Voice For Liberty

Tag: Kansas Policy Institute

  • Public radio ignores facts, pushes rhetoric on Kansas school funding

    A Kansas radio news reporter seems not to care about reporting facts about Kansas school spending. Dave Trabert of Kansas Policy Institute reports.

    Public radio ignores facts, pushes rhetoric on school funding

    By Dave Trabert

    The latest attempt to undermine Kansas tax reform comes from KCUR-FM and National Public Radio: “Huge income tax cuts have led to … shrinking classroom budgets for public schools.” That statement might make a captivating movie ad but the film would be classified as fiction.

    The Kansas Department of Education says school funding last declined by 0.045% in the 2011 school year and has increased every year since. To put that tiny reduction in perspective, it’s the equivalent of cutting spending from $1,000.00 to $999.55. Income tax cuts hadn’t even been proposed at that point and didn’t go into effect for another eighteen months. Tax reform had nothing to do with the 2011 reduction in school funding, but why let facts get in the way of a popular tale.

    The final numbers aren’t in yet, but funding for the 2015 school year just ended is estimated at about $6.1 billion and more than $13,000 per student. That would be the fourth consecutive record for total funding and the third consecutive record for per-student funding, using data from the Kansas Department of Education and the Kansas Division of the Budget.

    Why do KCUR and NPR say school budgets are “slashed” and “shrinking” given this data? Because school officials say so. Seriously. No data was cited — just statements made by school officials.

    The first story on KCUR-FM ran on July 2 and included this false statement: “The Legislature has cut classroom funding.” First of all, the Legislature does not set classroom funding and there is no official definition of ‘classroom funding;’ the amount that goes to Instruction (defined by the Department of Education) is determined by each local school board. On average, school districts spend about 55 cents of every education dollar on Instruction — and that ratio has remained about the same since 2005 even though total funding increased by nearly $2 billion.

    Secondly, the Legislature increased funding. Administrators may not be getting as much funding as they want (in government parlance that is a “cut”) but KSDE data shows block grant funding increased last year by $142.2 million without counting KPERS and increased another $4.5 million this year. (The spreadsheets are no longer on the KSDE site but we have them for anyone interested.)

    I shared this information with KCUR reporter Sam Zeff but the data apparently didn’t matter to him. He said KSDE Deputy Commissioner Dale Dennis told the court that schools were getting less money and superintendents say they are getting less money, so that’s all the proof he needed. But school officials’ claims are based on getting less money than they want or feel they are entitled to receive … school officials are not saying that they are getting less money than they actually received in the previous year, but that is the message they want to send.

    For example, USD 259 said the block grants cut their funding by $4.8 million last year but the district’s chief financial officer said spending was expected to increase by $87 million, or 14 percent. Only government could call that a “cut.” (See here for details.)

    The reporter was even given an email from Dale Dennis (also documented in a KPI Blog post), confirming that school funding increased last year.

    Mr. Zeff agreed to get together and look at the KSDE data but that meeting never occurred. Two days later, another version of the story ran on NPR’s “All Things Considered.” And just to make sure listeners got the message, there were four false references to school funding “shrinking” or being “slashed.” That story also falsely said the Kansas Legislature “…stripped teachers of tenure.” No such thing occurred. The Legislature merely said ‘due process’ procedures associated with efforts to remove a teacher would be determined by individual school districts rather than be mandated by state law. If any districts actually eliminated due process, it must be a well-kept secret; we can’t find any media stories citing elimination of due process and inquiries to various education organizations produced no results in that regard.

    There was another breach of sound journalistic principles in both stories — no alternate views were included. Both stories dealt with opinions on the perceived ramifications of political actions but only one viewpoint was presented.

    Reporters should be able to rely on school officials to make clear, factual statements but that still is no substitute for actual examination of hard data and the inclusion of multiple viewpoints in these plainly political stories.

  • Discussion of open government in Wichita and Kansas

    Discussion of open government in Wichita and Kansas

    Perspectives may differ, but the point is the same — more government transparency leads to more citizen engagement and better outcomes in communities, states, and nations.

    In this podcast, Kansas Policy Institute Vice President James Franko discusses government transparency with Seth Etter and Bob Weeks. Etter is the organizer of Open Wichita, an initiative to bring the benefits of open data and civic hacking to Wichita. Weeks blogs at Voice for Liberty in Wichita where he advocates for government transparency and accountability and uses open records requests to access, analyze and publish state and local government data. KPI maintains KansasOpenGov.org, an online data portal for state and local government data.

