Voice For Liberty

Tag: Kansas legislature

Articles about the Kansas legislature, both the House of Representatives and the Senate.

  • Kansas jobs creation numbers in perspective

    This week the administration of Kansas Governor Sam Brownback announced job creation figures that, on the surface, sound like good news. But before we celebrate too much, we need to place the job numbers in context and look at the larger picture, specifically whether these economic development wins are good for the Kansas economy.

    The governor’s office announced that since January 10th, almost exactly one-half year ago, the Brownback administration is taking credit for creating 3,163 jobs. These jobs, according to the governor’s office, are in companies that are moving to Kansas or expanding their current operations. Some of the jobs, like those in the recently-announced Mars Chocolate plant to be built in Topeka, won’t start for perhaps two years.

    To place this number on an annual basis, extrapolating to a full year, we get 6,326 jobs created during the first year of Brownback’s term.

    That sound like a lot of jobs. But we need to place that number in context. To do so, I gathered some figures from the Bureau of Labor Statistics, in particular figures for the gross number of jobs created in the private sector. According to BLS, “Gross job gains are the sum of increases in employment from expansions at existing units and the addition of new jobs at opening units.” In other words, jobs created — just like the governor’s definition.

    Looking at the numbers, we find that for the years 2000 to 2009, the Kansas economy created gross jobs in the private sector at the average rate of 293,335 per year. Of course, jobs are lost, too. In Kansas, again for 2000 to 2009, there was a net loss of 61,394 jobs in the private sector. Not a good number.

    Each year, then, many jobs are created and lost, nearly 300,000 per year in Kansas. This illustrates the dynamic nature of the economy. Each year many jobs are created, and many are lost. Even in 2009 — a recession year — the Kansas economy created 232,717 jobs in the private sector. That same year 294,111 jobs were lost. But in most years, the number of jobs created is pretty close to the number of jobs lost.

    Kansas job gains and lossesKansas job gains and losses

    Now we have context. If we compare the 6,326 jobs (the extrapolated annual rate) the state created through its economic development efforts to the average number of private sector jobs created each year, we find that number to be 2.2 percent.

    If we use a recession year (2009) figure for private sector job creation, the state’s efforts amount to 2.7 percent of the jobs created by the private sector economy.

    These numbers, I would say, are small. About one of 40 jobs created in Kansas is created through the efforts of the state’s economic development machinery. This assumes that these jobs would not have been created without government intervention, and I think that’s something we can’t assume one hundred percent.

    These jobs that Brownback takes credit for come at great cost. In the case of Mars, the incentive package is reported to be worth $9 million, or $45,000 for each of the 200 people to be initially hired. I haven’t asked the Department of Commerce for a full rundown of the incentives offered, but in my experience the press releases and news stories based on them understate the full cost of the incentives.

    But in any case, the incentives used by the state’s economic development efforts have costs. Some require the direct expenditure of state funds.

    Some incentives require that the state spend money through the tax system in the form of tax credits. These expenditures made through the tax system have the same fiscal impact on the state’s budget as if the legislature appropriated funds and wrote a check for the amount of the tax credit.

    Other incentives require that the state give up a claim to tax revenue that it would otherwise collect. This means that other taxpayers must make up the difference, unless the state were to reduce spending.

    The cost of these incentives is born by the taxpayers of the state of Kansas. This cost is a negative drag on jobs that would have been created or retained in companies that don’t receive incentives. The Brownback administration knows this, although it doesn’t recognize this job loss when it trumpets its accomplishments in creating new jobs through targeted economic development incentives. One of the major initiatives of Brownback is to reduce Kansas taxes, particularly the personal and corporate income tax, in order to grow the Kansas economy. The governor — correctly — recognizes that low taxes are good for economic growth.

    The governor also needs to recognize that targeted economic development incentives have a cost. That cost is paid in the form of taxes that someone else pays. That cost leads to foregone economic activity, and that leads to lost jobs.

    While the state’s wins in job creation are easy to see — there are government employees paid to make sure we’re aware of them — the lost jobs, however, are spread throughout the state. These job losses don’t often take the form of a large — or even small — business closing or moving to another state, although sometimes it does.

    Instead, the job loss occurs in dribs and drabs across the state. A restaurant manager finds his store is not as busy as last month, so he lets a server go. A small retail outlet finds it can’t quite keep up with its overhead, so it shuts down. These events don’t often make news. The jobs lost are difficult to detect — nearly invisible — although the cumulative impact is very real.

    Instead of relying on traditional, targeted economic development efforts, Kansas needs to follow the advice of Dr. Art Hall. He recommends policies to encourage as much business experimentation as possible. These policies, basically, call for low taxes for all business firms. Then, it is through markets, not the government’s economic development officials, that successful and productive firms are identified.

    Portions of Dr. Hall’s advice was incorporated in Governor Brownback’s economic development plan. Specifically, page 10 of the plan contains this language: “Over the decades, Kansas has enacted a variety of tax policies intended to advance economic development. Many of them provide a meaningful economic incentive to make new investments and create new jobs. Almost all of the policies provide a meaningful incentive to a small number of worthy businesses to the exclusion of tens of thousands of other worthy businesses. The initiatives in this plan seek to end the exclusion. They begin the process of fulfilling the vision that every business matters; they seek to replace the old vision of ‘targeting’ with a new vision of ‘dynamism.’”

