Voice For Liberty

Author: Bob Weeks

  • Randy Scholfield and less government

    In an editorial in the September 18, 2005 Wichita Eagle, Randy Scholfield wrote “Less government is a laudable goal.”

    The dictionary defines laudable as “Deserving commendation; praiseworthy” or “Deserving honor, respect, or admiration.” Mr. Scholfield’s past writings don’t treat the goal of less government this way. In fact, it doesn’t seem there is a single government program that Mr. Scholfield doesn’t like and praise.

    On September 13, 2004, he advocated more funding for early childhood education, writing “… the state Legislature needs to do the right thing for the state’s children and future, and invest in early childhood education.”

    He seems to automatically believe that schools need more money.

    He believes in government subsidies. In an editorial in The Wichita Eagle published on April 19, 2005, he wrote: “Wichita should stick to its subsidies. They’re fostering competition, not stifling it, and paying off big-time for the community by lowering airfares and boosting economic development.”

    He has consistently supported the government building the downtown Wichita arena.

    He advocates more government spending on arts (August 9, 2005 “Culture requires community support”).

    He supports more funding for Exploration Place.

    Mr. Scholfield, is there any government program you have opposed, any example that would lend credibility to your claim that less government is a laudable goal?

  • Judicial abuse authorized in Kansas

    Thank you to Karl Peterjohn of the Kansas Taxpayers Network for this fine article that explains the problems that Kansas should be aware of in the Kansas Supreme Court. Readers of this website may remember that I joined Karl in filing ethics complaints against Justices Allegrucci and Nuss (The Ethics Case Against Justice Donald L. Allegrucci, The Ethics Case Against Justice Lawton R. Nuss). I thought the case we made against Justice Allegrucci was compelling, but the Commission on Judicial Qualifications didn’t think so (The Wrong Canon; The Wrong Allegrucci). But someone did, as his wife — the link to Governor Kathleen Sebelius that was the source of the ethics problem — resigned her position. Readers might be asking where is the coverage in Kansas news media of these cases.

    Judicial Abuse Authorized in Kansas
    By Karl Peterjohn, Executive Director, Kansas Taxpayers Network

    A closed door meeting in early September in Topeka provided the excuse to expand judicial abuse at the highest level of Kansas government. The Commission on Judicial Qualifications met to consider the complaint that Kansas Supreme Court Justice Lawton Nuss should not participate in the school finance lawsuit. This commission decided that Justice Nuss did not need to recuse himself from ruling on this billion dollar lawsuit.

    Prior to joining the Kansas Supreme Court in 2002, Nuss had been an attorney representing the lead school district plaintiff that is participating in this lawsuit. The Salina public schools had joined with Dodge City public schools in filing and financing this lawsuit back in the 1990’s and Nuss was one of Salina’s lawyers at that time. Nuss should have recused himself from this case since he had represented one of the plaintiffs when this case arrived in front of the court.

    Three years ago when Nuss joined the Kansas Supreme Court he was expected to obey the ethics rules that supposedly exist for the members of Kansas courts. The judicial canon includes provisions that judges are supposed to avoid all appearances of impropriety. These rules in part say, “A judge shall not allow family, social, political, or other relationships to influence the judge’s judicial conduct or judgment. A judge shall not lend the prestige of judicial office to advance the private interests of the judge or others; nor shall the judge convey or permit others to convey the impression that they are in a special position to influence the judge.”

    Would you like to go in front a judge who used to represent the person who is suing you? No one would want to do so. This is basic legal ethics. However, you are now a target of an aggressive tax funded plaintiff that is suing you indirectly as a taxpayer. Millions of tax dollars have been spent to finance this school finance litigation in Kansas. The school districts are now suing to transfer $1 billion from the private sector to the public school districts every year. This year they received $290 million more than last year. Next year is likely to be even more costly to Kansas taxpayers.

    This appointed commission has now decided that it is perfectly appropriate for Justice Nuss to rule that hundreds of millions of additional tax dollars must be spent for one of the clients he use to represent according to this judicial commission. Well, who appointed this commission of judges, ex-judges, lawyers, and mainly members of the news media? The Kansas Supreme Court appointed them to their four year terms.