    Listen below, or click here for this and other Kansas Policy Institute podcasts.

  • Examining a Kansas school district election

    In its campaign to convince voters to raise taxes, the Auburn-Washburn school district deceives voters. David Dorsey explains.

    Eight reasons why the Auburn-Washburn (USD 437) LOB election increase is a ruse

    By David Dorsey, Kansas Policy Institute

    Auburn-Washburn USD 437 is in the midst of a Local Option Budget (LOB) election, asking district voters to approve an up-to three mill increase in their taxing authority. As part of the effort to convince us to support their request, I received, along with every other USD 437 resident, a propaganda card via USPS last week. The card (of which I have provided both front and back) includes virtually every deceptive tactic used by school districts to cajole voters into supporting a tax increase, including the implication that without this extra money, the futures of little Evan and Clare are in doubt.

    I must preface the following remarks by saying that I have largely supported the district’s expansion in the past, having enthusiastically voted in favor of building a new elementary school (Farley) several years ago. I also recognize that as school districts go, USD 437 is well run. Their administrative costs are below the state per-pupil average and are 17th lowest among the 25 largest districts statewide. And undoubtedly the relative quality of USD 437 plays a role in increasing property values in the district. Having said that, it doesn’t detract from the fact that this election is just plain unwarranted. Below is the flip side of the card followed by eight reasons why the election is truly needless.

    1. They already have the money.  As the table shows, USD 437 has a consistent cash reserve balance of about $9 million each July 1. The card says they are going to use cash reserves to cover part of the “Block Grant reductions,” but the $386k in taxes they tell us they need represents less than five percent of the district’s cash reserves. If they pulled the $386k from those reserves (taxes they received in prior years but didn’t spend), they would still have several million more than in 2008 and prior years, and the district didn’t say they lacked sufficient reserves during those years.
    2. They don’t spend the money they budget. In the 2013-14 school year, USD 437 spent nearly $2 million less than budgeted.  Do they really expect the voters to believe they need another $386 thousand (out of a total budget of over $65 million – roughly six-tenths of a percent) to “maintain our excellent schools?”
    3. They use misleading tactics to imply they have, and will continue to suffer budget cuts under the  block grant funding formula. They say (in bold, nonetheless) that the state reduced cash support by over $1.1 million for the current school year. Actually, the truth is under the three-year block grant funding law, USD 437 will get an increase in state aid of $1.4 million from $30.5 million to $31.9 million (4.3%).
    4. They act as if they have no authority over spending. According to the card “expenses are expected to rise next year by $1,252,000.” They speak of costs as if they are analogous to flood waters; that they are simply at their mercy and have no control over them. And this argument gets to the heart of the prevailing mentality that instead of trying to be more efficient with taxpayer money, school districts feel they are justly entitled to more taxpayer money.
    5. It’s simply a last-chance cash grab. Under block grant funding, districts must have LOB elections prior to July 1, 2015 or wait two years.
    6. It’s another false choice, right from the give-us-more-or-we’ll-have-to-cut playbook. The card itemizes six potential ways they “will consider” increasing fees/charges to students and five rather vague ways to reduce expenses. Do they really believe it will take a 1% increase in the LOB (again, that’s six-tenths of one percent of the total budget) to keep from increasing class sizes or from having to “Cut Programs (TBD)?”
    7. Kansas taxpayers are already overburdend and will experience yet another tax increase at the state level. School districts don’t operate in a vacuum. As USD 437 is asking their residents to pony up more money at a local level, the state legislature will be increasing taxes statewide by as much as $470 million. Those of us who will foot this bill can’t simply demand a pay raise to cover our increased food, insurance, transportation, or housing costs. So why should school districts be able to?
    8. It will not improve student outcomes. I saved the most important reason for last. Regardless of the dire implications, the result of this election will have exactly zero effect on the educational outcomes of little Evan and Clare when they enter kindergarten — three years from now!
  • Examining Kansas City school district claims

    Examining Kansas City school district claims

    A critical look at the statements coming from one of the largest school districts in Kansas leads to wonder if the Kansas City school superintendent is uninformed, misinformed, or simply lying. Dave Trabert of Kansas Policy Institute reports.