    It’s time that the governor and his administration apply this advice. That’s going to be hard to do. The crowing over the Mars deal — the very type of targeted economic development “win” that the plan criticizes — shows that politicians love to be seen as actively pursuing and creating jobs. A dynamic, free market-based job-creating economy requires that politicians and bureaucrats keep their hands off — something that goes against their very nature.

  • Kansas job growth — or lack of it

    The lack of job growth in Kansas should be in the news, as the figures are quite startling and reveal a stagnant Kansas economy when compared to nearby states. It’s also the one-year anniversary of the increase in the state-wide sales tax of one cent per dollar.

    But some want to stick their heads in the sand when it comes to the harmful effect of tax increases and the dismal performance of the Kansas economy. An example is from yesterday, when Wichita Eagle opinion page chief Phillip Brownlee editorialized that “Apparently last year’s sales-tax increase didn’t wreck the Kansas economy, as some predicted.”

    Perhaps Brownlee hasn’t been listening to what others have said. The most startling fact, and one that should be a wake-up call to anyone who cares about the future of Kansas, is the uncovering by the Kansas Policy Institute that Kansas is the only state to have a loss in private sector jobs over the past year.

    All the spending on schools, highways, and other government programs that are supposed to spur our economy to greatness have lead to this: last place. The only state with private-sector job loss. We couldn’t have done worse.

    Here are some charts based on data from the Bureau of Labor Statistics that illustrate. First, here’s the trend in Kansas employment, using January 2009 as the base. Other months are indexed from that number. The chart separately shows the trends in government and private sector employment.

    The effect of the recession on private sector employment has been severe, while government employment has fared much better. But government employees don’t create the wealth necessary to create prosperity for Kansans. Instead, the government jobs are a burden to our economy as they drain resources from the productive private sector.

    Of particular interest is the relative flatness of the curve over the past year. Around that time we’re told the recovery was taking place — it was on June 17, 2010 that President Barack Obama announced the “Summer of Recovery.” But Kansas private sector employment has remained largely unchanged since then.

    Kansas employment trendsKansas employment trends, government and private sector

    Comparing Kansas private sector employment to other states near Kansas produces a grimmer picture. All these states suffered from the recession, but many of these states did not suffer job losses as large as Kansas (on a relative basis).

    Then about a year ago, the trend in most of these states started to improve. But not Kansas.

    Kansas private sector employment trendsKansas private sector employment trends, compared to other states

    Even if one believes that government jobs create prosperity, Kansas has lagged here, too. It should be noted that Kansas has a very large number of government employees compared to its population. Kansas has 717.4 public employees per 10,000 population, which is number 48 in the nation. Only two states have more government employees, compared to population, than Kansas.

    Starting from such a high level of government employment may explain the following chart, where Kansas, when compared to neighboring states, has lagged behind in the change in the number of government jobs.

    Kansas government sector employment trends, compared to other statesKansas government sector employment trends, compared to other states

    Last year supporters of the increase in the sales tax made the case that more government revenue was necessary to avoid decreases in government employment. Judging by the record since then, the cost of the sales tax has been a stagnant Kansas private sector economy at the same time our neighbors are starting to grow employment. This is a policy that must be reversed. We know how to do this — the Rich States, Poor States: The ALEC-Laffer Economic Competitiveness Index report has evidence of polices that work to produce economic growth and those that don’t work. We simply need the will to implement them.

  • Kansas and Wichita quick takes: Tuesday July 5, 2011

    Kansas can choose its future path. Kansas has a choice to make, writes Dave Trabert, President of Kansas Policy Institute: “‘Rich States, Poor States’ is loaded with good policy advice but perhaps the greatest takeaway is that economic prosperity is a matter of choice. Some states choose to create an environment that encourages economic activity; others choose to put a higher value on government growth, which discourages job creation.” The choice we have to make is based on Kansas’ middle-of-the-road ranking in Rich States, Poor States: The ALEC-Laffer Economic Competitiveness Index, a new edition of which was recently released. It is, writes Trabert: “We can either choose to continue the tax-and-spend mentality that continues to drive jobs away or we can choose to become prosperous.” More is at Rich State or Poor State — It’s a Matter of Choice . … Trabert will be speaking in Wichita on this topic this Friday, see the next item.

    Kansas budget to be topic. This Friday’s meeting (July 8th) of the Wichita Pachyderm Club features Dave Trabert, President of Kansas Policy Institute, speaking on the topic “How Kansas ranks in the Rich States, Poor States Economic Competitive Index, and how our state’s ranking can be improved by stabilizing the Kansas budget.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. … Upcoming speakers: On July 15, Jon Hauxwell, MD, speaking on “Medicinal Cannabis.” On July 22, U.S. Representative Mike Pompeo of Wichita on “An update from Washington.” On July 29, Dennis Taylor, Secretary, Kansas Department of Administration and “The Repealer” on “An Overview of the Office of the Repealer.”