    So who will oversee the appointed members of this court? The answer is that the Kansas Supreme Court is untouched by ethics rules for the rest of the legal profession. Nuss’ case follows the recent dismissal of similar ethics complaints by this commission. The second complaint concerned Justice Donald Allegrucci, whose wife was until recently the chief of staff as well as the 2002 campaign manager for Governor Sebelius. Governor Sebelius has been supporting the school district’s position that state spending must be dramatically raised.

    An oxymoron is a word that describes a phrase that combines contradictory elements like, “thunderous silence.” The Kansas Supreme Court now orders legislators on what is appropriate as well as what amount should be in the appropriation, issues edicts that could shut down the schools, and capriciously re-writes Kansas law. The term, “judicial ethics,” for the highest court in this state is now an oxymoron. Kansans need to know that the appointed judicial elite is now untouchable by their own ethics rules. The fiscal abuse of Kansans by this state’s highest and, arguably, most activist state court in the entire country continues. Every Kansas taxpayer will have to pay this court’s huge bill.

  • Book review: What’s The Matter With Kansas?

    What’s The Matter With Kansas?
    Thomas Frank
    Metropolitan Books, 2004

    Much has been written about this book and its premise of the great backlash, the revolt against the increasingly liberal society of the 1960’s and 1970’s. Mr. Frank believes (I think) that working-class social conservatives in Kansas are not using their votes wisely, that they vote for Republicans for social reasons, and in turn Big Business Republicans turn around and mistreat them. Their social interest, in other words, works in opposition to their economic interest.

    I have some quarrel with this, although I think it is true in some ways. Is it true that the interests of big business are opposite of that of the working man? That’s not always the case.

    Reviewers of this book have remarked how witty and funny it is. I must have missed those pages. Mr. Frank is a liberal. He advocates liberal government positions, and there’s not much funny about that. Certainly, Mr. Frank is nowhere near as funny as P.J. O’Rourke. But then, I agree with most of what P.J. writes.

    The best part of this book is the extensive research of Kansas and Kansas politicians that Mr. Frank did, and how much of that he includes. The footnotes are valuable. I read this book on loan from the library, but I may look for a used copy to keep as a reference work. It is for that reason that I can recommend reading this book.

    Links to good reviews of this book: Resenting the Heartland’s Success by Kimberly Shankman

  • Prices ration scarce goods

    As the price for gasoline rises, politicians hear increased calls for regulation of gas prices. We hear news stories of hotels increasing prices for victims of hurricane Katrina, and prices for needed goods in the destructed area could rise, too.

    In Wichita, when gasoline prices rose rapidly, someone told me that this was price gouging, because the price the gas stations pay for gasoline hasn’t increased yet. I’m sure that’s true, their cost hasn’t increased yet, as they’re still selling gasoline they already bought some time ago. This analysis, however, doesn’t consider the most important role of prices: to strike a balance between supply and demand. That’s what prices do.

    Consider what the economist Walter E. Williams wrote about plywood prices:

    Windfall profits are indeed profits far beyond what’s necessary for an entrepreneur to stay in business, but windfall profits also play a vital role. Windfall profits signal that a human want is not being met. Resources emerge to meet that want. For example, when Hurricane Andrew devastated parts of South Florida, plywood prices skyrocketed. Florida’s attorney general threatened actions against companies for price-gouging.

    Those windfall profits conveyed messages to the rest of the economy. Let’s say that pre-hurricane plywood prices were $10 a sheet and afterward they were $20. That profit potential created a powerful signal. Instead of plywood manufacturers selling their plywood inventory to, say, Pennsylvania wholesalers for $8 a sheet, they were more than happy to ship them to Floridian wholesalers for higher prices. Wholesalers in other states were happy to sell their plywood to Floridians for higher prices. Since plywood supplies were moving to Florida, plywood prices elsewhere rose.

    From a social point of view, this is wonderful. Say I planned to spend a Saturday afternoon building a house for my dog. I go to my neighborhood lumberyard in Pennsylvania expecting to pay $10 for a plywood sheet, and get there and find out it’s $18. I say, “The heck with the dog; let him sleep in the rain!” I have voluntarily made a plywood sheet available for a more valuable use — rebuilding the house of a human.

    None of these and other voluntary actions making plywood available to Floridians would happen if price controls were slapped on plywood making the pre- and post-hurricane prices the same. Freely fluctuating prices, including the potential for windfall profits, encourage people to do voluntarily what’s in the social interest.