    USD 500 Kansas City misleads on school funding and budget claims

    By Dave Trabert, Kansas Policy Institute

    At a time when many school districts are issuing misleading statements about school funding to parents, teachers and legislators, recent claims by USD 500 Kansas City set a new transparency low. A story in the Kansas City Star outlined the district’s plans to reduce spending, which Superintendent Cynthia Lane blamed on “…years of low state funding, rising costs and the loss this year of $2 million in state money because of a new block grant funding measure….”

    Citizens are also dealing with rising costs, and school districts would like to inflict even higher costs on them — more taxes — to fund districts’ financial desires. “Years of low state funding” is a matter of opinion but data from the Kansas Department of Education and the Kansas Division of the Budget show that state funding and total funding of schools are setting new records this year.

    Part of the 2015 increase in state aid ($522 million according to block grant files prepared by KSDE) is money that had been inappropriately recorded as Local aid in prior years (20 mills mandated by the Legislature for all districts) but state aid is still at an all-time high with that adjustment. Total taxpayer support of public education will also set a new record this year.

    Contrary to Supt. Lane’s implication, however, USD 500 is not getting $2 million less in state aid with the block grant, it is gaining $12.8 million in state aid this year without counting any increases for KPERS, Bond & Interest or Special Education. What she is really saying — but doesn’t want you to know — is that she wanted an even larger increase and says the district is being “cut” because it didn’t get as much of an increase as it desired.

    That is just the beginning of the district’s conscious efforts to mislead parents, teachers and legislators. “We have cut more than $50 million,” Lane said. “There is no longer any fat left. … I frankly think there is very little left to cut that doesn’t dramatically impact what we do for our kids.”

    Budget cut claims don’t hold up

    The district has definitely not reduced spending by more than $50 million as implied by Supt. Lane. They may have budgeted for and spent less than they would like (which is what Supt. Lane is really saying) but they most certainly have not cut spending recently (as she wants you to think). This comparison of the district’s budget and actual spending over the last ten years shows that spending less than the amount budgeted is rather common but doesn’t necessarily mean that spending was actually reduced; most often, it means that their plan to spend more was reduced. Districts openly admit that they budget more than they plan to spend to avoid having to re-publish a budget … but conveniently forget to mention that fact when claiming that their budget was cut.

    Operating budgets were at record-highs in Kansas City this year and the two previous years; actual spending on current operating costs set records the last two years and likely will do so again this year.

    Operating spending increases between 2005 and 2014 in the Kansas City district have been very large across all cost centers; capital spending also jumped but debt service has been stable. Administration spending “only” increased by 23 percent but it was well above average in 2005 and was the second highest spender among large districts last year (profligate USD 501 Topeka wins that prize at $1,568 per-pupil). Shawnee Mission, by comparison, spends $942 per-pupil on administration; spending at that level would save $9.4 million in the Kansas City district, which could be spent on Instruction or returned to taxpayers.

    Listening to administrators and media reports, one would think the district is suffering from extreme austerity but district financial reports show otherwise. And these spending comparisons only reflect what has actually been spent. USD 500 also boosted operating cash reserves by $26.7 million over the period, going from $25.1 million in 2005 to $51.8 million in 2014. Operating reserves increase when more money is collected than is spent.

    “Very little left to cut” is a farce

    Supt. Lane may claim that there is very little left to cut but a July 2013 Legislative Post Audit report on the district says differently; page after page lists recommendations to bring district spending in line with market conditions and reduce costs. One recommendation was “Reduce Custodial and Maintenance Positions and Salaries” since some salaries were found to be more than 20% higher than paid in the private sector and the district had more staff than comparable districts. The district response is listed in the audit: “The community and staff will resist any reduction in staff or salaries. The custodians might unionize if staff positions or salaries are reduced.”

    Here is a sampling of maintenance, custodian and bus driver pay taken from an Open Records request of the 2014 school year payroll. This list reflects the highest paid in these positions and reflects total pay (wages, overtime, bonuses, etc.) but do not include any benefits. The position titles are shown as provided by the district.

    The simple solution would be to outsource this type of work to private sector companies as is done by some districts. Private sector companies are fully capable of providing these services at the same or better quality and at a better price.

    The LPA audit also recommended reducing administrative salaries to market wages through attrition; the district responded by saying “staff would resist any reduction in salaries.” This table shows pay increases given to the highest paid district employees, all of whom are administrators who mostly received double-digit pay increases over the last two years.

