Medicaid coverage, or nothing. Health economists then compared the people who got Medicaid to the people who didn’t. The OHIE is the only randomized, controlled study ever conducted on the effects of having health insurance versus no health insurance. Randomized, controlled studies are the gold standard of such research.

Consistent with lackluster results from the first year, the OHIE’s second-year results found no evidence that Medicaid improves the physical health of enrollees. There were some modest improvements in depression and financial strain–but it is likely those gains could be achieved at a much lower cost than through an extremely expensive program like Medicaid. Here are the study’s results and conclusions:

We found no significant effect of Medicaid coverage on the prevalence or diagnosis of hypertension or high cholesterol levels or on the use of medication for these conditions. Medicaid coverage significantly increased the probability of a diagnosis of diabetes and the use of diabetes medication, but we observed no significant effect on average glycated hemoglobin levels or on the percentage of participants with levels of 6.5% or higher. Medicaid coverage decreased the probability of a positive screening for depression [by 30 percent], increased the use of many preventive services, and nearly eliminated catastrophic out-of-pocket medical expenditures…

This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured physical health outcomes in the first 2 years, but it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain.

As one of the study’s authors explained to me, it did not find any effect on mortality because the sample size is too small. Mortality rates among the targeted population – able-bodied adults 19-64 below 100 percent of poverty who aren’t already eligible for government health insurance programs – are already very low. So even if expanding Medicaid reduces mortality among this group, and there is ample room for doubt, the effect would be so small that this study would be unable to detect it. That too is reason not to implement the Medicaid expansion. This is not a population that is going to start dying in droves if states decline to participate.

There is no way to spin these results as anything but a rebuke to those who are pushing states to expand Medicaid. The Obama administration has been trying to convince states to throw more than a trillion additional taxpayer dollars at Medicaid by participating in the expansion, when the best-designed research available cannot find any evidence that it improves the physical health of enrollees. The OHIE even studied the most vulnerable part of the Medicaid-expansion population – those below 100 percent of the federal poverty level – yet still found no improvements in physical health.

If Medicaid partisans are still determined to do something, the only responsible route is to launch similar experiments in other states, with an even larger sample size, to determine if there is anything the OHIE might have missed. Or they could design smaller, lower-cost, more targeted efforts to reduce depression and financial strain among the poor. (I propose deregulating health care.) This study shows there is absolutely no warrant to expand Medicaid at all.

Posted by Todd Davidson on Wednesday, May 01, 2013

In today’s Wall Street Journal, Christina Corieri describes how not expanding Medicaid will benefit the country and each state.

As the battle over Medicaid expansion rages in the states, supporters of expansion have dusted off an age-old favorite in making the case for taking federal dollars. They say: If our state doesn't take the money, those dollars will go to some other state instead.

Happily, in this instance that is not true. When a state declines to expand Medicaid coverage to more people, no other state will receive its share of funds and federal spending declines. Based on figures from the Congressional Budget Office and analysis by the Kaiser Family Foundation, Washington was expected to spend roughly $950 billion expanding Medicaid between 2014 and 2022. Each state that declines to expand Medicaid relieves strain on the overall federal budget for this entitlement.
 

It’s no drop in the bucket either:

Using figures compiled by Kaiser and our own research at the state level, the Goldwater Institute estimates that the federal tab for Medicaid expansion has been reduced by more than $424 billion in new federal spending over the next eight years thanks to the 18 states that have already opted out. If the 12 still-undecided states also decide to opt out, there will be an additional $185 billion in savings.

According to Christina, Kansas' share of that savings is $6,696,000,000.

It’s also very likely current cost projections are understated:

In addition to protecting the federal budget, states that decline to expand their Medicaid coverage will protect their own budgets as well. States such as Arizona that voluntarily expanded their Medicaid programs in the past have faced much higher costs than expected. In 2005 alone, the program originally was projected to cost Arizona $315 million, but the actual cost that year was over $1.3 billion. 

Lest we not forget the federal government’s track record on keeping promises:

States would be wise to remember that those who rely on assurances of federal dollars are often chasing fool's gold. A recent example is the Individuals with Disabilities Education Act, where Congress promised federal funding to the tune of 40% of program costs after 1982 but today funds only 17%. 


Posted by Dave Trabert on Monday, April 29, 2013
The 2012 Workforce Development Report published by the Department of Administration shows that state-funded universities in Kansas have thousands more employees than the number of full time equivalent (FTE) employees authorized by the Kansas Legislature.  Even if this creates no statutory or budgetary issues, it certainly raises a number of transparency issues.  

Why isn't every position budgeted...and is this unique to universities or more widespread?  Do members of the Board of Regents know the exact employment level of each university (they certainly wouldn't know from the Databooks)?  Legislators and citizens should not be expected to piece together data from multiple reports to know how employees they are funding. 


The number of Classified and Other Unclassified employees (17,914) in the Workforce report is similar to the number of Authorized FTE positions (17,293) and the number of Budgeted Positions listed in the Regents 2012 Databook. Unclassified Temporary No-Benefits employees, however, are not considered Budgeted Positions by universities (according to Diane Duffy, Regents Vice-President for Finance & Administration). Their pay is included in budgets but the positions themselves are not separately identified. The Workforce report says Unclassified Temporary No-Benefits employees are limited to 999 hours in a twelve-month period.

