Voice For Liberty

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  • Kansas base state aid is only a part of spending

    Kansas base state aid is only a part of spending

    Using base state aid per pupil as the only measure of school funding leads to an incomplete understanding of school spending in Kansas.

    Much of the discussion surrounding school funding in Kansas has centered around base state aid per pupil. It’s the starting point for the Kansas school finance formula, and therefore an important number.

    Base state aid per pupil has fallen in recent years. Public school spending advocates want Kansans to be aware of only this fact. For them, only this number is important.

    But Kansas schools have much more to spend than just base state aid.

    Ratios of school spending to base state aid.
    Ratios of school spending to base state aid.
    In the last school year base state aid per pupil was $3,838. But in that year total spending funded by Kansas state sources was $6,984 per pupil, or 1.82 times base state aid. Adding local and federal sources, spending was $12,781 per student, or 3.33 times base state aid.

    As shown in the nearby chart, there has been a steady increase in measures of school spending when compared to base state aid.

    Considering Kansas state spending only, the ratio of state spending to base state aid was 1.10 in 1998. By 2013 that ratio had risen to 1.82, an increase of 65 percent for the ratio.

    For total spending, the ratio rose from 1.86 to 3.33 over the same period, an increase of 79 percent.

    What’s important to realize is that the nature of Kansas school funding has changed in a way that makes base state aid per pupil less important as a measure of school spending.

  • What incentives can Wichita offer?

    What incentives can Wichita offer?

    Wichita government leaders complain that Wichita can’t compete in economic development with other cities and states because the budget for incentives is too small. But when making this argument, these officials don’t include all incentives that are available.

    In making the case for an economic development fund paid for by a sales tax, the argument goes like this: “Wichita and Sedgwick County compete conservatively with incentives. The City of Wichita and Sedgwick County have a total of $1.65 million in new uncommitted funds for cash incentives this year with any unused money going back to the general fund.” (Will Wichita Accelerate Competition for Primary Jobs?, presentation made to Wichita city council.)

    This statement is true only if we use a very narrow definition of the word “incentive.” By any reasonable definition, Wichita has many incentives worth much more than what is claimed by Wichita economic development officials and politicians.

    In fact, the report cited above contains contradictory information about the amounts that are available for economic development incentives in Wichita. Here is an example: “The $4.5 million PEAK program incentive from the Kansas Department of Commerce was an important factor in keeping NetApp in Wichita. Locally we were able to provide $836,000 in incentives.”

    So with an incentives budget of $1.65 million, a Wichita company received $5.3 million in incentives. Some of that, like the PEAK incentive, is paid over a period of years. But that amount doesn’t begin to describe the benefits NetApp received.

    Available incentive programs

    Kansas Department of Commerce logoA letter to NetApp from the Kansas Department of Commerce laid out the potential benefits from the state. As detailed in the letter, the programs with potential dollar amounts are:

    • Promoting Employment Across Kansas (PEAK), up to $7,705,535
    • Kansas Industrial Training with PEAK, up to $160,800
    • sales tax savings of $6,880,000
    • personal property tax exemption, $11,913,682
    • High Performance Incentive Program (HPIP), $8,500,000

    The total of these is $35,160,017. Some of these benefits are paid over a period of years. The PEAK benefits are payable over seven years, according to the letter, so that’s about $1.1 million per year. These are potential benefits; the company may not actually qualify for and receive this entire amount. But it’s what the state offered.

    It’s true that some of these programs are not cash incentives of the type Wichita complains of lacking. But if a company is going to make purchases, and the state says you can skip paying sales tax on the purchases — well, that’s as good as cash. $6,880,000 in the case of NetApp, according to the Kansas Department of Commerce.

    Local tax exemptions

    Besides sales tax exemptions, the city has other types of tax exemptions it regularly offers. These exemptions can have substantial value. In 2008 as Drury contemplated Broadview Hotel 2013-07-09 020purchasing the Broadview Hotel, the city allowed the hotel to escape paying much of the taxes that the rest of us have to pay. According to city information, Drury planned to spend $22,797,750 on the hotel. If we use this as the appraised value for the property when it is complete, the annual property taxes due for this property would be $22,797,750 times .25 times 126.323 divided by 1000, or $719,970. This calculation may be rough, but it gives us an approximation of the annual operating subsidy being given to this hotel for the next ten years.