    Supt. Lane told the Star “I absolutely believe if you have to cut people, you have got to start at the top.” She was referring to the dismissal of Edwin Hudson, chief of Human Relations, and “… 30 assessment managers hired three years ago to keep track of state assessment scores so teachers and principals could concentrate more on school instruction.” Loading up on managers to track state assessment scores that are released once per year (except last year when no scores were released because of technical issues) is symptomatic of district hiring practices.

    Over the last ten years, USD 500 increased its management staff by 18.8 percent; management is a KPI-defined label that includes superintendents, assistant superintendents, principals, assistant principals, directors, managers, supervisors and instruction specialists. Maintenance, transportation and food workers jumped by 45.6 percent, teacher aides more than doubled and a variety of employment categories we lumped into All Other shot up by 42.7 percent. Enrollment, meanwhile, increased by just 7.2 percent.

    Non-teaching staff jumped by a third and total employment is 24.4 percent higher. The district has one full time equivalent employee for every 5.9 students.

    USD 500 has one manager for every 125 students, which is very inefficient compared to other districts. Shawnee Mission, for example, had one manager for every 210 students last year and has since reduced its administrative footprint because Superintendent Jim Hinson felt it was too large. If Kansas City had the same pupil/manager load as Shawnee Mission (before it was reduced), they would have 66 fewer managers … and those costs could be made available for instruction instead of suing citizens for more money.

    Here’s another example of misleading information from USD 500. The employee count in the above table comes from official KSDE personnel reports with data provided by each school district. But USD 500 may have many more employees. The LPA efficiency audit shows that the district was significantly under-reporting employment to KSDE. Lest anyone suggest that the KSDE report doesn’t contain categories that capture all of the district’s staff, it should be noted that the Certified Personnel and Non-Certified Personnel reports each have an “Other” category for such purpose. Consciously and consistently underreporting employment by more than 200 employees fits the district’s pattern of providing misleading information.

    Misrepresentation by design

    The district’s financial position is much different than represented by management, but it should be noted that staff, students and parents are likely experiencing legitimate resource issues. Frankly, that’s part of a pattern across many school districts, which is intended to gain sympathy and support for higher spending at the expense of others. USD 259 in Wichita, for example, is telling staff and media that they are suffering a $4.8 million “cut” with the block grants this year when in reality, they plan to spend $87 million more this year.

    The Kansas City district even takes misrepresentation into the courtroom. I was in the courtroom when Supt. Lane testified that lack of funding was the reason that many of the district’s students weren’t adequately prepared for college and career, but she is on record placing the blame elsewhere, months before she made her court appearance.

    When the U.S. Department of Education denied a portion of the district’s proposal to raise standards in a requested waiver from the Kansas Approved Accountability Plan from USDOE, Supt. Lane responded by saying, “The Kansas assessment is not rigorous enough to guarantee that our students are on-track with where they need to be. We have asked to raise standards for our students by administering the MAP, which is a more rigorous assessment, and USDOE is telling us ‘No!’”

    The district newsletter in which this quote appears makes no mention of funding; the blame for academic issues is placed solely on sub-standard assessment issues. Supt. Lane may say that funding is also an issue but the point here is that the story routinely is crafted to maximize sympathy for the desired outcome.

    That’s a disservice to staff, parents, legislators and most important, to students.

  • Kansas Center for Economic Growth: Show us the math

    Kansas Center for Economic Growth: Show us the math

    Why won’t Kansas Center for Economic Growth show its calculations and explain its data sources? Dave Trabert of Kansas Policy Institute explains.

    KCEG misleads on job growth — again

    By Dave Trabert

    The latest misleading claim on job growth from the Kansas Center for Economic Growth is loaded with misleading and irrelevant information; they don’t fully disclose their methodology and at this writing they have ignored our request to explain it. Sadly, this is not the first, second or even third time that KCEG has published misleading information and declined to produce documentation.

    Here are the questions we posed to Annie McKay, executive director at KCEG:

    We received a ‘read’ receipt but no reply, so we attempted to replicate their methodology to arrive at what they call “private sector job growth since tax changes” which they measure between January 2013 and March 2015. Based on tests of Kansas and national data, it appears that KCEG is using seasonally adjusted jobs but we couldn’t find a 6-state region including all of Kansas’ neighbors to match their number.