Use of Unclassified Temporary No-Benefits employees has grown 13 percent at universities over the last four years, but declined by 28% in other state agencies. A similar pattern exists with Authorized FTE Positions; universities have seen a 10 percent increase while authorized FTE positions in other state agencies have declined by 18 percent.

 

 

Posted by Todd Davidson on Friday, April 26, 2013
The International Economic Development Council, a body of state and local economic development officials, surveyed its members and the results may be a bit shocking. 

The people whose job is to give money to corporations in return for promised new investment and jobs say that they give too much in too many deals, affirming what critics have been saying for a long time ~ “Giving Too Much With Too Little Scrutiny” (subscription required).

60.4% of the IEDC’s survey respondents feel there should be more transparency in financial incentive negotiations and 57% reported there are too many incentive deals in the U.S. It’s no surprise, considering state and local corporate giveaways top $80 billion each year, Kansas doles out over $1 billion

Images courtesy of Tax Analysts

Posted by Dave Trabert on Wednesday, April 24, 2013

Here's a little perspective on the current debate over state funding of Kansas universities.  The Senate is proposing a 2% reduction in state aid and the House is proposing a 4% reduction as part of the 2014-15 budget negotiations.  But reducing state aid by 2% or 4% is not the same as reducing universities' revenue by those percentages; universities also collect tuition, fees and have other income that supports their General Use Operating Expenditures.

State aid to universities (including the University of Kansas Med Center and the K-State Veterinary School) accounted for 48% of General Use Expenditures in 2012.  For the  sake of simplicity, let's say that state aid is half of General Use expenditures.

The impact on university expenditures of a reduction in state aid is therefore about half.  A 4% reduction in state aid would require a 2% reduction in expenditures; a 2% reduction in state aid would require a 1% reduction in expenditures.  

That assumes, of course, that universities would respond to a reduction in state aid by reducing expenditures.  As explained in our recent analysis, universities have a number of options to deal with potential changes in state aid without increasing tuition.

Posted by Todd Davidson on Wednesday, April 17, 2013

In the The Righteous Mind: Why Good People Differ on Politics and Religion, renowned psychologist Jonathan Haidt describes how the human mind is dual in nature: we live most of our lives in the ordinary world, but we achieve our greatest joys in those brief moments of transit to the sacred world, in which we become “simply a part of a whole.” 

A recent survey by the City of Wichita capitalized on this innate human tendency by equating community with government.  Our natural desire to become “simply a part of a whole” manifests itself in our jobs, churches, softball leagues, clubs, dinner parties and recently pride in WSU’s success in the NCAA tournament. Our citizenship in Wichita is one of many communities that define us as individuals, one of many communities we make sacrifices for, one of many communities we call upon to solve problems.

The survey respondents provide a list of wishes, all with the goal of improving our lives, many of which can and should be provided by city and county governments. Allowing businesses to openly compete to build water and street infrastructure, with competitive bidding for contracts, would strengthen the community by precluding any unfairness that weakens trust in the city.

Survey respondents showed a plea for business formation and young talent. The city could promote a sense of community by creating a welcoming culture for all businesses, one that does not pick favorites. 71.8% of respondents do not have faith that most people are willing to put community interests above personal interest—perhaps because so often city hall is called upon to hand out special tax treatment.

The survey also tries to identify challenges to the community; respondents were asked one question about Boeing and two questions about political divisions. Overwhelmingly respondents believe political divisions are negatively impacting our community’s ability to respond to global challenges.

We live in the biggest city in the state which brings with it many challenges; solutions to those challenges come in many forms, giving rise to the vast diversity of opinion borne out in the survey. That diversity may be trying but we should not allow the aspiration for political unity to squelch debate. Ultimately it is our ability to engage and debate these issues that unites us as a community.

Posted by Todd Davidson on Wednesday, April 10, 2013
Kansas temporarily increased the state sales tax rate from 5.3% to 6.3% on July 1,2010. It is scheduled to automatically drop to 5.7% on July 1, 2013 (the first day of the state’s 2014 fiscal year). The tax package that passed the Senate earlier this year makes the 6.3% sales tax permanent; the House plan allows the sales tax to drop to 5.7%, on schedule

In order to inform the debate KPI used the Beacon Hill Institute’s STAMP model to estimate the effects of making permanent Kansas’ once-temporary 6.3% sales tax. The STAMP model projects how the sales tax extension will affect economic and fiscal barriers relative to the baseline growth 

Projected growth in employment, annual gross wage rates and investment would be lower with an extension of the sales tax. (Note: this does not mean that in 2018 these variables will be lower than their 2013 levels, rather, in 2018 the variables will be lower than what they will be if the sales tax is allowed to drop). The model estimated that by 2018, making what was once thought to be a temporary 6.3% sales tax permanent would cost each Kansan $60 annually, $240 for a family of four.  