    It's important for citizens to know incentivesWhen Boeing announced in 2012 that it was closing its Wichita operations, city leaders complained that Boeing was leaving Wichita even though it had received many incentives. From 1979 to 2007, Boeing received tax abatements through the industrial revenue bond process worth $658 million, according to a compilation provided by the City of Wichita. (This is not money the city lent or gave to Boeing. IRBs provide a vehicle for granting tax abatements or exemptions.) At the time, city officials said the average amount of bonds was $120 million per year. With Wichita commercial property tax rates at 3.008 percent ($30.08 per $1,000 of appraised value), according to GWEDC, that’s a tax savings of around $3.6 million per year. To Boeing, that’s as good as receiving cash year after year.

    Tax increment financing

    In 2013 Wichita approved a package benefiting Exchange Place in downtown. Here’s what the city council agenda packet gives as the sources of financing for this project.

    HUD Loan Amount         $29,087,700
Private Equity            5,652,254
Tax Credit Equity        19,370,395
TIF Proceeds             12,500,000
Total Sources of Funds  $66,610,349

    TIF, or tax increment financing, diverts future increased tax revenues away from their normal uses and diverts them back to the project. In this case, the city will borrow $12,500,000 by selling bonds. It will give this money to the developer. Then, TIF proceeds will be used to repay these bonds.

    Some will argue that TIF isn’t really an incentive. The owners of the property will have to pay their property taxes, just like any other property owner. But for this project, the property taxes are used for the project’s own benefit instead of funding the costs of city government. This project gets to spend $12.5 million of its property tax payments on itself, rather than funding the costs of Wichita city government.

    Tax credits

    Ambassador Hotel sign 2014-03-07Note that the sources of financing for the Exchange Place project includes “Tax Credit Equity.” Here’s an example of another downtown project, the Ambassador Hotel, and the incentive package the city prepared:

    • $3,325,000 in tax increment financing.
    • $4,245,000 in city funding under the capital improvement plan (CIP), to build parking for the hotel.
    • $3,800,000 in tax credits from the State of Kansas.
    • $3,500,000 in tax credits from the U.S. government.
    • $537,075 in sales tax exemptions on purchases during the construction and furnishing of the hotel.
    • $60,000 per year in community improvement district (CID) sales tax. The hotel charges an extra two cents per dollar sales tax, which the state returns to the hotel.
    • $127,499 per year (estimated) in rental revenue to the developers from a sweetheart lease deal.
    • Participation in Wichita’s facade improvement program, which provides special assessment financing that is repaid.

    All told, this project was slated to receive $15,407,075 in taxpayer funds to get started, with additional funds provided annually.

    The tax credits for this project are historic preservation tax credits. They have the same economic impact as a cash payment. The federal tax credits are available across the country, while the Kansas tax credits, of course, are a state program. In this case the hotel developers received an upfront payment of $3.8 million from the state in a form that’s as good as cash.

    STAR bonds

    Last year a STAR bonds district in northeast Wichita was approved to receive $31,570,785 from these bonds. The STAR bonds are paid off with sales tax revenue that would otherwise go to the state and overlapping jurisdictions. This is sales tax collected from the business’s customers, and doesn’t cost the business anything.

    Adding it up

    This list is not complete. There are other programs and other beneficiaries of economic development subsidies. With this in mind, it is disingenuous for city and other officials to use the $1.65 million figure as though it was all Wichita had to offer. It’s important for citizens to know that contrary to the claims of officials, Wichita has many economic development incentive programs available, and some have substantial value to the recipients, with corresponding cost to the city and other jurisdictions.

  • WichitaLiberty.TV: Issues surrounding the Wichita sales tax and airport

    WichitaLiberty.TV: Issues surrounding the Wichita sales tax and airport

    In this episode of WichitaLiberty.TV: Who would be most harmed by the proposed Wichita sales tax? Also: A look at updated airport statistics, and what the city could do if it wants to pass the sales tax. View below, or click here to view at YouTube. Episode 55, broadcast August 17, 2014.

  • Kansas school finance formula explained

    Kansas school finance formula explained

    From Kansas Policy Institute.

    Kansas Policy Institute presents the 2014-15 student weighted funding formula

    By David Dorsey

    The updated version of the formula that will be used by the Kansas State Department of Education to determine student weighting in the coming school year is presented below. This complex formula is the basis to adjust (increase) the number of “students” in a school district for state funding purposes.