    KCEG has the national average increasing 5.2% and Kansas 3.8%, so we assume they are comparing January 2013 to March 2015. This is not a true measure of post-tax reform activity, however; the base month of a point-to-point comparison should be the last month of the old tax system, which was December 2012. Comparing Kansas to the 5-state region does show that Kansas is slightly behind (4.0% vs. 4.2%) but by not showing the performance of individual states, KCEG hides the fact that Kansas beat three of its four neighbors.   

    While Kansas is outperforming three of its neighboring states on this measurement, point-to-point comparisons are problematic; one or both points can be unusual spikes or declines, making the data less reliable.  The Bureau of Labor Statistics also publishes average annual employment, which minimizes the impact of any single data point.

    The more stable comparisons of average annual employment show job growth trends for Kansas to be much more competitive since tax reform. Private sector jobs grew just 2.2% between 1998 and 2012, which ranked Kansas at #38, but Kansas moved up to #27 in 2013 and last year moved up again to #21. That’s still not good enough and it will take perhaps another decade to fully understand the impact of tax reform, but the early trend is very encouraging. Kansas still trails Colorado, but has improved its competitive position. The table below shows Kansas trailed Colorado by a factor of five (2.2% vs. 10.6%) between 1998 and 2012 but has since closed the gap to a factor of two.

    KCEG noted that Utah and Idaho have higher taxes on “the wealthy” and better job growth than Kansas, but of course they don’t tell the whole story. Kansas does have a lower marginal rate than both states but that is a recent development; Kansas was higher than Utah until 2013 and much closer to Idaho when the marginal was 6.45%. Kansas’ lower rates are helping to reverse trends but it will take much more time to catch up to states that historically grew much faster – like Utah and Idaho.

    Here’s the rest of the story that KCEG doesn’t want you to know. According to the Tax Foundation, the corporate income tax rate in Kansas is 40% higher than Utah’s and just slightly below Idaho’s.  State sales tax rates are comparable but Kansas has much higher local sales tax rates. 

    Utah and Idaho also have much lower property taxes on commercial and industrial real estate. Kansas has the 10th highest effective tax rate on urban property and the worst in the nation on rural property!   Part of the reason that Kansas has very high effective tax rates is baked into the State Constitution, where Commercial and Industrial property is assessed at 25% of appraised value but Residential is assessed at 11.5%.

    The other major factor driving up property taxes is that Kansas has too much government.  Kansas and Utah have about the same population but Kansas has 1,997 cities, counties and townships whereas Utah has only 274.  Idaho has just 244.  Extra government means extra government employees (and higher taxes to pay for all of that government); Kansas is ranked #47 in government employees per 10,000 residents (i.e., the 3rd worst in the nation) but Utah is ranked #15 and Idaho is #9.

    These truths about private sector job growth and relevant competitive issues with Utah and Idaho are typical of KCEG efforts to mislead citizens and legislators – and probably explain why they refuse to engage KPI in public debates on tax, spending and education issues.

  • In Topeka, to raise taxes, scare the voters

    The Topeka public school district is using scare tactics to persuade voters to raise taxes. David Dorsey of Kansas Policy Institute explains.

    Topeka schools use scare tactics to justify LOB election

    By David Dorsey

    The USD 501 school board voted unanimously on April 29 to hold an election to increase the district’s local option budget (LOB). They claim the $3 million that could be raised with voter approval is necessary “in the face of state budget cuts.”  The district held three public meetings to discuss how to deal with what they called a $1.6 million cut in state funding this year and $2 million over the next two years. KPI has shown in this blog that Topeka Public Schools will actually get a total increase in state aid of 6.5% over the three years of the new block grant funding law.

    But that’s not how a school district sees things. To the educrats, a cut means getting a smaller increase than they had planned.

    If I were the suspicious type, I might think the meetings were just a ruse, using the implicit threat of cutting school programs in order to scare the public into supporting an override election to raise more money.

    The purpose here is not to revisit the increase vs. decrease debate. The purpose here is to discuss the spending side of the equation and show just how easy it would be for USD 501 to meet their self-defined shortfalls – and without having any impact on students.

    First, here’s a little perspective on the realities between what is budgeted and how much is actually  spent. The adjoining table shows the millions that have gone unexpended for the last four years. Given this recent history, it’s hard to imagine that a $1.6 million “cut” from the budgeted $203 million 2014-15 budget is even a concern, let alone cause for an election.