Further, any revenue gains from a higher sales tax rate would be partially offset by declining revenue elsewhere. Weakened job and income growth will cause nearly $40 million in reduced growth in personal income tax receipts each year through 2018. Growth in local sales and property tax collections will be $52.7 million lower in 2014 and $62.65 in 2018. According to the model the net tax revenue gain for state and local would be $125.04 million in fiscal year 2013 and $140.14 million in fiscal year 2018.

(Click image to enlarge)

While a sales tax increase is not as damaging as an increase in personal income taxes, any higher tax is associated with diminished economic growth. As Tax Foundation Chief Economist, Dr. William McBride, finds in his review of the academic literature

While there are a variety of methods and data sources, the results consistently point to significant negative effects of taxes on economic growth even after controlling for various other factors such as government spending, business cycle conditions, and monetary policy. In this review of the literature, I find twenty-six such studies going back to 1983, and all but three of those studies, and every study in the last fifteen years, find a negative effect of taxes on growth. Of those studies that distinguish between types of taxes, corporate income taxes are found to be most harmful, followed by personal income taxes, consumption taxes and property taxes. 

 

Posted by Todd Davidson on Tuesday, April 09, 2013
All the blood, sweat and tears you have poured into your job thus far this year went straight to Uncle Sam but you made it! April 9th is Kansas' 2013 Tax Freedom Day; from here on out the dollars you earn will be yours.

Each year the Tax Foundation calculates Tax Freedom Day, for the country and the each of the 50 states. The national average was April 18th, five days later than last year. Kansas' Tax Freedom Day arrived 6 days earlier than in 2012, thanks to last year’s income tax cuts. In spite of Kansas’ improvement our neighbors to the east and south still enjoy an earlier Tax Freedom Day.

 

 

 

Posted by James Franko on Friday, March 29, 2013
This is a post by KPI Adjunct Fiscal Policy Fellow Barry Poulson, Ph.D.; Poulson is also Emeritus Professor at the University of Colorado - Boulder.

Public officials in Kansas have proposed using pension obligation bonds to solve the funding crisis in the Kansas Public Employee Pension System (KPERS). In my view this is not a solution to the funding problem and I will discuss what I perceive to be flaws in this proposal.

The rationale for using pension obligation bonds to pay off unfunded liabilities in the pension plan assumes that the state can borrow funds at a low interest rate and then earn a higher rate of return on the proceeds deposited with the pension fund. The flaw in this rationale is the assumption that KPERS will earn a higher rate of return on bond proceeds deposited in the KPERS fund. KPERS assumes an 8 percent return on assets accumulated in the fund. For a number of years, economists and actuaries have questioned this assumed rate of return and the use of this assumed rate to discount liabilities in the plan. The Government Accounting Standards Board has issued new standards, 67 and 68, to be implemented over the next two years, requiring state and local governments to use a lower interest rate, the mortgage bond rate, to discount liabilities in their financial statements.

If we assume that a lower rate of interest, such as the municipal bond rate, is the interest rate relevant in discounting unfunded liabilities in the pension plan then it is not clear that issuing pension obligation bonds will generate returns above the interest cost on those bonds. If the returns fall below the interest cost on the bonds then this introduces an additional risk and could in fact exacerbate the funding problem in KPERS.

A major flaw in the proposed issuance of pension obligation bonds is the lack of nexus between the investment of the bond proceeds and payments for unfunded liabilities in the plan. The experience in other states is that sometimes bond proceeds are earmarked for other state expenditures. The most egregious example of this problem is the state of Illinois which issued $10 billion in pension obligation bonds and then used the proceeds to meet current expenditures rather than to pay off unfunded liabilities in the pension plan.

Even if the state of Kansas would not commit this form of fraud on the taxpayers the fungible nature of state funding makes it impossible to guarantee the nexus between bond proceeds and the payment for unfunded liabilities in the pension plan. If legislators see that additional funds are available to pay off unfunded liabilities in the pension plan they may choose to allocate less general fund money to meet these pension obligations. The state has not allocated the annual required contribution (ARC) to KPERS for several decades and is not projected to do so for the foreseeable future. Legislators continue to promise pension benefits without allocating the funds required to meet these obligations. We should expect this moral hazard to be even greater with the issuance of pension obligation bonds.

Even if the proceeds of pension obligation bonds could be set aside in a lock box and earmarked to pay off unfunded liabilities in the pension plan the state must still address the accumulation of unfunded liabilities in the defined benefit plan. Without fundamental structural change, including shifting public employees to some form of defined contribution pension plan, these unfunded liabilities will continue to accumulate. Legislators should not be diverted from this difficult task by non-reforms, such as the issuance of pension obligation bonds.

Shifting the cost of pension obligations from one generation of employees and taxpayers to the next generation is not a solution to the funding crisis in KPERS. The defined benefit plan offered by KPERS is not sustainable.

I analyze the sources of unfunded liabilities in the plan and explore alternative reforms to solve this problem in an upcoming paper with KPI.