    Year of school choice. The Wall Street Journal, in a Review and Outlook piece, notes the progress made throughout the country in advancing greater freedom for parents in educational opportunities for the children. Of particular note is expansion of existing programs in Milwaukee and Indiana. … Schools choice is important, writes the Journal, but alone is not sufficient: “Choice by itself won’t lift U.S. K-12 education to where it needs to be. Eliminating teacher tenure and measuring teachers against student performance are also critical. Standards must be higher than they are. But choice is essential to driving reform because it erodes the union-dominated monopoly that assigns children to schools based on where they live. Unions defend the monopoly to protect jobs for their members, but education should above all serve students and the larger goal of a society in which everyone has an opportunity to prosper.” … In Kansas, reform measures such as these are rarely mentioned, as the state’s education establishment is content with keeping inner-city and disadvantaged kids in poor schools. While Kansas has some good schools, these are largely located in well-to-do suburbs in Johnson County and surrounding Wichita. Families with money, therefore, have opportunities for school choice (of a sort). Poor families don’t have this choice. … In Kansas, tinkering with the teacher tenure formula is all that has been accomplished this year regarding school reform. This is in a state that ranks very low among the states in policies relating to teacher effectiveness, according to the National Council on Teacher Quality. … Kansas Governor Sam Brownback campaigned with an education platform, but it contained mostly weak measures that appeared to be designed by the education establishment. So far Brownback has not come forth with proposals for meaningful reform of schools in Kansas.

    How much does a stimulus job cost? According to the Council of Economic Advisors, all appointed by President Barack Obama, $278,000. If that’s not bad enough, analysis from The Weekly Standard finds that now, the stimulus program is working in reverse: “In other words, over the past six months, the economy would have added or saved more jobs without the ‘stimulus’ than it has with it. In comparison to how things would otherwise have been, the ‘stimulus’ has been working in reverse over the past six months, causing the economy to shed jobs.” Why might the stimulus not be working? Borrowing the money and then “spending it mostly on Democratic constituencies” is to blame, writes Jeffrey H. Anderson.

    More ‘Economics in One Lesson.’ Next Monday (July 11th) Americans For Prosperity Foundation is sponsoring a continuation of the DVD presentation of videos based on Henry Hazlitt’s classic work Economics in One Lesson. The event is Monday from 7:00 pm to 8:30 pm at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. The event’s sponsor is Americans for Prosperity, Kansas. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

  • Economist: Kansas must improve its competitive position

    Last week the American Legislative Exchange Council released the fourth edition of Rich States, Poor States: The ALEC-Laffer Economic Competitiveness Index. This is an important study by authors Arthur B. Laffer, Stephen Moore, and Jonathan Williams that identifies states that use “best practices to enable states to drive economic growth, create jobs, and improve the standard of living for their citizens.” On Friday Williams was in Wichita and spoke to a group of business and political leaders at an event sponsored by Kansas Policy Institute and Wichita Independent Business Association.

    Williams said that there is reason for optimism in Kansas, but the news is not all good for our state. ALEC calculates economic outlook rankings, which is a “forecast based on a state’s current standing in 15 policy variables, each of which is influenced directly by state lawmakers through the legislative process, looking at states’ forecast for growth. In this ranking, Kansas fell from 25th to 27th among the 50 states in one year. A lot of this, Williams said, was due to the statewide sales tax increase of one cent per dollar which took effect on July 1, 2010. That will “leave a mark on competitiveness,” he added.

    Williams praised a bill in the Kansas Legislature this year which would have used increases in tax revenue to buy down the income tax rate. That bill, SB 1, known as the March to Economic Growth Act, passed the House of Representatives but did not advance out of committee in the Senate. This bill was important, Williams said, as one of the key findings of the Rich States, Poor States report is how important low income taxes are for economic growth.

    Kansas has a choice to make, Williams told the audience. Kansas could become a growth state like Texas, which has gained four Congressional seats over the last ten years. (Kansas has four seats. States gain Congressional seats when they grow in population more rapidly than other states.) Also, according to co-author Stephen Moore, Texas has created 40 percent of all jobs created during the recent economic recovery. Moore attributes part of Texas’ growth to having no personal income tax and living within its means.

    The other course is for Kansas to become accustomed to its mediocre, middle-of-the-pack ranking. But we may not want to live with the loss or prosperity that comes with this ranking. Williams cited research by KPI that show that Kansas was the only state to have a net loss of private sector jobs over the last year. All other states had at least some job growth.

    In ranking states on economic outlook, three of our our neighboring states — Colorado (number 6), Missouri (9), and Oklahoma (14) are in the top 15 states. This, said Williams, makes Kansas’ mediocre ranking of 27th look even worse.

    Williams outlined some principles that lead to effective tax policy. First, taxes ought to be simple. Complicated tax systems require much effort and cost to comply with, and are a deadweight loss to the economy.

    Transparency is important. It should be clear who is paying the tax. Williams said that business taxes violate this principle, as businesses pass on taxes to customers, employees, and investors.

    Neutrality — not using tax policy to select winners and lowers — is important, as government has a terrible record of success, and it leads to corruption in the manner of choosing winners.