    Dissecting this complicated formula reveals those factors the state recognizes that require additional money.

    Highlights include:

    • Up to 13 different factors decide what the “real” student count will be for a particular district*.
    • Seven factors (at-risk, vocational ed, bilingual ed, high-density at-risk, new facilities, high enrollment, and virtual students weighting) are calculated using percentages of student enrollment.
    • Four factors apply to all 286 districts. They include:
      • at-risk students (those who qualify for free lunch)
      • low or high student enrollment
      • special education weighting
      • transportation
    • The others vary in applicability from the vocational education weighting (267 districts in 2013-14) to declining enrollment weighting (2 districts in 2013-14).

    Once all applicable factors are determined, the total weighted number of students is multiplied by the Base State Aid Per Pupil (BSAPP — $3,838 in 2013-14 and $3,852 in 2014-15) to calculate that part of the amount of state aid a district receives.

    These weightings are no small affair. For example, in the Elkhart School District (USD218) last year, the weighting factors increased the student count from 502.6 (actual enrollment) to 1,668. 2, a 231.9% increase. In dollar terms, that increased Elkhart’s BSAPP funding by $4,473,573 from $1,928,979 to $6,402,552. That’s an effective BSAPP of $12,739! And that’s not an isolated case. Nearly half of Kansas’s 286 school districts realized at least a doubling of the effective BSAPP due to weighting.

    People in the education establishment are quick to lament that BSAPP is down from the pre-recession figure of $4,400 in 2008-09 to the current $3,852 for the 2015 fiscal year. However, you never hear them speak of the all the weightings that significantly add to the dollars actually received. In fact, when all students statewide are included, the real BSAPP for 2013-14 was $6,640. In a recent Lawrence Journal-World article it was reported that Lawrence Superintendent Rick Doll said the district is still suffering from cuts in base state aid. According to Doll, “We are operating basically at about 1999 school funding levels.” That’s not even close to being accurate. According to KSDE, state funding per pupil in 1999 was $4,533. That figure rose to an estimated $7,052 per pupil for last school year. Local support has more than doubled since ’99 (from $2,238 to $4,809 per pupil). Likewise for federal support.

    It is important to understand what a difference in the level of funding the weighting of students adds. Last school year, the weightings provided $1.3 billion over and above BSAPP to the state’s 286 districts. But some Kansas politicians, particularly those more interested in protecting institutions than serving children, and the education establishment don’t like to talk about that part of state aid to education. Instead, they like to focus only on the BSAPP figure. That’s why we hear statements made like Superintendent Doll’s.

    If I were still a math teacher and they were my students, their homework assignment would be learn and understand this formula. And yes, it would be on the test.

    *There is one change in the formula from the 2013-14 school year. The low-proficient, non-at-risk factor was removed during the 2014 legislative session.

    Kansas School Finance Formula, from Kansas Policy Institute, August 2014
    Kansas School Finance Formula, from Kansas Policy Institute, August 2014
  • Economic development in Wichita, one tale

    Economic development in Wichita, one tale

    In this excerpt from WichitaLiberty.TV: A look at a recent episode of economic development in Wichita, and what can we learn from that. View below, or click here to view at YouTube. Originally broadcast June 15, 2014.

    For more on this issue, see A lesson for Wichita in economic development.

  • Wichita sales tax hike would hit low income families hardest

    Wichita sales tax hike would hit low income families hardest

    Analysis of household expenditure data shows that a proposed sales tax in Wichita affects low income families in greatest proportion, confirming the regressive nature of sales taxes.

    One of the criticisms of a sales tax is that it is regressive. That is, it affects low-income families in greatest proportion. This is an important consideration to explore, because in November Wichita voters will decide whether to create a new city sales tax of one cent per dollar. If enacted, the sales tax in Wichita would rise from 7.15 percent to 8.15 percent.

    It’s an important issue because to hear some people talk, it seems as though they are saying the proposed tax is “one penny.” Anyone can afford that, they say. But the tax is an extra penny on each dollar spent, meaning that the cost of, say, fifty dollars of food at the grocery store increases by fifty cents, not one penny.

    Further, we hear the sales tax spoken of as being a one percent increase. That’s true, if we mean a one percent increase in the cost of most things we buy. And one percent, after all, is just one percent. Not a big deal, people say. But considering the sales tax we pay, a relevant calculation is this: (8.15 – 7.15) / 7.15 = 14 percent. Which is to say, the amount of sales tax we pay will rise by 14 percent.