    Even if one concedes the point of a revenue shortfall, should the taxpayers of USD 501 (in the name of full disclosure, I do not live in the district, so I don’t have a dog in this hunt) shell out more money to the district? Or could the district find ways to reduce spending and operate more efficiently (a concept foreign to any government organization)? As a former employee of USD 501 I can attest that finding a savings of what amounts to $114 per pupil should be pretty easy to accomplish.

    I offer these three opportunities that would reduce spending far in excess of what the district calls a cut and save local taxpayers the burden of providing more financial support to a district that won’t look seriously at reducing spending.

    Reduce a bloated administration

    As the table shows, Topeka Public Schools has the highest per pupil administrative costs of the 25 largest districts in the state. A glance at their own budget document reveals the costs are trending significantly higher. The 2013-14 costs were a 14% increase from the previous year. The USD 501 2014-15 budget for administration and support of $28,301,407 is a whopping 25% higher than 2013-14! That’s an increase from two years ago of 41.8% when administration costs were just under $20 million.

    Some of that increase can be explained by the decision made by the USD 501 school board to drastically increase salaries of the administrative staff by $435,400 in the summer of 2013 in the name of being competitive with other districts. Perhaps if USD 501 was “competitive” in terms of administrative costs per pupil, there would be no issue.

     I’m guessing these facts didn’t come up at the public meetings.

    Put literacy and math coaches back in the classroom

    Little-known to the public is that in every USD 501 school there are licensed teachers who do NOT teach students. They are known as math coaches and literacy coaches. Each school has at least one coach and most have more than one. What is their job, you ask? They are in the buildings to help classroom teachers do a better job. Furthermore, USD 501 forbids the coaches from directly teaching students, except in special circumstances. They are there to teach the teachers.

    There are several reasons the practice of having licensed teachers be coaches should end.

    • “Teaching the teachers” is what professional development is supposed to do.
    • Dealing with ineffective teachers should be the job of the principals, not other teachers.
    • Since coaches have no contractual authority over teachers, teachers do not have to utilize coaches. In practice, that means teachers who are least effective don’t solicit assistance from the coaches, so the coaches end up spending most of their time with the most effective teachers.
    • Many coaches use the position as a stepping-stone toward getting into administration.
    • Most of the coaches are among the best teachers in the district and should be with students, not other teachers.

    To be fair to USD 501, math and literacy coaches are an educational trend and most districts now employ them. However, it doesn’t stray from the fact that money spent on coaches doesn’t directly benefit students. In fact, students lose out anytime a quality teacher chooses to become a coach and leaves the classroom.

    Putting just one coach per building back in the classroom through attrition would go a long way toward dealing with the budget “cut.”

    Cash reserves

    The district could easily deal with any short-term budget issue simply by using their current operating cash reserves. The following table shows USD 501’s cash reserves for the past ten years. The table not only shows the district had in excess of $24 million from which to draw at the beginning of this school year, but that is 56.2% more than a decade ago. I doubt they explained that fact to the patrons at the public meetings.

    I now present a rather conservative approach to dealing with the “budget cut.” A 5% reduction in administration, returning just one coach in each building to the classroom, and tapping 10% from the operating cash reserves, hardly Draconian measures, would generate nearly twice as much as they could take from the voters.

    Savings CategorySpending reduction
    5% reduction in administration costs$1.41 million
    Returning 1 coach to the classroom (through attrition) in each traditional public school building – 26 X $60,000 (salary/benefits) 

    $1.56 million

    10% from operating cash reserves$2.47 million

    Total reduction

    		 $5.44 million

    Board member Patrick Woods was quoted as saying K-12 funding is a “state responsibility.” Maybe it’s time the state starts taking responsibility for how the money gets managed.

  • Kansas state aid to schools is increasing

    The top school finance official in Kansas says that says that state aid for schools has risen for the current year. From Kansas Policy Institute.

    KSDE confirms that state aid to schools is increasing this year

    By Dave Trabert

    While some school districts and special interests claim state aid to schools is declining this year, Kansas State Department of Education Deputy Commissioner for Finance Dale Dennis confirms that state aid to schools is increasing.

    KSDE published spreadsheets comparing block grant equivalent funding for the 2013-14 school year with block grant funding for this year and the next two school years. SF15-092 shows total funding last year was $3.263 billion including KPERS and $2.951 billion without KPERS. SF15-109 shows total funding this year of $3.408 billion including KPERS and $3.093 billion without.  Even excluding KPERS, state aid to schools under the block grants will increase by $142 million.