    Predictability is important, and institutional controls like the taxpayer bill of rights or a super majority requirement to raise taxes help in this regard.

    Finally, tax policies must be pro-growth.

    Williams also said that increasing spending is not a good answer to economic problems. The ARRA (federal stimulus program of 2009) allowed states to live beyond their means for two years, and the money had many strings attached. Maintenance of effort requirements forced states to abandon good budgeting practices, and set states up to fail once the stimulus money stopped. In Kansas, the budget shortfall at the start of the legislative session in January was about $550 billion, and most of that was due to the end of the stimulus money.

    In analyzing tax policy, Williams told of how many people insist on using static analysis to predict the outcome of changes to tax policy. He showed the famous Laffer Curve, made prominent by co-author Arthur Laffer. The concepts illustrated by the curve include these: At an income tax rate of zero, the government collects no tax revenue. At a tax rate of 100 percent, again the government collects no revenue, as no one will work if all their earnings go to taxes. Between these two rates, revenue will rise as the tax rate is increased, until at some point tax revenue begins to fall with increasing tax rates. Eventually people figure out it just doesn’t pay to work any longer after the tax rate becomes too high.

    It’s important, therefore, to include human behavior and reaction to changes in tax policy. This is dynamic analysis — realizing that as tax rates change, people alter their behavior. Static analysis, on the other hand, doesn’t take this into account. Williams recounted an example as told in the book Flat Tax Revolution: Using a Postcard to Abolish the IRS by Steve Forbes:

    In 1989, Bob Packwood (R-OR) requested a revenue forecast from Congress’s Joint Committee on Taxation (JCT) on a hypothetical tax increase raising the top rate to 100 percent on incomes over $200,000. The JCT responded by forecasting increased revenues of $204 billion in 1990 and $299 billion in 1993. Essentially, the JCT predicted that people would continue to work even if the government taxed them out of every penny they earned.

    Williams said that only about ten states use a method of analysis different from static analysis when considering tax policy changes. Therefore, pro-growth tax policies often don’t get a good revenue score and are rejected for that reason. But the static models don’t take into account that as tax rates decrease, revenue may increase, or not decline as much as static models predict.

    On the state pension crisis, Williams said that official estimates understate the magnitude of the actual problem, as government accounting standards do not require states to fully recognize the full magnitude of recent investment losses. The losses may be spread over several years. Further, he said that states generally use an assumed rate of return that is greater than what is likely to be realized. He said that legendary investor Warren Buffet has recommended that state use six percent as their future earnings assumption. Kansas uses eight percent. Over long periods of time, which is the timeframe of pension plans, this difference in returns produces a large change in earnings.

    For more information on this report and its findings for Kansas, see Rich States, Poor States released for 2011. The report is available to read in its entirety at no cost at Rich States, Poor States: The ALEC-Laffer Economic Competitiveness Index.

  • Rich States, Poor States author to be in Wichita

    Kansas Policy Institute and the Wichita Independent Business Association are hosting a breakfast event featuring Jonathan Williams, one of the authors of Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index.

    This annual publication looks at each of the 50 states and evaluates them on several areas of economic competitiveness. Last year, Kansas ranked 40th for “Economic Performance Rank” and 25th for “Economic Outlook Rank.” It is feared that Kansas may fare even worse this year.

    The report is a source of much useful information. For example, did you know that Kansas has 696.3 public employees for each 10,000 people? That ranks us 48th among the states. That’s good news if you’re a public employee union organizer, but bad for everyone else.

    The event is at 7:30 am on Friday June 24th at Pioneer Balloon (5000 E. 29th St. N., across from the WSU Metro Complex). The cost is $10. Click here to RSVP by email, or call 316-201-3264.

  • Kansas and Wichita quick takes: Wednesday June 1, 2011

    Transportation planning. It’s been the assumption in America over the last half-century that transportation needs — roads, bridges, buses, subways, etc. — must be planned by government in a top-down fashion. But the Cato Institute’s Randal O’Toole disagrees: “Should transportation be funded and planned from the top down or bottom up? Top-down advocates, such as the Brookings Institution’s Robert Puentes (writing in the May 23, 2011 Wall Street Journal) argue that only central planners can have a ‘clear-cut vision for transportation’ that will allow them to target spending ‘to make sure all those billions of dollars help achieve our economic and environmental goals.’ Advocates of bottom-up funding, such as the Cato Institute, Reason Foundation and Heritage Foundation, respond that public and private transportation providers better serve our needs when they are responsive to the fees people pay for various forms of transportation. In fact, most of the problems with transportation today, from an antiquated air-traffic control system to deteriorating bridges to empty transit buses, are due to top-down planning.” O’Toole goes on to explain the problems with federal funding of local transportation projects, concluding “No matter how well intentioned, top-down transportation planning quickly turns into a combination of social engineering and pork barrel. It is time to return to a bottom-up funding system that rewards transport agencies and companies for reducing costs and increasing mobility.” … In Wichita, the bus transit system is running a deficit, and the city manager has warned that cuts to service may be made. Most people would be surprised that in 2009, the fares paid by passengers covered just 22.5 percent of the bus system’s total cost, according to Michael Vinson, Director of Transit for the City of Wichita. The Wichita Eagle recently reported the figure as just 20 percent. The rest of the cost is covered by a variety of local, state, and federal grants. … Is it a coincidence that Wichita’s bus service is a top-down government-planned service? And what does this foretell for the future of other government-planned and provided transit, which is said by government planners like the Wichita Downtown Development Corporation to be necessary for the revitalization of downtown Wichita