    Click the table for a larger version.
    Click the table for a larger version.
    To explore the effect of the proposed sales tax on families of different incomes, I gathered data from the U.S. Census Bureau, specifically table 1101, which is “Quintiles of income before taxes: Annual expenditure means, shares, standard errors, and coefficient of variation, Consumer Expenditure Survey, 2012, (Selected Values).” This table divides families into five quintiles. It gives annual expenditures for each quintile in various categories. For each category, I judged whether it is subject to sales tax. For example, for housing, I indicated it is not subject to sales tax. This is not totally accurate, as some of the spending in this category may be for taxable items like maintenance and repair supplies. Food is subject to sales tax in Kansas, although low-income families may apply for a rebate of the tax. Despite these shortcomings, I feel this data gives us an approximation of the effect of the sales tax. (Click on the table to view a larger version, or see below for how to obtain the data.)

    As you might imagine, as income rises, so does total taxable expenditures. Of interest, the percent of expenditures that are taxable is relatively constant across income levels.

    Additional cost of proposed Wichita sales tax as percent of after-tax income, by income quintileAn important finding is the bottom line of the table, which shows the increase in cost due to the proposed sales tax as percent of income after taxes. This calculates the relative impact of the proposed sales tax increase as a percent of income. It is here that we expect to see the regressive nature of a sales tax appear. For all consumers, the increase in cost is 0.35 percent. For the lowest class of income, the increase in cost is 0.97 percent of income. It falls to 0.26 percent for the highest income class.

    This means that the lowest income class of families experience an increase nearly four times the magnitude as do the highest income families, as a percentage of after-tax income. This is the regressive nature of sales taxes illustrated in numbers, and is something that Wichita policy makers and voters should consider.

    I’ve made the data available as a Google Docs spreadsheet. Click here for access.

  • Kansas budgeting “off the tops” is bad policy

    Kansas budgeting “off the tops” is bad policy

    From Kansas Policy Institute.

    Budget “Off The Tops” Bad Policy

    By Steve Anderson

    Direct transfers of taxpayer money sent to a specific business or industry is always a tough sell to politicians, let alone the voting public. But, that is why some corporations pay lots of money to lobbyists. If we can’t get a company more revenue (via a taxpayer-funded payment) why don’t we lower their expenses via a tax loophole that lowers how much they pay in taxes?

    These sort of special interest tax breaks come in a variety of different forms but the net effect of each is the same — revenues are diverted from the appropriation process and instead sent to some “special” group. A shrewd lobbyist will often make sure the program is funded in a way that their client(s) will receive their funding even if the statute is changed in the future. However, that should not preclude bringing these special interest deals to an end. This is especially important given that the reduction in tax rates will increase the impact of these programs on the revenue stream even as the state continues along the path to eliminating the individual income tax.

    These transfer schemes are funded in a number of different ways that obscure the transaction from both the public and the appropriation process. For example, there are a number of these special deals that are funded by payroll withholding taxes. The payroll withholding exemptions are programs where the state abates collection of state income tax withheld on employee’s wages. The state then provides either a program or directly funds some benefit for the employer. These programs come in many forms and often are nearly impossible to find within the very complex tax and revenue reporting statements. In general these programs require relatively long commitments by the state of taxpayer funds. The discontinuance of these type of programs will not generally eliminate the programs immediately but it will create savings going forward that could be substantial to the maintenance of a stable fiscal environment and a more transparent tax code. It would also be a breach of trust, on some level, to yank away a promise made by the state to an entity or individual. But, that doesn’t mean we have to let these program exist into perpetuity.

    Investments in Major Projects and Comprehensive Training (IMPACT)

    IMPACT provides for major project investment to provide financial assistance to defray business costs. IMPACT uses withholding revenue for a direct funding source to pay for bonds issued by the state for projects. In fiscal year 2013 that percentage was 2% and the program expended $25,420,654 of funds that otherwise would have gone to the state coffers. The good news is that Kansas stopped issuing bonds in the IMPACT program effective Dec. 31, 2011. The bad news was it was replaced with other programs that are very similar. The IMPACT payments will extend on for a number of years in to the future because of the bond’s that funded those projects. This ability to bind future legislators and taxpayers to these sort of “deals” is, in and of itself, problematic but there is more damage done to the state of Kansas than just the direct cost of these bonds.