    In free and open markets, profits are to be praised — not scorned, as economic and political charlatans would have us do.

    We might consider the prices for hotel rooms. As families evacuated before (or after) Katrina struck, they needed hotel rooms. If the usual price for a hotel room was, say, $50, and hotel operators can’t increase their prices, there will be a shortage of hotel rooms. Why is this? Think of the Jones family with children. At a room price of $50, the Jones family might take two rooms, one for the parents, and another for the children. If the hotel operator is allowed to increase prices, the room price might rise to, say, $100. At that price, the Jones family might decide they could all stay in one room. That makes the second room, the room the Jones family children would have occupied at a price of $50, available for the Smith family. Otherwise, the Jones family children would be in the second room, and the Smith family is on the street, or has to drive farther to find a room.

    Yes, the Smith family had to pay $100 for a room when they would prefer to pay only $50, but if the price is $50, there is no hotel room available for them.

    Some people might object that the hotel operator is unjustly enriched by being able to sell hotel rooms for $100, when normally they fetch only $50. But what is the alternative? Is there anyone who has the power to say to the Jones family that they should all stay in one room, leaving a room free for the Smith family? Or, in the case of gasoline prices held artificially low through price controls, someone has to judge whose use of gasoline is more valued.

    But if the prices of hotel rooms, plywood, and gasoline are allowed to fluctuate, each person is free to make their own judgment as to how much they want to consume. If the Jones family really wants two hotel rooms, they can have them. If Dr. Williams really wants to build the doghouse, he can. But people acting as they do — demanding less of something as its price rises — there will be more hotel rooms or plywood available for others. If the price of plywood in Florida is controlled so that it can’t increase, the cost of plywood in Pennsylvania will likely be the same $10 as it always is. So plywood is used in Pennsylvania to make doghouses as people in Florida need plywood to patch the roofs of the homes so that they can stay dry.

    That’s what is important about prices. They represent people voluntarily — and that’s a very important word that Dr. Williams used — adjusting their behavior. The alternative is shortages, gas lines, rationing, government control, and commissions deciding who gets what at what price — all the signs of a planned economy. That does no one any good.

    In the case of my friend in Wichita, who was going to make a weekend trip that would require about 100 gallons of gasoline in a vehicle that gets 12 miles per gallon, I suggested renting a car that gets better fuel economy. That’s what he did. In the end, he’s saving about $100, even considering the cost of car rental, and he’s making about 50 gallons of gasoline available to someone else. That’s the power of prices in action.

  • Kansas income has large drop in 2004, says census report

    Kansas Income Has Large Drop in 2004 Says Census Report
    By Karl Peterjohn, Kansas Taxpayers Network

    Kansas Taxpayers Network (KTN) expressed dismay at the latest Census Department income figures that show Kansas income dropping at the second worst rate among the 50 states in 2004. The U.S. Census Department released this data at the end of August in their report on Income, Poverty and Health Insurance Coverage in the United States: 2004.

    This report is available online at: http://www.census.gov/prod/2005pubs/p60-229.pdf (see page 30 for the 50 state data). In this report Kansas is listed as having the second largest drop in income among the 50 states. Here’s how Kansas ranked with our five neighboring states and the U.S. average:

    State                 % Change      Change in Dollars
KANSAS                - 4.2%            -$1,890
Colorado              + 0.3%            +$  164
Missouri              - 3.2%            -$1,419
Nebraska              + 0.1%            +$   53
Oklahoma              + 1.8%            +$  693
U.S. avg.             - 0.2%            -$   79

    This large decline in income for Kansas also indicates that this state is lagging behind our neighbors. “The Census Department’s report of declining Kansas income indicates that this state continues to be in economic trouble. This should be worrisome to state officials who seem intent on figuring out more ways of spending taxpayers’ money instead of focusing upon growing this state’s economy,” said Karl Peterjohn, executive director of the Kansas Taxpayers Network.

    “The massive fiscal uncertainty created by the activist Kansas Supreme Court and the profligate state spending hikes supported by Governor Sebelius and the legislative big spenders during the special session have put this state in a fiscal bind. The increases in property and income taxes, various other state ‘revenue enhancements,’ and permanent extensions of supposedly ‘temporary’ state sales tax hikes are putting an anchor on this state’s economic prospects. This federal census data dramatically shows the recent decline in Kansans’ incomes. Soaring state spending will only worsen this problem.”