    Pompeo, Huelskamp ‘no’ on debt limit. U.S. Representative Mike Pompeo, a Wichita Republican serving his first term, voted “no” to increasing the U.S. federal debt limit, which currently is about $14.3 trillion dollars. In a statement, Pompeo said; “I voted no on raising the debt ceiling. No to more debt without a change in behavior. No to increasing the credit card limit when the Obama Administration has zero commitment to reducing the unsustainable rate of spending. No to business as usual in Washington, D.C. … With this debt ceiling vote, my colleagues and I are putting down a marker on behalf of the American people. Americans have rejected the status quo and sent me along with 86 other Republican Freshmen to Congress to reverse course. Earlier this year, the President presented a spending plan to Congress for 2012. Unfortunately, that plan proposed 10 straight years of deficits in excess of $1 trillion. That is a recipe for disaster and one which we cannot accept on behalf of the Americans who sent us here to rein in out-of-control government spending.” … In explaining his intent to vote against the bill, Tim Huelskamp, who represents the Kansas first district, said: “The President’s request to increase the debt limit without cutting spending is irresponsible and fiscally reckless, therefore I plan to vote against it. The acquisition of more debt while failing to deal with Washington’s addiction to spending only sustains Washington’s unhealthy behaviors. It puts the country on the path of Greece. We owe it to the American people and to future generations to deal with overspending once and for all.” Lynn Jenkins and Kevin Yoder, the other representatives from Kansas, also voted against raising the debt limit. … Proponents of federal spending insist that we must increase our debt limit or financial markets will tank and economic activity will come to a halt. The Concord Coalition writes: “Approval of a debt limit increase is necessary to maintain the full faith and credit of the United States government. Failure to approve an increase would not be an act of fiscal responsibility, unless it can be said that deadbeats are fiscally responsible because they refuse to pay their bills. It would result in the United States defaulting on the commitments it has already made, including Social Security, Medicare and veterans benefits, vendor payments, tax refunds, student loans and interest payments on outstanding debt.” The Cato Institute counters: “A temporarily frozen debt limit could instead signal U.S. lawmakers’ resolve to get our fiscal house in order. It may even reassure investors about long-term U.S. economic prospects. … For too long, analysts and politicians have balked at the massive political impediments to reforming the federal budget — especially entitlement programs. Many now concede, actually, that no prudential reforms are likely unless there is an imminent ‘crisis.’ On the other hand, political liberals argue that there is no real ‘crisis’ — and so no need for real reforms. … Indeed, investors should be fearful of the opposite: an increase in the debt limit without a serious challenge from reform-minded lawmakers. This only signals business as usual for U.S. fiscal affairs.”

    This Week in Kansas. Recently the KAKE Television public affairs program This Week in Kansas started placing episodes on its website. On the most recent episode, Malcolm Harris and I join host Tim Brown for a discussion of the Kansas Legislature and economic development topics. Also, Meteorologist Jay Prater contributes a segment on storm preparation.

    Kingman is the first. The office of Kansas Governor Sam Brownback has announced that Kingman County, just to the west of Wichita, is the first county to participate in the new Rural Opportunity Zone student loan repayment program. This program allows residents who move into counties with declining population to escape paying state income taxes for five years. In deciding to participate in the student loan repayment program, the county and the state will participate equally in repaying student loans of up to $15,000 for college graduates who move to Kingman County. … In a statement, the governor said “I am pleased Kingman County commissioners recognize the direct benefit of partnering with the state to attract college graduates to their community. This aggressive policy move is targeted to grow our shrinking rural counties. Like the Homestead Act, ROZ offers opportunity instead of handpicking winners and losers.” While almost all welcome the ROZ program — the legislation passed 102 to 18 in the House and 34 to 5 in the Senate — the nostalgia for the glory days of small-town Kansas may not be in our best interests. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, which has influenced Governor Brownback’s economic policy, Dr. Art Hall wrote that productivity — which should be our ultimate goal — is related to population density: “Productivity growth is the ultimate goal of economic development. Productivity growth — the volume and value of output per worker — drives the growth of wages and wealth. Productivity growth results from a risky trial and error process on the front lines of individual businesses, which is why Kansas economic development strategy should focus on embracing dynamism — a focus virtually indistinguishable from widespread business investment and risk-taking. Productivity growth tends to happen in geographic areas characterized by density. This pattern shows up in Kansas. The dense population centers demonstrate superior productivity growth.”

    Legislature is through for season. Today both the Kansas House of Representatives and Senate met for sine die, a fancy Latin term for its ceremonial last day, although action may be taken. The House made an attempt to override the governor’s line-item veto of funding for the Kansas Arts Commission, but the effort failed by a vote of 50 to 44. Two-thirds, or 84 votes, would be needed to override the veto. The Senate didn’t make an attempt. The next meeting of both chambers of the Kansas Legislature will be on January 9, 2012, although there are many committee meetings during the summer and fall months.