    Bad policy like the type of special interest payment that IMPACT represents often have negative impacts in the future that are not foreseen at the time of their passage. For example, the IMPACT bonds were at the heart of the recent Moody’s down grade of the Kansas state bond rating. The IMPACT bond’s ratings were reviewed by Moody’s rating agency because the funding source to pay off the bonds — withholding taxes — was being reduced by a cut in the tax on wage earners in the state income tax rates. The media, which generally is not comprised of individuals with a financial background, reported that the change in the IMPACT bond ratings were caused by the broad tax cuts, which is only partially true. What the media in general did not report, at least not with the same enthusiasm as their portrayal of the impact of the income tax cuts, was that Moody’s noted the long running unfunded liabilities of the Kansas Public Employees Retirement System (KPERS) and the lack of spending cuts as key elements of their downgrade.

    However, analysis of the IMPACT bond rating issues bring to light another important problem with these type of giveaways. Future legislators have their hands tied because their predecessors have committed future tax revenues in a manner that precludes the ability to bring an immediate cessation, or even partial reduction, in the special interest funding source without repercussions such as the recent bond rating issue.

    Promoting Employment Across Kansas (PEAK)

    The PEAK program allows companies that create 100 new jobs within a specified two-year period to retain 95% of employee withholding taxes for up to 10 years. Not surprisingly with such a generous incentive companies have grown its use rapidly going from $2.7 million in expenditures in 2010 to an estimated $12.5 million in 2012 years. The “cap” on this program going forward is: In FY 2014, the cap is $12 million. In FY 2015, the cap is $18 million, $24 million in FY 2016, $30 million in FY 2017, $36 million in FY 2018, and $42 million 2019. Immediately freezing the cap at the current level and eliminating the program going forward to prevent new obligations generates significant savings going forward for the state. This is giveaway is even more troubling when considering that a recent analysis from Kansas City’s Kauffman Foundation found that, “PEAK incentives recipients are statistically not more likely to generate new jobs than similar firms not receiving incentives.”

    Kansas Bioscience Authority (KBA)

    The KBA’s short lifespan is a microcosm of what can go wrong with the concept of dedicated directed funding. The lack of transparency created by bypassing the scrutiny of the appropriation process often leads to expenditures that generate headlines but don’t create economic growth.

    The legislation that created the KBA produced a number of programs and funding streams. It also set the total funding limit to the authority over 15 years at almost $582 million. The funding was to be for a period of 15 years from the effective date of the establishment of the KBA and required the State Treasurer to annually pay 95% of withholding above the certified base, as certified by the Secretary of Revenue, on Kansas wages paid by bioscience employees to the bioscience development (code categories from NAISC) and investment fund of the KBA.

    The amount of funding transferred to the KBA grew from almost $20 million in 2006 to nearly $36 million by 2008 before the creation of the annual funding cap of $35 million in 2009. Issues with operations and management emerged in 2011 which led to a forensic audit by an outside CPA firm. The audit pointed to a number of issues that led subsequent legislatures to reduce the Authority’s funding to $11.3 million in 2012, $6.3 million in 2013, and $4.0 million in 2014 (KBA funding history here). It is doubtful that the current Administration or legislatures would increase funding above current levels but the $35 million is still the statutory cap leaving open that possibility.
    There is a secondary issue with KBA’s statutory cap caused by the treatment of these type of dedicated directed funding in the budgeting process. These statutory caps for entities like KBA are considered to be at their cap amount when forecasting future budgets. The $35 million of KBA statutory cap, for example, creates an illusion in fiscal impact statements issued by the Kansas Legislative Research Department (KLRD) because those statements show the full statutory amount of $35 million being spent every year for the five years they project. Based on the current trend line of KBA funding this will not happen and, instead, creates a significant overstatement of expenditures and helps create fiscal deficits where none may exist. These projections are used by legislators and the media and should strive to present as accurate a picture as possible of current and possible future realities. A more proper and accurate display of these type of funded programs for five year projections like KLRD produces would consider whether spending could be altered or removed completely. This should be reflected in either the actual amount shown, if there was a history of partial funding, or, at the very least, in a separate line item with a notation that the sum could be arbitrarily reduced or eliminated.