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  • Revenue Growth Lags As Kansas Falters

    Revenue Growth Lags As Kansas Falters
    By Karl Peterjohn, Kansas Taxpayers Network

    In early August Governor Sebelius issued a news release praising the economic growth that had allowed state tax revenues to grow significantly in the fiscal year that ended June 30. In the state’s general fund revenues were 7.1 percent or $322 million above last year.

    This seemingly good news hides a big problem. Kansas revenues are growing well below the national averages. We are also lagging behind our neighbors and this includes job growth too. Nationally, the Wall Street Journal reported in July that federal revenues were 14.6% above the same period last year or over $204 billion. Oklahoma’s state government is taking $150 million of their increased tax revenue to use to cut personal income taxes but they will also raise spending by $750 million more according to Budget and Tax News in August.

    Why is Kansas economic growth lagging? Some tax collections are actually down. In 2002 the state’s cigarette tax was raised from 24 to 79 cents a pack. Naturally, tax collections soared in 2003 with this 229 percent tax hike. However, the state’s revenue per penny of cigarette taxes started to fall and has continued to decline. Total revenues are falling in the last two years and are now over $10 million below the 2003 high point.

    Before the cigarette tax was raised, this levy generated about $2 million for every penny of tax. Now it is barely $1.5 million per penny. While total revenues are about $119 million, or 2 percent of the state’s revenues, the proposal by Governor Sebelius for another large, 50 cent a pack tax hike will just shift a lot of cigarette purchases out-of-state, to the internet, or other tax avoiding alternatives. Sadly, this is also leading to more illegal cigarette sales and smuggling.

    Severance tax collections soared over 22 percent or over $18 million in the most recent fiscal year as oil and gas prices enjoyed large hikes. This tax collected over $100 million for the first time but is also just 2 percent of state tax collections.

    Personal and corporate income tax receipts enjoyed a large percentage growth of 11.9 percent or $244 million above last year. This increase alone was 75 percent of the total increase in state general fund revenues. In contrast, Kansans are shopping outside of Kansas since sales tax collections grew only 2.2 percent or $35 million. Many Kansans, particularly those in eastern Kansas, have learned that the lower state tax rates on groceries, cigarettes, gasoline, beer and alcohol lead to lower prices in western Missouri and in other border states.

    This might also explain the generally flat overall, but in some individual cases, declining tax collections the state has on various forms of alcohol and related products. The state’s cereal malt beverage tax collections actually dropped over 4 percent or $88 thousand last year.

    The state’s 20 mill property tax for public schools is excluded from the official state revenue estimates. However, the increase in appraisals resulted in estimates of a $40 million hike in the state’s tax collections for this levy that is excluded from the official Kansas General Fund figures.

    So the shifting changes in Kansas tax collections shows the mixed nature of the economic recovery in this state. This is an additional reason why Kansas cannot afford another new state spending spree next year.

    #####

    Karl Peterjohn is the executive director of the Kansas Taxpayers Network and is a former news reporter and California Department of Finance budget analyst.

  • From Karl Peterjohn to Ann Mah

    Here’s an open letter from Karl Peterjohn of the Kansas Taxpayers Network to Kansas Representative Ann Mah, a Democrat from district 53, which is southeast Topeka and areas southeast of there. Rep. Mah scored 12.5 on KTN’s 2005 Legislative Vote Ranking, which places here very near the left end of the spectrum. In other words, she didn’t see many taxes she didn’t vote for. Organizations like KTN bring facts like these to the public’s attention. Sometimes politicians do not like being exposed in this way, and as we have learned, we can’t rely solely on Kansas newspapers and other Kansas news media to report all that we need to know.

    Rep. Mah:

    I have heard that you made some derogatory comments about Kansas Taxpayers Network and myself on Jim Cates radio program yesterday. I look forward to a public debate on Kansas fiscal issues with you to correct the left-wing misinformation you are spreading.

    I would be interested in your source for your assertion that HB 2247 contained a $400 million increase in taxes. I heard many descriptions of this bill during the regular session but I did not see any Legislative Research or other analysis that contained this information at that time. Ooops, in re-reading your post you prefaced this with the word “..potential..,” well the KTN vote rating likes to deal with specifics, like the votes to raise income and sales taxes in 2004 passed the Kansas house with EVERY house Democrat voting for it. Sadly, many fiscally liberal Republicans joined in passing that bill out of the house, like Bill Kassebaum, Cindy Neighbor, Stan Dreher, Mary Compton, and others you didn’t get a chance to meet because they did not return to the 2005 legislature.