  • In Kansas, a lost legislative opportunity

    In Kansas, a lost legislative opportunity

    Kansas legislators are struggling to balance the state’s budget. In 2012 the legislature passed a tax cut, although it was unevenly applied. But in the intervening years, the legislature has not taken serious steps to cut state spending to match. Legislators failed to consider bills to streamline and outsource government functions, although the bills had passed in a previous session. The legislature has also failed to consider budgetary process reform as explained below in an article from May 2012.

    Leaders in the Kansas legislature and executive branch tell us the only way to balance the Kansas budget this year is by raising more revenue through taxation. That may be true, as reforming spending and budgeting takes time to accomplish. We had the time. But our legislature and executive branch squandered that opportunity. Now, they ask you for more tax revenue.

    This year Kansas made a leap forward in reducing income tax rates. The next step for Kansas is to reduce its spending, both to match the reduced revenue that is forecast, but also to improve the efficiency of Kansas government and leave more money in the hands of the private sector. Specifically, Kansas needs to improve its budgeting process and streamline state government.

    In Kansas, like in many states, the budgeting process starts with the previous year’s spending. That is then adjusted for factors like inflation, caseloads, and policy changes that necessitate more (or rarely, less) spending. The result is that debates are waged over the increment in spending. Rarely is the base looked at to see if the spending is efficient, effective, or needed.

    There are several approaches Kansas could take to improve on this process. One is zero-based budgeting. In this approach, an agency’s budget set to zero. Then, every spending proposal must have a rationale or justification for it to be added to the budget.

    Zero-based budgeting can be successful, but, according to the recent paper Zero-base Budgeting in the States from National Conference of State Legislatures, it requires a large commitment from the parties involved. It also can take a lot of time and resources. Kansas could start the process with just a few agencies, and each agency could go through the process periodically, say once every five or six years. Some states have abandoned the zero-based budgeting process.

    In its State Budget Reform Toolkit, American Legislative Exchange Council advocates a system called priority-based budgeting. This process starts with deciding on the core functions of state government. That, of course, can be a battle, as people have different ideas on what government should be doing.

    ALEC reports that “In 2003, Washington state actually implemented priority based budgeting to close a budget deficit of $2.4 billion without raising taxes.”

    The spending cuts Kansas needs to balance the budget are not large. Kansas Policy Institute has calculated that a one-time cut of 6.5 percent next year would be sufficient to bring the budget to balance.

    The problem that Kansas will face in reducing state spending and streamlining its government is that there are those who are opposed. Streamlining often means eliminating programs that aren’t needed, aren’t performing as expected, or are very costly. These programs, however, all have constituencies that benefit from them — the concept of concentrated benefits and dispersed costs that public choice economics has taught us. These constituencies will be sure to let everyone know how harmful it will be to them if a program is scaled back or ended.

    Streamlining also means that there may be fewer state employees. Some will say that the loss of state employees means a loss for the economy, as the state workers will no longer be receiving a paycheck and spending it. This reasoning, however, ignores the source of state workers’ pay: the taxpayers of Kansas. With fewer state employees, taxpayers will have more money to spend or invest. The problem is that it is easier to focus on the employees that may lose their jobs, as they are highly visible and they have vocal advocacy groups to watch out for them. This is an example of the seen and unseen, as explained by Henry Hazlitt.

  • Wichita economic development, the need for reform

    Wichita economic development, the need for reform

    An incentives deal for a Wichita company illustrates a capacity problem and the need for reform.

    Next week the Wichita City Council will consider an economic development incentives package intended to enable a local manufacturing company to expand its operations.

    R and R Aerospace benefits 2015-05-05City documents give some detail regarding the amounts of property tax to be forgiven on an annual basis, for a period of up to ten years. In the past, city documents have often mentioned other incentive programs that will benefit the company, but that information is missing. Other sources mention two state programs — PEAK and HPIP — the company may benefit from, but amounts are not available.

    In order to prepare the incentives package, several events took place. There was a visit to the company. Then another visit and tour. Then economic development officials helped the company apply for benefits from the Kansas Department of Commerce. Then these officials worked closely with Wichita city staff on an incentive package.