Some of my other work for KPI on KPERS is here and a legal analysis of what can, and cannot, be changed in KPERS is here; the latter piece was done by another scholar.
Posted by Dave Trabert on Friday, March 29, 2013
Skeptics who don't believe revenues can increase when marginal tax rates are cut should look across the border to Oklahoma.

In 2005, they cut their marginal rate on individual income tax from 7.0% to 6.65% and actually experienced 6.5% growth in Individual income tax collections in FY 2005.

Oklahoma cut their marginal rate to 6.25% in 2007 and experienced a 1.0% gain in income tax collections for FY 2007. Their sales & use tax revenue also increased 8.4% that year with no change in the sales tax rate. This is a good example of the dynamic impact of income tax reductions...some of that money is spent on taxable goods and sales tax revenues increase.

They cut rates again in 2008, dropping the marginal rate to 5.65%. Even though they cut the rate by 9.5%, tax collections grew by 0.1% (keep in mind things were beginning to slow down in 2008). And again, the dynamic impact of cutting income tax rates pumped up sales tax revenue by 6.7%.

The concept works when governments allow it to work.  Of course, taxpayers know that spending increases lead to tax increases so if government tries to cut rates AND increase spending, you don't get the same reaction.  So you can't jack up spending as Bush did and get the same results.  
Posted by Todd Davidson on Friday, March 29, 2013

The New York Times reports:

A growing number of lawmakers across the country are taking steps to redefine public education, shifting the debate from the classroom to the pocketbook. Instead of simply financing a traditional system of neighborhood schools, legislators and some governors are headed toward funneling public money directly to families, who would be free to choose the kind of schooling they believe is best for their children, be it public, charter, private, religious, online or at home. 

The article goes on to tell the story of Nydia Salazar:

Some parents of modest means are surprised to discover that the education savings accounts put private school within reach. When Nydia Salazar first dreamed of attending St. Mary’s Catholic High School in Phoenix, for example, her mother, Maria Salazar, a medical receptionist, figured there was no way she could afford it. The family had always struggled financially, and Nydia, 14, had always attended public school. 

But then Ms. Salazar, 37, a single mother who holds two side jobs to make ends meet, heard of a scholarship fund that would allow her to use public dollars to pay the tuition.

She is now trying to coax other parents into signing up for similar scholarships. “When I tell them about private school, they say I’m crazy,” she said. “They think that’s only for rich people.”

It is truly unfortunate that the Kansas House of Representatives recently refused to expand educational opportunities for Kansas families.

Posted by Todd Davidson on Thursday, March 28, 2013
The Mercatus Center at George Mason University just released their 2013 Freedom in the 50 States report. The report, authored by Professors William Ruger and Jason Sorens, analyzes over 200 policy variables to score the level of freedom in each state. A dismal showing for Kansas, whose score has fallen 33.7 points since 2001 causing the state's rank to fall from 7th in 2001 to 26th in 2011. 

 

The increasingly high burden of government spending was the chief among the reasons for Kansas tumble:

Fiscal policy is the dimension in which Kansas does worst. Its public payroll is extremely large, at 15.8 percent of the private workforce. Taxes are about average, but the debt burden is very high: 26.2 percent of income. The areas of spending that could most stand to be cut are education, hospitals, and highways, while the taxes that should have priority for cutting are individual and business income, sales, and property taxes. In fact, since the closing date for this study, Kansas has cut income taxes and the overall tax burden significantly.

The public employee largess, a product of an archaic county boundary system, has been a constant source of higher government spending. Debt will only worsen as $1.5 billion in pension obligation bonds are likely to be issued. In spite of these negatives the study's author had praise for Kansas and expects to see Kansas jump in the next edition:

  The $800 million tax cut in 2012 would alone raise Kansas from #26 to #12 on overall freedom if all other states remained exactly the same. Trimming government debt, consumption, and employment to national averages would raise the state one more notch, to #11. ~ Jason Sorens, author of Freedom in the 50 States

Pair the 2012 tax cuts with the study's other recommendations and Kansas has the potential to be the freest state in the country. Regrettably, Kansas had the opportunity to provide tax credits for private school tuition, further advancing freedom in Kansas, but failed to do so.

 

 

 

Posted by Todd Davidson on Thursday, March 14, 2013

Bloomberg news reports:

Several states including California and Maryland raised taxes on high earners last year, and Congress boosted federal levies on them. Families who look to change their domicile to a state with no income taxes such as Florida or Nevada open themselves up to years of scrutiny and possible litigation as local governments search for revenue. 

“I look at some of these domicile audits almost as an archeological dig and a full physical including MRIs and CAT scans,” said David Scott Sloan, a partner who advises high net worth families at Boston-based Holland & Knight LLP. “What we’re seeing at least in Massachusetts is the tax authorities are not going quietly into the night.”

It’s disturbing to see governments go to such lengths to extract wealth from hard working individuals. Luckily, in Kansas, moves have been made to slow the growth of spending and alleviate the burden of taxation.

Posted by Todd Davidson on Tuesday, March 12, 2013
A few newspapers argued a bill in the legislature seeking to clarify Kansas’ 2006 exemption of business machinery and equipment from tangible personal property taxes would aid businesses at the expense of citizens. The editorial writers failed to understand who actually bears the burden of this tax. Business machinery and equipment taxes are chiefly borne by both Kansas workers and consumers, through lower paying jobs and higher prices for goods.