    Stossel looks at energy. In a recent episode of his weekly television show available to view using the free hulu service, John Stossel looks at various forms of energy and asks: Who will keep the lights on? … Early in the show, Stossel argues with Bill O’Reilly over the role of speculators in the run-up of oil prices. O’Reilly favors strict regulation of speculators, believing that the market is rigged. In a discussion with two guests, wild speculation was promoted as the cause of rapidly rising prices, with some trades by traders said to be stoned at the time. But it was mentioned that speculation carries huge risks, and if the speculators are wrong, they lose — and big. For more on speculators, see Speculators selfishly provide a public service.

  • Kansas and Wichita quick takes: Tuesday May 31, 2011

    Pachyderm to feature DA Foulston. This Friday (June 3) the Wichita Pachyderm Club features Nola Tedesco Foulston, District Attorney for the Eighteenth Judicial District of Kansas, whose boundaries are coincident with Sedgwick County. Foulston’s topic will be “An office overview and current events at the Eighteenth Judicial District of Kansas District Attorney’s office.” Foulston, a Democrat, was elected to her office in 1988 and has served continuously since then. … Appearances by speakers other than Republicans at Pachyderm often generate controversy, and this week is no exception. Pachyderm is a Republican club, and the mission statement of the national organization reads: “Promote active citizen involvement and education in government and politics through the formation and support of grassroots, Republican clubs across America.” Some feel that an appearance at Pachyderm will bolster Foulston’s re-election prospects, should she decide to run again next year. Others believe that no Democrat should be be a speaker — ever. In my opinion, the sentiment of the Pachyderm board and of many of the club’s regular attendees is that while Pachyderm is indeed Republican and conservative, the club’s mission of political education and civic engagement allows — in fact, encourages — appearances by prominent officeholders of any political party. In any county, the District Attorney is a powerful force in local government, with broad discretion as to the prosecution of criminal cases. This is a speaker that the members of Pachyderm should be encouraged to hear, even though members may not agree with her politics. …. Foulston will likely face several tough questions from the usually spirited Pachyderm audience. … Upcoming speakers: On June 10, John Allison, Superintendent of USD 259, the Wichita public school district, on “An update from USD 259.” On June 17, The Honorable Lawton R. Nuss, Kansas Supreme Court Chief Justice on “The State of the Kansas Courts.” On June 24, Jim Mason, Naturalist at the Great Plains Nature Center will have a presentation and book signing. Mason is author of Wichita’s Riverside Parks, published in April 2011. On July 1, Jay M. Price, Director of the Public History Program at Wichita State University, speaking on “Classes of Values in Kansas History.” On July 8, Dave Trabert, President, Kansas Policy Institute, on “Stabilizing the Kansas Budget.”

    Sedgwick County Commission. In its Wednesday meeting, the Sedgwick County Commission will consider making two forgivable loans for the purposes of economic development. These loans have become popular with economic development officials, and often the City of Wichita and Sedgwick County make loans of equal amount to the same company. … The program works by loaning the company an amount of money, with the entire amount paid out at once. Then, if performance goals are met over a period of time, the loan (and interest) is forgiven. Otherwise, portions of it, with interest, may become due. Often the term of the loan is four or five years, with a portion of the loan forgiven each year if goals are met. The performance goals are usually the number of full-time or equivalent employees. … The Golf Warehouse in northeast Wichita is asking for a $48,000 forgivable loan. It recently received a loan of that amount from the City of Wichita. Mid-Continent Instrument, Inc. is asking for $10,000. … Usually economic development incentives are accompanied by a cost-benefit study performed by Wichita State University Center for Economic Development and Business Research. The county hasn’t supplied such analysis for these two items.

    Kansas budget signed. On Saturday — a holiday weekend day — Kansas Governor Sam Brownback signed the budget bill. He used his line-item veto authority to strike an across-the-board reduction in spending, preferring to make targeted cuts instead. Although the governor had proposed ending funding for public broadcasting, the legislature included funding, and the governor did not veto it. … Most controversial of the governor’s handful of changes to the bill will be his veto of funding for the Kansas Arts Commission. This action was not a surprise, as recently the administration laid off all the commission’s employees. Associated Press reports that the chairman of the commission isn’t ruling out a lawsuit.

    KPERS suit threatened. Changes made by the Kansas Legislature to Kansas Public Employees Retirement System, or KPERS have caused state employee organizations to consider a lawsuit, according to Associated Press reporting. The changes made this year are mild compared to the changes that must be made if KPERS is ever to become self-sustaining. The threat of a lawsuit over these minor changes doesn’t foretell a future of cooperation from state employees in making the much larger reforms that must be made.