    Like I said in my previous post the SB 3 legislation was much more important in school finance than HB 2247.

    You should be aware that most of the recorded votes cast on bills during final action are often unanimous or close to unanimous with a member or two missing due to health or other excused absences. I find it odd that you would want KTN to include bills on modifying insurance statutes, grain elevator regulations, the color of lights in emergency vehicles or recorded votes on similar legislation for KTN’s vote rating. Have you extended your critique of KTN’s vote rating to the other organizations, like the teachers unions (KNEA) or Kansas chamber (KCCI) which also use a much smaller number of votes than the 457 cast during the legislative session?

    I am sorry that you have overlooked the massive tax hikes that were enacted between 1999 and 2003 during the second Graves administration. The Graves administration raised sales, cigarette, business franchise, gasoline, “enhanced” revenues, and raised a variety of charges and other fees. These votes were included in our vote ratings for each of these years and are available for viewing at www.kansastaxpayers.com. More recent tax hike and fiscal votes from 2003-05 Kansas legislatures are there now too.

    Since Governor Graves left office this trend has largely continued albeit at a reduced level since the unsuccessful effort to raise broadbased state taxes under Governor Sebelius’ leadership failed in 2004. Democrats lost seats in the Kansas house due to their support for higher spending and taxes last year.

    Growing Kansas spending and taxes have occurred due to pressure from liberals and fiscal leftists supporting an expansion of Kansas spending in both major political parties in this state since the 1970’s. I heard that you are claiming that our vote rating is “partisan”. I would point out to you that the two lowest scores in the 2005 house rating is for two Republican house members. In 2004’s scorecard there were four senators who receive scores of zero. Three were Republicans.

    I am sorry that you seem to be unable to comprehend the meaning of oligarchy and the damange created by the appointed Kansas Supreme Court as you as an elected official helped surrender your constitutional powers to the judges. The courts treated you and your 164 legislative colleagues in such contempt that they refused to even let any legislator appear before them before they issued their edicts. You helped to meekly surrender your powers as an elected official and violated your oath of office to defend the Kansas Constitution.

    Our form of government is in jeopardy in this state due to this judicial usurpation of power that you and over 40 other house colleagues repeatedly surrendered during the special session. Sadly, only two Democrats in the legislature resisted this surrender. If this trend is not reversed the Kansas legislature will become an elected advisory body to the real power in this state: the appointed judiciary and the governor. I have heard a number of legislators on the floor of the house point this out to the entire house. I was disappointed that you and so many of your colleagues ignored this problem.

    Kansas is in trouble. This state is stagnating economically due to hostile fiscal policies that have been created before you took office but also by these liberal/left wing policies that you are helping promote while you have been in elected office. I’ll provide you with some excellent commentary from a Kansas businessman that was posted earlier this week on www.kssmallbiz.com that discusses this economic trend. I could share with you stories about the odious “rich” that leftist politicians have helped drive out of this state but this action does have consequences. I hope you’ll read this commentary and see a private sector perspective and how this trend is occurring:

    FUNDING OF BUSINESSES: A DIFFERENT PERSPECTIVE PART II
    By Kenneth Daniel
    August 31, 2005

    In my article of last week, I made the point that the risk capital of businesses is almost exclusively made up of personal savings invested in the business by the owners plus profits left in the business. When we take money away from businesses in the form of taxes, we are curtailing their financial viability, their growth, and their ability to compete with businesses in lower-tax states.

    Employees and others, including governments, that depend on our businesses to provide salaries and tax revenues are better off if businesses are financially sound than if they are not. And, we really, really want our businesses and their owners to park their wealth here instead of elsewhere to support jobs and generate taxes for Kansas.

    What other things are preventing our business owners from keeping wealth here?

    Last week the American Shareholders Association released a report on
    the impact of the American Jobs Creation Act, signed into law in 2004 by President Bush. A provision of the act allows companies to bring their foreign profits back to the U.S. at an income tax rate of 5.25% instead of the normal 35% domestic rate.