By increasing the cost of machinery, the tax discourages investments in Kansas’ worker productivity – in turn hindering growth in wages. Because machinery and equipment is mobile, firms can shift production to lower tax districts, meaning less production and fewer jobs in Kansas.

Businesses that do locate in Kansas can clandestinely offload the tax onto consumers. The Tax Foundation explains:

 [Tangible Personal Property] tax is a business expense that must be offset by business revenues in order for the business to be profitable. The tax therefore is at least partly passed on to consumers through higher product and service prices, but this additional cost cannot be shown on receipts, such as with a retail sales tax. As a result, the impact of these non-transparent TPP taxes is hidden to most consumers and an invisible issue to most voters.

The 2006 legislature and governor were wise to pass this pro-growth and common reform. Unfortunately there is some confusion as to what defines real property verse personal property. For instance, Legislative Post Audit reports heating, ventilation and air conditioning (HVAC) is considered real property in Anderson County while Phillips County considers HVAC to be personal property. 

Montgomery County saw property taxes spike after 2006 and found itself in court over the issue. Further clarifying this reform will ensure the playing field is not arbitrarily determined by county appraisers.

Posted by Todd Davidson on Thursday, February 28, 2013
A new report, The School Staffing Surge, highlights the tremendous growth in K-12 non-instructional employment throughout the 50 states.  The report, published by The Friedman Foundation for Educational Choice, pulls data from the National Center of Education Statistics to show how employment of administrators and other staff has grown 46% since 1992 while employment of teachers has grown 32%, between 1992 and 2009.  The report then estimates how much each money each state could have saved or used to increase teacher salaries.

Here are the highlights for Kansas:

  • Enrollment increased 5% while Non-teaching staff increased 43% between 1992 and 2009.
  • Kansas would be spending $340 million less per year if non-teaching staff had grown with student enrollment (5%) instead of 43% between 1992 and 2009
  • If that money had been spent on teachers, the average salary would increase by more than $10,000
2012 totals, available at KansasOpenGov.org, show Kansas employees 34,075 just a bit more than the 33,785 non-teacher employees.  And when you measure employment against full time equivalent enrollment, there are just 6.7 students for every full time employee.

Posted by James Franko on Monday, February 25, 2013
The debate about whether Kansas should expand Medicaid only now seems to be heating up and reaching the public consciousness (here and here). Better late than never, I guess.

Amidst this debate are different (competing?) studies of what it may cost to expand Medicaid. We released a study after the Affordable Care Act (aka Obamacare) was signed into law but before the U.S. Supreme Court determined the individual mandate was a tax and allowed states the choice of expanding Medicaid, the Kansas Health Institute released a study last December, and the Kansas Department of Health and Environment did likewise earlier this month.

The authors of those studies gathered last week to discuss their findings and compare methodologies, projections, etc. The event was sponsored by KPI and KHI and also included a representative from KDHE.

The best moment of the event  may have been when the author of our study, Jagadeesh Gokhale, Ph.D., offered his projection of what could happen when the ACA is fully implemented with a simple, "Utter chaos!"

Aside from that, there was a lot of discussion regarding how much of an impact the different health care/Medicaid cost-drivers would impact Medicaid costs for Kansas. Keep in mind there is the choice of expanding Medicaid and estimated increases now that most Kansans will be subject to the individual mandate...some people were eligible for Medicaid pre-ACA but didn't sign up while in the future they'll likely join Medicaid to avoid paying the tax, er, fine.

Jagadeesh has written a bit more about how he arrived at his estimate and how this was driven by historical cost increases - it will be published shortly in a follow-up analysis - but check out a sneak preview below.

In the meantime, it is important to examine any gov't program in light of the benefits AND costs. More people may have access to gov't-run health care in the form of Medicaid (if eligibility is expanded) but the costs are staggering - $4.1 billion in extra costs to Kansas under the ACA in the next 10 years and $625 million if the decision is made to expand. These issues must be viewed for their impact, not simply good intentions.

It should be noted that other private and public agencies have also estimated the financial impact of the Mandate Effect and Medicaid Expansion Effect on the Kansas General Budget. Examples are those by the Kansas Health Institute, the Lewin Group, Urban Institute, Center for Budget and Policy Priorities, and the Kansas Department of Health and Environment. Estimates for the number of currently eligible but not Medicaid-enrolled individuals range from 30,000 (Kansas Health Institute, December, 2012) to 162,000 (also KHI, December 2012, alternative study). The KPI estimate of this group of potential new enrollees into Medicaid is 102,000 individuals—well within the range of other estimates. In terms of new enrollments from Medicaid Expansion, most estimates fall within the range of 100,000 (Kansas Health Institute, December 2012) to 200,000 (Center for Budget and Policy Priorities, latest available but undated). The KPI study’s estimate of newly eligible enrollees is 130,000 by 2023, also well within the range of other estimates.