    Stimulus jobs — or not. Malcolm Harris calls attention to an analysis of the job-creation performance of the 2009 stimulus bill. The working paper is titled The American Recovery and Reinvestment Act: Public Sector Jobs Saved, Private Sector Jobs Forestalled. Its goal, according to authors Timothy Conley and Bill Dupor, is to “understand the causal effect on employment of the government spending component of the ARRA.” The key finding is this: “Our benchmark point estimates suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs.” That’s a net loss of jobs. … The authors note there is “appreciable estimation uncertainty” in the estimates. Still, they are able to conclude: “However, our estimates are precise enough to state that we find no evidence of large positive private-sector job effects.” … The report includes a section summarizing other researchers’ findings, which usually find that the stimulus program created or save many jobs. The studies that find large job creation usually rely on “fiscal policy multipliers,” a Keynesian economics concept.

    Government doesn’t create jobs. Investor’s Business Daily relies partly on the Conley and Dupor paper in its editorial Government Doesn’t Create Jobs. IBD asks “In a joint op-ed with the British prime minister, President Obama admits that jobs are created by an innovative private sector. So why is he strangling ours with regulations, rules and taxes? We would hope it was a candid admission of the truth rather than just boilerplate rhetoric in an op-ed in the Times of London by President Obama and British Prime Minister David Cameron. But there it was: ‘Governments do not create jobs; bold people and innovative businesses do.’” Continuing: “For once, the president is spot on. Businesses create jobs to fill a need, and their incentive is profit. Businesses invest; governments can only spend. Businesses create wealth, as do their employees. Government consumes wealth and sucks the economic oxygen out of the room. Its employees create paperwork and regulations that restrict economic growth.”

  • What’s really the matter with Kansas

    By Dave Trabert, Kansas Policy Institute.

    A May 22 story in the Wichita Eagle about the Kansas Legislature’s lack of focus on job creation in the just-concluded legislative session provides great insight into the economic stagnation the Sunflower State has suffered over the last decade.

    According to the Kansas Department of Labor, between April 2008 and April 2011 the state lost 73,200 private sector jobs, 500 state government jobs and 500 local government jobs. Last year, despite warnings from two academic studies that a sales tax increase would cost thousands of jobs, legislators did it anyway — and sure enough, between July 1, 2010 and April 30, 2011 we lost 5,000 private sector jobs (seasonally adjusted according to the Bureau of Labor Statistics for comparability). State government employment didn’t change over that time frame.

    So what was the focus of that lengthy article? The loss of government jobs. Private sector jobs were barely mentioned.

    The Eagle article spoke of a large number of state job cuts without mentioning that the majority were vacant positions. But there was no mention of last year’s legislative action that destroyed private sector jobs by raising the sales tax so government could spend more money.

    That pretty much sums up the job problem in Kansas for the last decade: lots of concern about protecting government and not much more than lip service for the private sector.

    The article painted a dire picture for education but failed to mention that total state spending on K-12 will increase by more than $100 million next year. Mandatory spending increases on school employee retirement benefits, special education programs and school bond payments prompted a reduction in the starting point of the funding formula (base state aid), but legislators also passed a law allowing districts to make up the difference in base state aid. Districts are allowed to transfer carryover cash balances from a variety of funds for operational purposes — and all but one district started this year with enough money in those funds to do so. Most, in fact, have more than $1,000 per pupil in those funds. Districts have the ability to avoid the layoffs mentioned in this article, so why did the reporter and the people he interviewed fail to mention it?

    The reporter also didn’t provide readers with the context of the education job cuts. Statewide, there are 4.6% more teachers in the wake of the cuts than there were in 2005, and all other school employment is up by 8.6%, while enrollment is up just 3.1%. It’s a shame that those people lost their jobs but it would be nice to see just as much concern for unemployed private sector workers.

    The Rural Opportunity Zones created by the Kansas Legislature are a good step forward, but the change that would create more jobs than any other effort — eventually eliminating the income tax — was killed in the Senate. The Senate wouldn’t even allow it to be discussed.

    Kansas will continue to suffer the economic stagnation we’ve seen over the last decade until we stop valuing government jobs over private sector jobs. That’s what is really the matter with Kansas.

    Dave Trabert is the President of the Kansas Policy Institute.

  • In Kansas Legislature this year, opportunities for saving were lost

    This year the Kansas Legislature lost three opportunities to improve the operations and reduce the cost of state government. Three bills, each with this goal, were passed by the House of Representatives, but each failed to make through the Senate, or had its contents stripped and replaced with different legislation.

    Each of these bills represents a lost opportunity for state government services to be streamlined, delivered more efficiently, or measured and managed.

    Kansas Streamlining Government Act

    HB 2120, according to its supplemental note, “would establish the Kansas Streamlining Government Act, which would have the purpose of improving the performance, efficiency, and operations of state government by reviewing certain state agencies, programs, boards, and commissions.” Fee-funded agencies — examples include Kansas dental board and Kansas real estate commission — would be exempt from this bill.

    In more detail, the text of the bill explains: “The purposes of the Kansas streamlining government act are to improve the performance, streamline the operations, improve the effectiveness and efficiency, and reduce the operating costs of the executive branch of state government by reviewing state programs, policies, processes, original positions, staffing levels, agencies, boards and commissions, identifying those that should be eliminated, combined, reorganized, downsized or otherwise altered, and recommending proposed executive reorganization orders, executive orders, legislation, rules and regulations, or other actions to accomplish such changes and achieve such results.”