    Previously, companies had to leave the profits overseas to avoid U.S. taxes, and wealth that could have supported jobs in the U.S. was left overseas. Among the study’s findings:

    According to the International Strategy and Investment Group (ISI), 91 companies listed on the S&P 500 have repatriated more than $191 billion back to America that otherwise would have been invested in other countries.

    JP Morgan estimates the provision will increase GDP by an additional 1 percent over the next two years.

    JP Morgan further estimates $120 billion will be used for new investment, which will create 500,000 new jobs over the next two years.

    The lesson here is the same – business wealth is good. We want and need our businesses to keep their money here. An interesting question is whether Kansas businesses that repatriate money will be hit with the full state income tax for doing so. If they are, multi-state businesses will almost certainly repatriate their profits to some other state that does not have a state corporate income tax.

    Another way we punish our Kansas businesses for keeping their money here is through our Franchise Tax. Kansas is one of fewer than twenty states that have a stand-alone tax on the net worth of a business. The old adage is “if you want less of something, tax it”. Kansas apparently wants less business wealth in the state.

    Kansas has yet another tax to punish business owners who keep their wealth here, and that is the estate tax. In 2010, when the federal estate tax goes away, Kansas will be one of fewer than twenty states with an estate tax. This is a virtual guarantee that our wealthiest business owners will retire elsewhere or sell their Kansas business interests so they can move their wealth. Even if they don’t, the business is at risk of losing part of its capital or of being sold to pay estate taxes.

    Kansas is likely to continue to be one of the slowest-growing states as long as we continue to eat our business nest eggs with punitive taxes. Even when the business owners aren’t whining, those eggs are being eaten, and we will continue to ship most of our best and brightest kids to other states.

    The federal government has figured this out. By lowering taxes on businesses and getting businesses to bring their wealth back to the U.S., the national economy is cooking along extremely well. Will we ever figure this out in Kansas?

    — END —

    Kenneth Daniel (kdaniel@kssmallbiz.com) is a Topeka small business owner and free-lance writer. He is publisher of www.kssmallbiz.com, a website dedicated to Kansas small business.

    Sadly, the benefits from this 2004 federal legislation are likely to diminish in the near future. This is going to result in a reduction in the growth rate of state tax collections. This will make the legislature and governor’s job of finding more money to feed the avaricious and litigious spending lobbies even more difficult next year.

    Unless the Kansas Supreme Court backs down from their spending edict (I don’t know why they would) the fiscal hole facing the governor and the legislature in 2006 is massive. If we follow the traditional Kansas path of raising taxes we will make our uncompetitive fiscal climate even worse. We will lag behind the rest of the country. This trend will worsen. Our young people will leave school with degrees but with few if any local job prospects. These young people will become “Kansas tourists,” who come back to their state at Thanksgiving, or Christmas, or perhaps a week during the summer to visit their family after finding employment in more competitive parts of the country.

    This is a terrible fiscal trend that I have been trying to stop for over a dozen years. Sadly, elected officials like yourself have succeeded in your liberal/leftist spending and tax policies across Kansas over a number of decades. Government’s share grows while the private sector recedes. I will look forward to debating you on fiscal issues on Jim Cates show in the near future.

    The middle class you claim to represent is moving away from the Kansas state oligarchy by voting with their feet. Since the 2000 census Kansas has dropped behind Arkansas in population. Arkansas! In 2010 or 2020 this state will lose another congressional seat under current fiscal trends and we’ll have only three. Kansans may be limited at the ballot box (no property tax referendums, and very few other tax/bond votes–unlike CO, MO, & OK) but hard working Kansans can still vote with their feet.

    Karl Peterjohn

  • Augenblick perhaps cheap by comparison

    Augenblick Perhaps Cheap by Comparison
    By Bob L. Corkins, Freestate Center for Liberty Studies
    August 29, 2005

    Billions of dollars are riding on the outcome of the state’s two education finance studies, one by the Legislative Division of Post Audit, the other by the national firm of business analysts at Standard & Poors. The Kansas Supreme Court is putting great reliance on the results of these studies in deciding how to resolve the behemoth Montoy v. State K-12 finance litigation.

    By threatening to close public schools, the Court forced the Legislature this summer to increase K-12 spending by a record-setting $293 million enhancement. However, the Court said this did not end the lawsuit and pointed to the 2002 study by education consultants Augenblick & Myers when declaring that at least another $580 million more may be necessary. The high price tag of A&M’s recommendation may be reaffirmed, the Court reasoned, by the new Post Audit and S&P studies to be completed by January. The Post Audit study is so important to the Court’s ultimate ruling, in fact, that the Court ordered changes to the study to accommodate all of the Court’s legal concerns.