However, the KPI study’s total annual dollar cost projections from the two effects of ACA are larger than those of other studies. The key reason for this is that other studies’ cost estimates are calibrated based on a per-person cost from a given year in the past; it is a global estimate—applied to all new enrollees regardless of their demographic (gender/age/income/health) attributes—and it is either kept constant or increased at a fixed, relatively low growth rate. The KPI study does not “flat-line” the cost per person to be used to calculate future expenditure increments from Mandate Effect or the Medicaid Expansion Effect.

Rather, historical trends in Medicaid costs per person are (a) differentiated by demographic/age/income group and (b) future years’ costs are based on extrapolating the historical trend for each separate category of enrollees. This is a methodologically sounder approach to making projections of future Medicaid expenditure increments from the two types of new enrollees that the ACA’s individual mandate and Medicaid expansion (if adopted) would trigger. It’s key advantages are, first, the implicit assumption that the same forces that escalated (or reduced) costs per person for particular categories of enrollees in the past would continue to influence cost growth in the future. Second, those cost rates per enrollee are appropriately weighted by the trend-determined shares of future enrollees by demographic (gender/age/income/health) type. A brief perusal of the historical data suggests that per-person costs have been growing at a rapid rate in Kansas for most categories of enrollees.

Non-incorporation of historical information on the rate of cost growth (assuming, instead, a lower cost rate per person) and not weighting the cost rate according to the size of the projected new-enrollee group by the other studies cited above is the most likely explanation of why those projections of future Kansas Medicaid expenditure increases from both types of new enrollees are considerably smaller than KPI’s projections.
Posted by Todd Davidson on Friday, February 22, 2013

During a life growing up in Kansas, and getting a public education’s worth of state history, I remember hearing somewhere that Kansas counties were carved up so a Horseone day horse ride could get citizens to a county courthouse.  Those boundaries, some dating to 1855, still determine who will be providing fire, police, judicial, and other services to Kansas citizens to this day.  Because of the ancient county lines and numerous municipalities, Kansas has one general purpose government for every 1,445.1 residents, according to data from the Census Bureau.  Only the Dakotas have fewer residents per government entities.  

The 105 counties and 1,894 municipalities pay administrators, judges, lawmakers, and other employees; resulting in Kansas having the 3rd highest number of public employees per 1000 residents.  In the age of the Internet, Kansas has a payroll clerk and sheriff every 30 miles.  The inefficiencies and duplicative public employees manifest themselves in higher taxes.

Kansas consistently performs poorly in tax rankings due to high property tax burdens.  The 2012 Tax Foundation study Location Matters, found Kansas has the 3rd highest tax burden for mature businesses and the 2nd highest tax burden for new businesses.  The study cited high property taxes for Kansas’ poor showing.  A 2011 study by the Minnesota Taxpayers Association found Iola, Kansas had the highest effective tax rate on rural commercial property taxes and the 2nd highest rural industrial property taxes of all the rural communities examined.

Over 150 years of innovation would now allow Kansas to redraw the map and take advantage of enormous economies of scale.  This doesn't necessarily mean the State should force consolidation. While that option is worthy of serious consideration, shared services or even unified governments (e.g. Wyandotte and Kansas City) offer ways to increase efficiency, lower the burden of government and make Kansas more competitive.

 

State   2012 Population    General Purpose Governments     Citizens Per General Purpose Government
North Dakota                            699,628                           1,724                           405.8
South Dakota                            833,354                           1,284                           649.0
Kansas                        2,885,905                           1,997                       1,445.1
Nebraska                        1,855,525                           1,042                       1,780.7
Minnesota                        5,379,139                           2,726                       1,973.3
Vermont                            626,011                              294                       2,129.3
Maine                        1,329,192                              504                       2,637.3
Iowa                        3,074,186                           1,046                       2,939.0
Wisconsin                        5,726,398                           1,922                       2,979.4
Indiana                        6,537,334                           1,666                       3,924.0
Missouri                        6,021,988                           1,381                       4,360.6
Alaska                            731,449                              162                       4,515.1
Illinois                      12,875,255                           2,831                       4,548.0
Wyoming                            576,412                              122                       4,724.7
Pennsylvania                      12,763,536                           2,627                       4,858.6
Ohio                      11,544,225                           2,334                       4,946.1
Arkansas                        2,949,131                              577                       5,111.1
Michigan                        9,883,360                           1,856                       5,325.1
New Hampshire                        1,320,718                              244                       5,412.8
Montana                        1,005,141                              183                       5,492.6
Oklahoma                        3,814,820                              667                       5,719.4
West Virginia                        1,855,413                              287                       6,464.9
Idaho                        1,595,728                              244                       6,539.9
Mississippi                        2,984,926                              379                       7,875.8
Kentucky                        4,380,415                              536                       8,172.4
Alabama                        4,822,023                              528                       9,132.6
Utah                        2,855,287                              274                     10,420.8
New York                      19,570,261                           1,603                     12,208.5
Louisiana                        4,601,893                              364                     12,642.6
Oregon                        3,899,353                              277                     14,077.1
Georgia                        9,919,945                              688                     14,418.5
Tennessee                        6,456,243                              437                     14,774.0
North Carolina                        9,752,073                              653                     14,934.3
South Carolina                        4,723,723                              315                     14,995.9
New Jersey                        8,864,590                              587                     15,101.5
Delaware                            917,092                                 60                     15,284.9
New Mexico                        2,085,538                              136                     15,334.8
Colorado                        5,187,582                              333                     15,578.3
Texas                      26,059,203                           1,468                     17,751.5
Massachusetts                        6,646,144                              356                     18,668.9
Connecticut                        3,590,347                              179                     20,057.8
Washington                        6,897,012                              320                     21,553.2
Virginia                        8,185,867                              324                     25,265.0
Rhode Island                        1,050,292                                 39                     26,930.6
Maryland                        5,884,563                              180                     32,692.0
Florida                      19,317,568                              476                     40,583.1
Arizona                        6,553,255                              106                     61,823.2
California                      38,041,430                              539                     70,577.8
Nevada                        2,758,931                                 35                     78,826.6
Hawaii                        1,392,313                                   4                   348,078.3
District of Columbia                            632,323                                   1                   632,323.0
Sources:
Population: http://www.census.gov/popest/data/state/totals/2012/index.html 
Governments: http://www.census.gov/govs/go/ 
Posted by Dave Trabert on Friday, February 15, 2013