    Job Creation Fund

    Another of those dedicated directed funds is the Job Creation Fund (JCF). The Job Creation Program Fund or the “deal closing” fund, its more press-friendly moniker, lets the state, led by the Office of the Governor, make investments and extend incentives aimed at attracting or retaining businesses within a range of statutory guidelines. The funding for the JCF was from the elimination of three other credits: Kansas Enterprise Zone, Job Expansion and Investment Credit Act and a refundable credit for property taxes paid on machinery and equipment. This sort of reallocation of funding sources carry the coveted title of “revenue neutral” and hence have no fiscal impact statement for legislators to worry about when the funding was created. This allowed elected officials to be able to say on one hand they eliminated special interest funding while creating another special interest fund out of the “elimination” of those entities. The annual cap on JCF funds is $10 million which is how much could be immediately saved by letting JCF join its now-defunct predecessors in state history.

    Transfers Out of the State General Fund

    There is another area where what would be State General Funds are diverted from the appropriation process. There are a number of transfers out of the State General Fund with the largest and most notorious being the $135 million School District Improvements Fund. Not only does this amount not get counted in the school formula, the recent Gannon ruling on school funding pointed directly to this fund as an example of inequity in funding. This “inducement” to issue bonds for new buildings was a bad idea both from a policy and process aspect. Policy-wise the Kansas Supreme Court’s Gannon ruling was correct in pointing out that only the growing school districts could use this fund with a few big school districts garnering most of the monies. Process-wise the choice to use a transfer as the funding mechanism not only bypassed the school finance formula but also ensured that these funds are not counted by the National Center for Education Statistics; NCES is the “go to” place for comparing education-related data from across the country and is run by the U.S. Dept. of Education.

    There is also another series of transfers that have their own particular issues.The adjacent list shows the recipient and the amount for FY-2015 (available at link above).The picking of winners and losers by government is never a good idea and the direct transfer of taxpayer funding to companies is a suspect type of economic development.

    Transfers out of the State General Fund
    Spirit Aerosystems Incentive($3,500,000)
    Eaton MDH Spec. Qual. Indus. Mfg. Fund($30,000)
    Siemens Manufacturing Incentive($650,000)
    Learjet Incentive($6,000,000)
    TIF Replacement Fund($900,000)
    Learning Quest Match ($500,000)
    Total($11,580,000)

    It is also troubling when local communities enter into Tax Increment Finance (TIF) arrangements, not to mention other subsidy giveaways, which are basically an agreement between a company or individual and the city to suspend property tax payments for that company or individual. State taxpayers as a whole have to make up for lost revenues to the governing body of each such city from the TIF arrangement. This means that a TIF issued in Johnson County is, at least in part, paid for by residents of Bourbon County and Elkhart. This distribution of funds from taxpayers across the state to individual “redevelopment areas” that were created by local governments in a manner that is basically hidden from the citizens is another great example of why these “off the tops” are bad policy. Requiring these TIF subsidies to be debated in the light of the full appropriation process would no doubt lead to questions by legislators whose districts did not include cities who receive this subsidy.

    A general thought for legislators, citizens and industry on these economic subsidies. The reduction in income tax rates by the state on withholding rates has already provided a huge incentive for these companies in addition to the direct largess they receive from these dedicated funds. The rate cut on withholding taxes increased the take home pay of their employees without those companies having to give a pay raise to their employees out of company funds. Note that the “incentive” of lower withholding taxes is applied to EVERY wage earner in the state and does not go about picking favored businesses, industries, or individuals. This type of transparent, rules-based, and equally-applied policy is the correct way to encourage economic growth and allow the free market to dictate outcomes not politicians or bureaucrats.

    Conclusion

    Every program that spends the funds of the taxpayer should be examined regularly and the nature of these “off the tops” suggests that is not happening. The need for transparency and accountability is especially true of programs that benefit any specific individual, company or sector of the economy at the expense of another. Because of the contractual type of arrangement some of these represent we do not advocate for the state breaking existing contracts in regards to incentives. But, the creation of new or expansion of existing economic development handouts that are direct redistributions from taxpayers to other sectors of the economy needs to be halted and those still in existence need to be reviewed.

    A complete review of every agreement entered into by the state to ascertain if that agreement is contractual in nature or are not legally binding going forward should proceed this next legislative session. The state should review those that are not legally binding and current renewals that can be foregone and put this “off the top” funding back in the appropriation process going forward. How much could the state expect to realize would be determined by that review. Even a preliminary, informed estimate would be in the neighborhood of $50 million annually without breaking any contractual arrangements. The following chart gives an estimate of just three programs with statutory flexibility.