    City documents state that the expansion will create 28 jobs over the next five years. Obtaining these jobs took a lot of effort from Wichita and Kansas economic development machinery. Multiple agencies and fleets of bureaucrats at GWEDC, the City of Wichita, Sedgwick County, and the State of Kansas were involved. Wichita State University had to be involved. All this to create 5.6 jobs per year for five years.

    The jobs are welcome. But this incident and many others like it reveal a capacity problem, which is this: We probably need to be creating 5.6 jobs every working hour of every day in order to make any significant progress in economic growth. If it takes this much effort to create 28 jobs over five years, how much effort will it take to create the many thousands of jobs we need to create every year?

    This assumes, of course, that the incentives are necessary to enable the company to expand. City documents state that the tax exemption is necessary to make the project “viable.” It’s likely that the mayor or city council members will say that if we don’t award the incentives, the company won’t be able to expand. Or perhaps the company will expand in some other city. So the incentives really don’t have any cost, they will tell citizens.

    This only hints at a larger problem. If companies can’t afford to make investments in Wichita unless they receive exemptions from paying taxes, we must conclude that taxes are too high. (An ongoing study reveals that generally, property taxes on commercial and industrial property in Wichita are high. In particular, taxes on commercial property in Wichita are among the highest in the nation. See here.) It’s either that, or this company simply doesn’t want to participate in paying for the cost of government like most other companies and people do.

    To top it off, this expansion and the new jobs seem far from certain. City documents state the company is “bidding on a new work package” and the “expansion project would be completed in phases
    based upon the timing and demand of the work package.”

    Civic leaders say that our economic development policies must be reformed. So far that isn’t happening. Our leaders say that cash incentives are on the way out. This deal does not include grants of cash, that is true. But forgiveness of taxes is more valuable to business firms than receiving cash. That’s because cash incentives are usually taxable as income, while forgiveness of taxes does not create taxable income. Each dollar of tax that is forgiven adds one dollar to after-tax profits. 1

    The large amount of bureaucratic effort and cost spent to obtain a small number of speculative jobs lets us know that we need to do something else in order to grow our local economy. We need to create a dynamic economy, focusing our efforts on creating an environment where growth can occur organically without management by government. Dr. Art Hall’s paper
    Embracing Dynamism: The Next Phase in Kansas Economic Development Policy provides much more information on the need for this.

    Another thing we can do to help organically grow our economy and jobs is to reform our local regulatory regime. Recently Kansas Policy Institute released a study of regulation and its impact at the state and local level. This is different from most investigations of regulation, as they usually focus on regulation at the federal level.

    Business Perceptions of the Economic Impact of State and Local Government Regulation coverThe study is titled “Business Perceptions of the Economic Impact of State and Local Government Regulation.” It was conducted by the Hugo Wall School of Public Affairs at Wichita State University. Click here to view the entire document.

    Following is an excerpt from the introduction by James Franko, Vice President and Policy Director at Kansas Policy Institute. It points to a path forward.

    Surprising to some, the businesses interviewed did not have as much of a problem with the regulations themselves, or the need for regulations, but with their application and enforcement. Across industries and focus group sessions the key themes were clear — give businesses transparency in what regulations are being applied, how they are employed, provide flexibility in meeting those goals, and allow an opportunity for compliance.

    Sometimes things can be said so often as to lose their punch and become little more than the platitudes referenced above. The findings from Hugo Wall are clear that businesses will adapt and comply with regulations if they are transparent and accountable. Many in the public can be forgiven for thinking this was already the case. Thankfully, local and state governments can ensure this happens with minimal additional expense.

    A transparent and accountable regulatory regime should be considered the “low hanging fruit” of government. Individuals and communities will always land on different places along the continuum of appropriate regulation. And, a give and take will always exist between regulators and the regulated. Those two truisms, however, should do nothing to undermine the need for regulations to be applied equally, based on clear rules and interpretations, and to give each business an opportunity to comply. (emphasis added)

    Creating a dynamic economy and a reformed regulatory regime should cost very little. The benefits would apply to all companies — large or small, startup or established, local or relocations, in any industry.

    Our civic leaders say that our economic development efforts must be reformed. Will the path forward be a dynamic economy and reformed regulation? Or will it be more bureaucracy, chasing five jobs at a time?

    1. Site Selection magazine, September 2009. 2015. ‘INCENTIVES — Site Selection Magazine, September 2009’. Siteselection.Com. Accessed May 1 2015. http://www.siteselection.com/issues/2009/sep/Incentives/ ↩