The following is a representative sample of recommendations submitted to the Governor's School Efficiency Task Force.  Submissions were made by school employees, parents and involved members of the community. The recommendations do not necessarily represent the views of Kansas Policy Institute.

Athletics

  • The last priority in our district is educating kids. It’s all about sports and fun. Our scores are some of the worst in the state. When it comes to educating the kids, it’s nickel and dime. When it comes to sports, money is no object. 
  • Focus the money on education and not on sports! Cut back on the types of sports. Leave most of the sports programs to the communities! Have intramural sports as part of Physical Education and improve those programs. The kids that need to move and exercise are not going out for sports. 
  • No study of our school system’s inefficiencies can be complete without a top-to-bottom analysis of how sports programs have come to dominate our curriculum and spending priorities. Sports are the curriculum and school work is the extra-curricular activity. Last week in our school involved about 30 hours devoted to traveling or attending sporting events. In small schools, this effectively shuts down the school for up to half of the day on any day involving away games. This needs to be addressed at the state level so as to mandate limits on the number of games per week, per year, etc. A cost-benefit analysis should be completed regarding what is being spent on sports versus what our “payoff” is toward educating students. 
  • When new funds became available after the lawsuit settlement some years ago, the local district spent a large amount of money to totally renew athletic facilities. The next two years, they added more sports programs. When funds were reduced the following year, the district discussed reducing spending on arts and music. No mention was ever made of cutting any of the new sports. 

Contracting/Purchasing

  • Contrary to state law, our district does not seek competitive bids for capital projects. They have a standing agreement with professional firms that design facilities (such as libraries and schools). The district contends that these services do not require competitive bidding since the work is not part of a “capital project” but is instead a “professional service.” The district has on multiple occasions entered into lease-purchase agreements with a private developer absent competitive bidding. These contracts include construction of new buildings and a multi-school contract for expansions. 
  • Roofing projects in Kansas should be open for alternate materials. In several districts, administrations use single source material suppliers masquerading as roofing consultants. 
  • Our district remodeled a school for a large sum of money. The district now heats/cools the entire building for a single police officer because there are no students there anymore. 
  • The district in my area conducts a mandatory spend-down every year on routine supplies (markers, erasers, pens, pencils, etc.). The justification? “If we don't spend it, we will lose the money.” 

Organization/ Logistics

  • We have too many school districts with overlapping functions. This is partly due to having so many jurisdictions. Especially where school districts are close to each other, services and administration can be consolidated. This does not have to mean closing the schools—just sharing things like specialists, principles, and other administrative staff. 
  • I feel that there are too many counties that have a number of small school districts. I feel that a county “central office” with a superintendent and district-level support personnel could save money. The various towns could still have their buildings with building-level personnel, but each district would not be top heavy with central office personnel. My small county is a perfect example of this inefficiency. There are too many school districts here! I was a teacher for 30 years teaching in 6 different districts, and I saw the same inefficiency in other counties. 
  • Our school district has been very efficient with spending. When the cuts first began we had community meetings to lay out all the spending within the district. The pubic had the opportunity to prioritize areas of wasteful spending. Things that were cut/reduced/postponed from the budget were staff (teachers, aides, cooks, coaches, administrative assistants, etc.); supplemental contracts; purchasing of school vehicles, buses, and curriculum; salaries; 5 days from the school calendar; summer school weeks; after school at-risk programs; field trips; classroom supply spending; educational spending that wasn’t benefiting all students; building maintenance projects; utility costs; sports programs (changed to a pay-to-play activity where parents had to foot the total bill). 
  • KSDE should consider a single statewide student information management system. Now, every district must submit data annually for funding. Those districts each are spending between $4.50 and $12.50+ annually for these SIS systems. Plus, KSDE is using another large database to collect all of the information sent by the districts. Several districts have employees dedicated all year or a large part of the year to accomplish the checking and uploading of information. Other states have proven that a single system provides the districts with a way to save by having the state pay for a single system and take that money out of the per student amount assigned to the district. Plus, KSDE could get information much more frequently than once a year. Statewide systems have proven to save money. The argument that the districts would not approve is no longer true as every district is looking to be more efficient and save money. 