    Total Dollars Returned to the State Coffers
    $s in MillionsFY16FY17FY18FY18
    Freeze PEAK at Current Levels$6$12$18$24
    Kansas Bioscience Authority$25$25$25$35
    Cease Job Creation Fund$10$10$10$10
    Totals$41$47$53$69
    The issue of transparency is front and center in all of these programs and it would be appropriate for every “off the top” to be displayed on both Consensus Revenue Estimates and Appropriation profiles so that legislators and citizens can see that a significant amount of funds have already been appropriated by these arrangements.

  • Wichita airport statistics updated

    Wichita airport statistics updated

    Why do Kansans pay taxes, including sales tax on food, to fund millions in subsidy to a company that is experiencing a sustained streak of record profits?

    As the Wichita City Council prepares to authorize funding for Southwest Airlines, it’s worth taking a look at updated statistics regarding the airport. The agenda item the council will consider is available here.

    Passengers

    Wichita Airport Passengers, Monthly, All Carriers vs. Airtran/Southwest, through May 2014
    Wichita Airport Passengers, Monthly, All Carriers vs. Airtran/Southwest, through May 2014
    The city has pointed to the arrival of Southwest last June as a game-changer for the airport. It’s true that passenger counts have increased. In the nearby chart I present monthly passenger counts, enplanements only, at the Wichita airport for all carriers and for Southwest separately. I’ve treated Southwest as a continuation of AirTran, as Southwest started service at the same time AirTran stopped, and Southwest is receiving a similar subsidy. I show monthly traffic, and also a 12-month moving average to smooth out the extreme monthly variations in passenger traffic. (Click on charts for larger versions.)

    Of note is that while the Southwest passenger count is rising, it started from a low position. Also, the count has not risen to the level that AirTran experienced in the middle of the last decade and as recently as 2011.

    Flights

    Wichita Airport Passengers, Monthly, Compared to National, through April 2014
    Wichita Airport Passengers, Monthly, Compared to National, through April 2014
    Wichita Airport Monthly Departures, through April 2014
    Wichita Airport Monthly Departures, through April 2014
    Wichita Airport Monthly Departures, Weekdays Only, through April 2014
    Wichita Airport Monthly Departures, Weekdays Only, through April 2014
    Considering the number of flights leaving the Wichita airport, the recent trend is up. This is a departure from recent trends. Although the number of available flights nationally has been slowly falling, it was falling faster for Wichita. That trend, for now, is reversed, although the number of flights in Wichita is far below the level of a decade ago.

    The number of flights is an important statistic. Greater attention is given to fares, but for many travelers, especially business travelers, an available flight at any price is paramount. Last year at this time I wrote “A program designed to bring low air fares to Wichita appears to meet that goal, but the unintended and inevitable consequences of the program are not being recognized. In particular, the number of flights available at the Wichita airport continues to decline.” So it is good news that the number of flights has risen.

    Wichita compared to the nation

    Wichita Airport Statistics, through 2013
    Wichita Airport Statistics, through 2013
    Looking at passengers through the end of 2013, Wichita has now experienced an uptick. Passenger traffic in Wichita had been relatively level at a time that national traffic was rising. The number of available seats on flights has started to rise in Wichita, while nationally the trend has been level the past several years.

    Load factor — the percent of available seats that were sold — is rising in Wichita, as it is nationally.

    The last set of four charts is from an interactive visualization I prepared using data from the Bureau of Transportation Statistics. Click here to open the visualization in a new window. You may select any number of airports for display on the charts.

    Southwest profits

    Recently Southwest reported record high profits for the quarter ending in June. The company said that net income was $485 million, which it said represented the fifth consecutive quarter of record profits.

    We might ask this question: Why do Kansans across the state pay taxes, including sales tax on food, to fund millions in subsidy to a company that is experiencing a sustained streak of record profits?

  • Susan Estes of AFP and the upcoming summt

    Susan Estes of AFP and the upcoming summt

    On the Joseph Ashby Show, Susan Estes of Americans for Prosperity-Kansas appeared on August 7, 2014. Bob Weeks is the guest host. We discuss the the goals of AFP and the upcoming Defending the American Dream Summit in Dallas. There are bus trips available from Wichita.