    S&P to Finish First; Not a Cost Study

    In February of this year the private Kansas City based Kauffman Foundation gave the state of Kansas a $400,000 grant to pay for an education finance study to be performed by S&P. Governor Sebelius’ office then contracted with S&P to define the scope, method, schedule, and other details of the work S&P would perform.

    Overseeing much of the state’s interests in this project is Duane Goossen, the Governor’s Budget Director. Goossen emphasized, and the terms of the contract confirm, that S&P will not perform an education “cost study” for Kansas as many have expected and as S&P has done in other states. Rather, S&P will complete a “best practices” analysis that is in some ways is more thorough, but less extensive overall.

    Although there are many details, we can summarize the contract study process. S&P uses state-provided data to analyze all USDs and identify those that are “resource effective”. The state, in consultation with S&P, will select four USDs from the resource effective list. S&P will then conduct site visits to those four USDs to conduct various detailed interviews. All that input is used by S&P to write a “resource management study” that will include examples of effective practices that other USDs may emulate. The projected publication for S&P’s study is early November.

    Post Audit to Employ Syracuse Experts

    At the Supreme Court’s insistence, the Post Audit study will conduct an “outcomes-based” analysis of K-12 costs in addition to an “input-based” approach. The primary question the input approach will answer is: “What should it cost for regular K-12 education to deliver the curriculum, related services, and programs mandated by state statute?”

    Future reports by the Freestate Center will examine particular parts of the S&P study as well as Post Audit’s. For now there is one feature of the Post Audit’s outcomes-based project that merits special attention. The primary question Post Audit will address in this chore is: “What should it cost for regular K-12 education to meet the performance outcome standards set by the Board of Education?” To help answer that question, Post Audit has contracted with two professors – William Duncombe and John Yinger – from Syracuse University in New York for their expertise in education finance.

    Authority for outside consultants was granted by HB 2247 during the regular 2005 legislative session and by SB 3 during the special session. The relevant language from both bills provides that “In conducting such cost analysis study, the legislative post auditor may enter into contracts with consultants as the post auditor deems necessary.” Although this gives discretion to Post Audit in deciding upon consultants, another part of the statute specifies that “the cost study analysis shall be conducted as directed by the legislative post audit committee.”

    Criticisms of Duncombe and Yinger

    Perhaps the best insight into what Kansas can expect from these researchers is found in their own published material. The state of New York was sued for allegedly failing to provide a constitutionally “adequate education”. In that litigation that’s now before a group of special masters, Duncombe and Yinger jointly filed a brief on September 17, 2004. Some highlights of their court brief are:

    (1) For the New York City school district alone, which currently spends about $10.8 billion, D&Y recommended an increase of $7.2 billion as “the best available current estimate of the annual cost of achieving the 160 adequacy standard”;

    (2) A large factor affecting D&Y’s recommendation was teacher wages. D&Y criticized as being “implausible” another study’s conclusion that teacher wages in New York City averaged only 10% higher than the state average. D&Y’s own method, which additionally adjusts for teacher working conditions such as their share of students eligible for a free lunch or with limited English proficiency, estimates that “wage costs are 54% above the state average in New York City and 13% above the state average in downstate suburbs.”

    (3) D&Y are critical of cost studies done by Standard & Poors. D&Y wrote “The S&P report also includes extra weights for the share of students in poverty or with limited English proficiency, but these weights are neither estimated nor drawn from the scholarly literature. All of the calculations in the [S&P] report, including the estimated cost of reform, are based on the same unrealistically low weights for disadvantaged students.”

    We also look to how other scholars view Duncombe & Yinger. A February 2004 review of various education cost studies was published by economics professor Thomas Downes of Tufts University. Downes observed that Duncombe uses the “cost function” approach and that there are “three main problems” with that method: (1) It is the least intuitive to non-economists and the least understood, requiring complex statistical techniques which are difficult to explain; (2) The data quality must be extremely good, since the entire model is based on real historical data; and, (3) It is sometimes called a “black box” method, since researchers do not say how funds should be spent, but simply how much should be spent. Downes also remarked in general that “.seemingly small methodological differences can translate into dramatic differences in spending distributions.”