Personal/Human Resources

  • We now have two teacher leaders and one assessment manager. This used to be one job! Our district is very administrative-heavy, with little teacher support. Teachers have too many administrators that require extra reporting, email-answering, and additional duties! Cut these positions before cutting any classroom teachers. Some administrators leave at 3:30 or before every day. Most teachers have so much to do that they have to come in early and stay late just to stay afloat. Even the principal rarely works an 8-hour day! This lack of leadership (do as I say, but not as I do) hurts our school and causes a hostile environment for all. Our district is way too top-heavy. For example, we have an administrative employee of the district who stops in at our school to check in on his son, sit in with teachers, and offer advice. There are so many hard-working employees, but our principal (and teacher leader) do not lead by example, which is sad.
  • Our district has maximized efficiency. We extended the school day by 30 minutes and shortened the school year by 14 days. We moved from two building-level media specialists to one district media specialist. We eliminated a maintenance staff position, a custodial staff position, and a food service staff position. We eliminated a rural bus route and after-school activity routes. We eliminated the in-town bus route. We reduced three counselor positions to two counselor positions. We moved from a block schedule to a traditional schedule. We blended middle school and high school. We have changed staffing, done fuel contracting (for our SPED cooperative), used TEEN video teaching network, changed SPED, reduced transportation, and optimized HVAC controls. We used EPM for business operations like payroll, leave, overtime, mandatory direct deposit, transportation, etc. We did an ESG feasibility study. We use ESSDACK for health insurance, PD, state bid list, etc. We also use paperless board meetings (via Blackboard).
  • We are strongly encouraged to send our paperwork to the central office to be copied. This costs us time and we pay this person a full time wage to do something that most teachers would rather do ourselves. Vocational money is also not spent on classroom/supplies/field trips but is mostly spent on salaries.
  • Administrators do not make teachers modify, take attendance, do their jobs, etc. Then they turn around and put more students in the good teacher’s class, therefore making her job harder. Let’s start having the same expectations for all teachers. Administrators need to speak up and start holding all teachers to the same standard. I'm also tired of coaches coming in for sports—they should be teachers first, coaches second. 
Posted by Todd Davidson on Wednesday, February 06, 2013
Tax Myths Debunked, a rigorous study by economists Dr. Randall Pozdena and Dr. Eric Fruits, was published by the American Legislative Exchange Council (ALEC) today.  The report takes a deep theoretical and empirical dive into both state and national tax policy debunking several myths along the way.

Myth number one is the notion that “increased government spending stimulates the economy during recessions.”  Messrs Pozdena and Fruits review the academic literature in order to debunk this common myth.  At the national level they find:

A large and long-standing body of literature finds that increased or higher government spending tends to reduce economic growth rather than increase it. This negative relationship between prior levels of high spending and growth is apparent in the data from developed nations (See Figure 3). 

Looking at the state level a similar conclusion is found; higher government spending correlates with slower economic growth:

Studies comparing the growth rates of various states with different levels of public sector spending also fail to identify consistent evidence that demonstrates how public spending increases a state’s rate of economic growth. This is particularly the case when the spending is on transfer payments, but it is ambiguous even when spending is on more productive items, such as education, health and infrastructure. 

Figure 4 shows that states that have a history of high rates of total government spending growth (per dollar of Gross State Product [GSP]) subsequently display much lower rates of GDP growth. This is suggestive of a causal relationship between fiscal profligacy and subsequent slow growth.
Posted by Todd Davidson on Thursday, January 10, 2013
While drinking my morning coffee and perusing through the Wichita Eagle’s Business Today section I noticed a common theme: The feds are in the way.

On page C1 you’ll find Employers in limbo amid health care law’s changes:

To a large degree, a lot of business owners still don’t understand the changes, and I don’t think they clearly understand what it means for them in terms of things like the individual mandate,” said Tim Witsman, Wichita Independent Business Association president. 
...
“People have a little bit of information but don’t have enough to really start making decisions,” said Janet Hamous, interim executive director for the Wichita Business Coalition on Health Care.
...
[Karen] Vines suggests that employers start now to prepare for changes next year, trying to educate themselves about the financial implications for their company and looking at options for coverage.

On top of the Affordable Care Act provisions lies a tax code of ‘biblical proportions’ see page 7C for Tax filers struggle with complex laws:

Too intimidated to fill out your tax return without help? Join the club.

At nearly 4 million words, the U.S. tax law is so thick and complicated that businesses and individuals spend more than 6 billion hours a year complying with filing requirements, according to a report Wednesday by an independent government watchdog.

With the level of regulatory kludge imposed by the federal government it truly amazes me that entrepreneurs and business still find time to serve their customers and earn a decent living.


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