    In testimony in support of this legislation, Dave Trabert, President of Kansas Policy Institute offered testimony that echoed findings of the public choice school of economics and politics: “Some people may view a particular expenditure as unnecessary to the fulfillment of a program’s or an agency’s primary mission while others may see it as essential. Absent an independent review, we are expecting government employees to put their own self-interests aside and make completely unbiased decisions on how best to spend taxpayer funds. It’s not that government employees are intentionally wasteful; it’s that they are human beings and setting self-interests aside is challenge we all face.”

    On February 25 the bill passed the House of Representatives by a vote of 79 to 40. It was referred to the Senate Committee on Federal and State Affairs, where it did not advance.

    Privatization and public-private partnerships

    Another bill that did not advance was HB 2194, which in its original form would have created the Kansas Advisory Council on Privatization and Public-Private Partnerships.

    According to the supplemental note for the bill, “The purpose of the Council would be to ensure that certain state agencies, including the Board of Regents and postsecondary educational institutions, would: 1) focus on the core mission and provide goods and services efficiently and effectively; 2) develop a process to analyze opportunities to improve efficiency, cost-effectiveness and provide quality services, operations, functions, and activities; and 3) evaluate for feasibility, cost-effectiveness, and efficiency opportunities that could be outsourced. Excluded from the state agencies covered by the bill would be any entity not receiving State General Fund or federal funds appropriation.”

    This bill passed by a vote of 68 to 51 in the House of Representatives. It did not advance in the Senate, falling victim to a “gut-and-go” maneuver where its contents were replaced with legislation on an entirely different topic.

    Opposing this bill was Kansas Organization of State Employees (KOSE), a union for executive branch state employees. It advised its “brothers and sisters” that the bill “… establishes a partisan commission of big-business interests to privatize state services putting a wolf in charge of the hen house. To be clear, this bill allows for future privatization of nearly all services provided by state workers. Make no mistake, this proposal is a privatization scheme that will begin the process of outsourcing our work to private contractors. Under a privatization scheme for any state agency or service, the employees involved will lose their rights under our MOA and will be forced to adhere to the whims of a private contractor who typically provides less pay and poor benefits. Most workers affected by privatization schemes are not guaranteed to keep their jobs once an agency or service is outsourced.”

    Note the use of “outsourcing our work.” This underscores the sense of entitlement of many government workers: It is not work done for the benefit of Kansans, it is our work.

    Then, there’s the warning that private industry pays less. Most of the time representatives of state workers like KOSE make the case that it is they who are underpaid, but here the argument is turned around when it supports the case they want to make. One thing is probably true: Benefits — at least pension plans — may be lower in the private sector. But we’re now painfully aware that state government has promised its workers more pension benefits than the state has been willing to pay for.

    Performance measures

    Another bill that didn’t pass the entire legislature was HB 2158, which would have created performance measures for state agencies and reported that information to the public. The supplemental note says that the bill “as amended, would institute a new process for modifying current performance measures and establishing new standardized performance measures to be used by all state agencies in support of the annual budget requests. State agencies would be required to consult with representatives of the Director of the Budget and the Legislative Research Department to modify each agency’s current performance measures, to standardize such performance measures, and to utilize best practices in all state agencies.” Results of the performance measures would be posted on a public website.

    This bill passed the House of Representatives by a nearly unanimous vote of 119 to 2, with Wichita’s Nile Dillmore and Geraldine Flaharty the two nay votes. In the Senate, this bill was stripped of its content using the “gut-and-go” procedure and did not proceed intact to a vote.

    Opposition to these bills from Democrats often included remarks on the irony of those who were recently elected on the promise of shrinking government now proposing to enlarge government through the creation of these commissions and councils. These bills, however, proposed to spend modest amounts increasing the manageability of government, not the actual range and scope of government itself. As it turns out, many in the legislature — this includes Senate Republicans who initiated or went along with the legislative maneuvers that killed these bills — are happy with the operations of state government remaining in the shadows.

    These proposals to scale back the services that government provides — or to have existing services be delivered by the private sector — mean that there will be fewer government employees, and fewer members of government worker unions. This is another fertile area of gathering support for killing these bills.

    State workers and their supporters also argue that fewer state workers mean fewer people paying state and other taxes. Forgotten by them is the fact that the taxes taken to pay these workers means less economic activity and fewer jobs in the private sector. And, in fact, Kansas has seen the number of government workers — at all levels — rise.

    As to not wanting performance measures: Supporters of the status quo say that people outside of government don’t understand how to make the decisions that government workers make. In one sense, this may be true. In the private sector, profitability is the benchmark of success. Government has no comparable measure when it decides to, say, spend some $300 million to renovate the Kansas Capitol. But once it decides to do so, the benchmark and measurement of profitability in executing the service can be utilized by private sector operators. Of course, private contractors will be subject to the discipline of the profit and loss system, something again missing from government.

    Curiously, Kansas Governor Sam Brownback didn’t use his prestige and influence to support these bills, at not publicly. Perhaps next year, an election year not only for the House but also for the entire membership of the Senate, will be different.