    A national review panel in 1999 compared D&Y to Augenblick and suggested that D&Y would exacerbate inefficient school spending. The National Reseach Council’s Committee on Education Finance wrote: “William Duncombe and John Yinger.are highly skeptical about whether schools with concentrations of low-income children, especially in urban areas, can realistically succeed with an amount of money that Augenblick’s model would provide. Given the complexity of the Duncombe and Yinger methodology, many will wonder to what extent they really have taken into account only costs that are beyond the school or district’s control and not allowed past spending inefficiencies to determine how much future revenue a school or district ought fairly have.”

    Freestate Commentary

    A few observations flow from our review of this information:

    (1) Had D&Y performed the cost analysis for Kansas in 2002 instead of Augenblick & Myers, it is quite possible that D&Y would have recommended more than that study’s $860 million increase for K-12.

    (2) Why did the state not want S&P to do a cost analysis? S&P’s “best practices” study will be different and more thorough than what S&P has done for any other state. Consider its timing. The S&P details were agreed upon early in 2005 before legislation required Post Audit to undertake any similar project. Was the Administration aware last spring, when it contracted with S&P, that Duncombe and Yinger disapprove of S&P’s methodology?

    (3) Even if for no other reason than timing, it’s very unlikely that Post Audit will cancel its contract with D&Y. Still, the Post Audit Committee has authority to direct the conduct of the study and perhaps insist on additional consultants. It might be cost effective for Post Audit to hire other national experts to evaluate D&Y’s conclusions without duplicating their work.

    Future Freestate Center bulletins will report on additional news about the pending state K-12 studies. All relevant findings will eventually be published in a Freestate Center study to be completed later this year.

    # # #

    Bob L. Corkins is executive director of the Freestate Center for Liberty Studies. The Freestate Center is a nonpartisan, not-for-profit, Topeka based research institute for advancing the Constitutional principles of limited government, individual liberty, free enterprise and traditional family values. Freestate is organized under IRS § 501(c)(3).

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  • Consider carefully all costs of gambling in Wichita

    In a free society dedicated to personal liberty, people should be able to gamble. But that’s not what we have, as in a free society dedicated to personal liberty, people wouldn’t be taxed to pay for the problems that others cause in the pursuit of their happiness.

    How does this relate to the issue of casino gambling in or near Wichita?

    There is a document titled “Economic & Social Impact Anlaysis [sic] For A Proposed Casino & Hotel” created by GVA Marquette Advisors for the Wichita Downtown Development Corporation and the Greater Wichita Convention and Visitors Bureau, dated April 2004. This document presents a lot of information about the benefits and the costs of gambling in the Wichita area. One of their presentations of data concludes that the average cost per pathological gambler is $13,586 per year. Quoting from the study in the section titled Social Impact VII-9: “Most studies conclude that nationally between 1.0 and 1.5 percent of adults are susceptible to becoming a pathological gambler. Applying this statistic to the 521,000 adults projected to live within 50 miles of Wichita in 2008, the community could eventually have between 5,200 and 7,800 pathological gamblers. At a cost of $13,586 in social costs for each, the annual burden on the community could range between $71 and $106 million.”

    If all we had to do was to pay that amount each year in money that would be one thing. But the components of the cost of pathological gamblers include, according to the same study, increased crime and family costs. In other words, people are hurt, physically and emotionally, by pathological gamblers. Often the people who are harmed are those who have no option to leave the gambler, such as children.

    Quoting again from the study: “While this community social burden could be significant, its quantified estimate is still surpassed by the positive economic impacts measured in this study.” The largest components of the positive economic impacts are employee wages, additional earnings in the county, and state casino revenue share, along with some minor elements. Together these total $142 million, which is, as the authors point out, larger than the projected costs shown above. But this analysis is flawed. Employee wages don’t go towards paying the costs of pathological gamblers, as employees probably want to spend their wages on other things. And the state casino revenue share is supposed to go towards schools.

    The absurdity mounts as we realize that gambling is promoted, by none other than Governor Kathleen Sebelius, as a way to raise money for schools. Often the figure quoted for the amount of money gambling would generate for the state is $150 million per year. But here is a study concluding that the monetary costs to just the Wichita area would be a large fraction of that, and when you add the human misery, it just doesn’t make sense to fund schools with revenue from gambling.